G.R. No.

134217 May 11, 2000

KENNETH ROY SAVAGE/K ANGELIN EXPORT TRADING, owned and managed by GEMMA
DEMORAL-SAVAGE, petitioners,
vs.
JUDGE APRONIANO B. TAYPIN, Presiding Judge, RTC-BR. 12, Cebu City, CEBU PROVINCIAL
PROSECUTOR'S OFFICE, NATIONAL BUREAU OF INVESTIGATION, Region VII, Cebu City,
JUANITA NG MENDOZA, MENDCO DEVELOPMENT CORPORATION, ALFREDO SABJON and
DANTE SOSMEÑA, respondents.

BELLOSILLO, J.:

Petitioners KENNETH ROY SAVAGE and K ANGELIN EXPORT TRADING, owned and managed by
GEMMA DEMORAL-SAVAGE, seek to nullify the search warrant issued by respondent Judge Aproniano B.
Taypin of the Regional Trial Court, Br. 12 Cebu City, which resulted in the seizure of certain pieces of wrought
iron furniture from the factory of petitioners located in Biasong, Talisay, Cebu. Their motion to quash the
search warrant was denied by respondent Judge as well as their motion to reconsider the denial. Hence, this
petition for certiorari.

The antecedent facts: Acting on a complaint lodged by private respondent Eric Ng Mendoza, president and
general manager of Mendco Development Corporation (MENDCO), 1 Supervising Agent Jose Ermie Monsanto
of the National Bureau of Investigation (NBI) filed an application for search warrant with the Regional Trial
Court of Cebu City. 2 The application sought the authorization to search the premises of K Angelin Export
International located in Biasong, Talisay, Cebu, and to seize the pieces of wrought iron furniture found therein
which were allegedly the object of unfair competition involving design patents, punishable under Art. 189 of the
Revised Penal Code as amended. The assailed Search Warrant No. 637-10-1697-12 was issued by respondent
Judge on 16 October 1997 and executed in the afternoon of the following day by NBI agents. 3 Seized from the
factory were several pieces of furniture, indicated in the Inventory Sheet attached to the Return of Search
Warrant, and all items seized have remained in NBI custody up to the present. 4

On 30 October 1997 petitioners moved to quash the search warrant alleging that: (a) the crime they were
accused of did not exist; (b) the issuance of the warrant was not based on probable cause; (c) the judge failed to
ask the witnesses searching questions; and, (d) the warrant did not particularly describe the things to be seized.
5

On 10 November 1997 petitioners filed a Supplemental Motion to Quash where they additionally alleged that
the assailed warrant was applied for without a certification against forum shopping. 6 On 30 January 1998
respondent Judge denied the Motion to Quash and the Supplemental Motion to Quash. 7 On 2 March 1998
petitioners moved to reconsider the denial of their motion to quash and alleged substantially the same grounds
found in their original Motion to Quash but adding thereto two (2) new grounds, namely: (a) respondent court
has no jurisdiction over the subject-matter; and, (b) respondent court failed to "substantiate" the order sought to
be reconsidered. 8 The denial of their last motion 9 prompted petitioners to come to this Court.

The principal issues that must be addressed in this petition are: (a) questions involving jurisdiction over the
offense; (b) the need for a certification of non-forum shopping; and, (c) the existence of the crime.

Petitioners claim that respondent trial court had no jurisdiction over the offense since it was not designated as a
special court for Intellectual Property Rights (IPR), citing in support thereof Supreme Court Administrative
Order No. 113-95 designating certain branches of the Regional Trial Courts, Metropolitan Trial Courts and
Municipal Trial Courts in Cities as Special Courts for IPR. The courts enumerated therein are mandated to try
and decide violations of IPR including Art. 189 of the Revised Penal Code committed within their respective
territorial jurisdictions. The sala of Judge Benigno G. Gaviola of the RTC-Br. 9, Cebu City, was designated
Special Court for IPR for the 7th Judicial Region. 10 Subsequently Supreme Court Administrative Order No.
104-96 was issued providing that jurisdiction over all violations of IPR was thereafter confined to the Regional
Trial Courts. 11

The authority to issue search warrants was not among those mentioned in the administrative orders. But the
Court has consistently ruled that a search warrant is merely a process issued by the court in the exercise of its
ancillary jurisdiction and not a criminal action which it may entertain pursuant to its original jurisdiction. 12
The authority to issue search warrants is inherent in all courts and may be effected outside their territorial
jurisdiction. 1 In the instant case, the premises searched located in Biasong, Talisay, Cebu, are well within the
territorial jurisdiction of the respondent court. 14

Petitioners apparently misconstrued the import of the designation of Special Courts for IPR. Administrative
Order No. 113-95 merely specified which court could "try and decide" cases involving violations of IPR. It did
not, and could not, vest exclusive jurisdiction with regard to all matters (including the issuance of search
warrants and other judicial processes) in any one court. Jurisdiction is conferred upon courts by substantive law;
in this case, BP Blg.129, and not by a procedural rule, much less by an administrative order. 15 The power to
issue search warrants for violations of IPR has not been exclusively vested in the courts enumerated in Supreme
Court Administrative Order No.113-95.

Petitioners next allege that the application for a search warrant should have been dismissed outright since it was
not accompanied by a certification of non-forum shopping, citing as authority therefor Washington Distillers,
Inc. v. Court of Appeals. 16 In that case, we sustained the quashal of the search warrant because the applicant
had been guilty of forum shopping as private respondent sought a search warrant from the Manila Regional
Trial Court only after he was denied by the courts of Pampanga. The instant case differs significantly, for here
there is no allegation of forum-shopping, only failure to acquire a certification against forum-shopping. The
Rules of Court as amended requires such certification only from initiatory pleadings, omitting any mention of
"applications." 17 In contrast, Supreme Court Circular 04-94, the old rule on the matter, required such
certification even from "applications." Our ruling in Washington Distillers required no such certification from
applications for search warrants. Hence, the absence of such certification will not result in the dismissal of an
application for search warrant.

The last question to be resolved is whether unfair competition involving design patents punishable under Art.
189 of the Revised Penal Code exists in this case. Prosecutor Ivan Herrero seems to agree as he filed the
corresponding Information against petitioners on 17 March 1998. 18 However, since the IPR Code took effect
on 1 January 1998 any discussion contrary to the view herein expressed would be pointless. The repealing
clause of the Code provides —

All Acts and parts of Acts inconsistent herewith, more particularly, Republic Act No. 165, as
amended; Republic Act No. 166, as amended; and Articles 188 and 189 of the Revised Penal
Code; Presidential Decree No. 49, including Presidential Decree No. 285, as amended, are
hereby repealed (emphasis ours). 19

The issue involving the existence of "unfair competition" as a felony involving design patents, referred to in
Art. 189 of the Revised Penal Code, has been rendered moot and academic by the repeal of the article.

The search warrant cannot even be issued by virtue of a possible violation of the IPR Code. The assailed acts
specifically alleged were the manufacture and fabrication of wrought iron furniture similar to that patented by
MENDCO, without securing any license or patent for the same, for the purpose of deceiving or defrauding
Mendco and the buying public. 20 The Code defines "unfair competition" thus —
 168.2. Any person who shall employ deception or any other means contrary to good faith by
which he shall pass off the goods manufactured by him or in which he deals, or his business, or
services for those of the one having established such goodwill, or shall commit any acts
calculated to produce said result, shall be guilty of unfair competition, and shall be subject to an
action therefor.

168.3. In particular, and without in any way limiting the scope of protection against unfair
competition, the following shall be deemed guilty of unfair competition:

(a) Any person who is selling his goods and gives them the general appearance of goods of
another manufacturer or dealer, either as to the goods themselves or in the wrapping of the
packages in which they are contained, or the devices or words thereon, or in any other feature of
their appearance which would be likely to influence purchasers to believe that the goods offered
are those of a manufacturer or dealer, other than the actual manufacturer or dealer, or who
otherwise clothes the goods with such appearance as shall deceive the public and defraud another
of his legitimate trade, or any subsequent vendor of such goods or any agent of any vendor
engaged in selling such goods with a like purpose;

(b) Any person who by any artifice, or device, or who employs any other means calculated to
induce the false belief that such person is offering the services of another who has identified such
services in the mind of the public; or

(c) Any person who shall make any false statement in the course of trade or who shall commit
any other act contrary to good faith of a nature calculated to discredit goods, businesses or
services of another. 21

There is evidently no mention of any crime of "unfair competition" involving design patents in the controlling
provisions on Unfair Competition. It is therefore unclear whether the crime exists at all, for the enactment of
RA 8293 did not result in the reenactment of Art. 189 of the Revised Penal Code. In the face of this ambiguity,
we must strictly construe the statute against the State and liberally in favor of the accused, 22 for penal statutes
cannot be enlarged or extended by intendment, implication or any equitable consideration. 2 Respondents invoke
jurisprudence to support their contention that "unfair competition" exists in this case. 24 However, we are
prevented from applying these principles, along with the new provisions on Unfair Competition found in the
IPR Code, to the alleged acts of the petitioners, for such acts constitute patent infringement as defined by the
same Code —

Sec. 76. Civil Action for Infringement. — 76.1. The making, using, offering for sale, selling, or
importing a patented product or a product obtained directly or indirectly from a patented process,
or the use of a patented process without authorization of the patentee constitutes patent
infringement. 25

Although this case traces its origins to the year 1997 or before the enactment of the IPR Code, we are
constrained to invoke the provisions of the Code. Article 22 of the Revised Penal Code provides that penal laws
shall be applied retrospectively, if such application would be beneficial to the
accused. 26 Since the IPR Code effectively obliterates the possibility of any criminal liability attaching to the
acts alleged, then that Code must be applied here.

In the issuance of search warrants, the Rules of Court requires a finding of probable cause in connection with
one specific offense to be determined personally by the judge after examination of the complainant and the
witnesses he may produce, and particularly describing the place to be searched and the things to be seized. 27
Hence, since there is no crime to speak of, the search warrant does not even begin to fulfill these stringent
requirements and is therefore defective on its face. The nullity of the warrant renders moot and academic the
other issues raised in petitioners' Motion to Quash and Motion for Reconsideration. Since the assailed search
warrant is null and void, all property seized by virtue thereof should be returned to petitioners in accordance
with established jurisprudence. 28

In petitioners' Reply with Additional Information they allege that the trial court denied their motion to transfer
their case to a Special Court for IPR. We have gone through the records and we fail to find any trace of such
motion or even a copy of the order denying it. All that appears in the records is a copy of an order granting a
similar motion filed by a certain Minnie Dayon with regard to Search Warrant No. 639-10-1697-12. 29 This
attachment being immaterial we shall give it no further attention.

WHEREFORE, the Order of the Regional Trial Court, Br. 12, Cebu City, dated 30 January 1998, denying the
Motion to Quash Search Warrant No. 637-10-1697-12 dated 30 October 1997 and the Supplemental Motion to
Quash dated 10 November 1997 filed by petitioners, as well as the Order dated 8 April 1998 denying
petitioners' Motion for Reconsideration dated 2 March 1998, is SET ASIDE. Search Warrant No. 637-10-1697-
12 issued on 16 October 1997 is ANNULLED and SET ASIDE, and respondents are ordered to return to
petitioners the property seized by virtue of the illegal search warrant.

SO ORDERED.

Mendoza, Quisumbing and Buena, JJ., concur.

De Leon, Jr., J., is on leave.

G.R. No. 82542 September 29, 1988

BARRY JOHN PRICE, JOHN WATSON CLITHERON and JOHN BRADSHAW, Assignors to ALLEN
& HANBURYS, LTD., petitioners,
vs.
UNITED LABORATORIES, respondent.

Castillo, Laman, Tan & Pantaleon Law Offices for petitioners.

Teodoro B. Pison for respondent.

GRIÑO-AQUINO, J.:

The petitioners are the owners-assignees of Philippine Patent No. 13540 which was granted to them on June
26,1980 for a pharmaceutical compound known as "aminoalkyl furan derivatives." On October 1, 1982,
respondent United Laboratories, Inc. (or UNILAB) filed in the Philippine Patent Office a petition Inter Partes
Case No. 1683, "United Laboratories, Inc. versus Barry John Price, John Watson CLITHERON and John
Bradshaw, assignors to Allen & Hanburys Ltd.') for the issuance of a compulsory license to use the patented
compound in its own brands of medicines and pharmaceuticals and to sell, distribute, or otherwise dispose of
such medicines or pharmaceutical preparations in the country. The petition further alleged that the patent relates
to medicine and that petitioner, which has had long experience in the business of manufacturing and selling
pharmaceutical products, possesses the capability to use the subject compound in the manufacture of a useful
product or of making dosage formulations containing the said compound.

After the hearing, the Philippine Patent Office rendered a decision on June 2, 1986, granting UNILAB a
compulsory license subject to ten (1 0) terms and conditions No. 3 of which provides as follows:

3. By virtue of this license, petitioner shall pay the respondent a royalty on all license products
containing the patented substance made and sold by the Petitioner in the amount equivalent to
TWO AND ONE HALF (2.5) PER CENT OF THE NET SALES in Philippine currency. The
terms 'net sales' means the gross billed for the product pertaining to Letters Patent No. 13540
less-

a) Transportation charges or allowances, if any, included in such amount;

b) Trade, quantity or cash discounts and broker's or agent's or distributor's

commissions, if any, allowed or paid;

c) Credits or allowances, if any, given or made on account with reflection or

return of the product previously delivered; and

d) Any tax, excise or government charge included in such amount, or measured

by the production, sale, transportation, use or delivery of the products.

In case Petitioner's product containing the patented substance shall contain one or more active
ingredients as admixed product, the royalty to be paid shall be determined in accordance with the
following formula:
 Net Sales on Value of
Admixed Product Patented Substance

Royalty = _______________ x 0.025 x ___________________

(Value of Pa Value of
tended Substance) Active Ingredients

4. The royalties shall be computed after the end of each calendar quarter for all goods containing
the patented substance herein involved, made and sold during the preceding quarter and to be
paid by the Petitioner at its place of business on or before the thirtieth day of the month
following the end of each calendar quarter. Payments should be made to Respondent's authorized
representative in the Philippines; (pp. 35-36, Rollo.)

The patentees appealed the decision to the Court of Appeals (CA-G.R. No. SP-09308) which dismissed the
appeal on December 4, 1 987. They have come to his Court praying for a review of the Appellate Court's
decision on the grounds that it erred:

1. in upholding the Director's unilateral determination of the terms and conditions of the
compulsory license, without affording the parties an opportunity to negotiate the terms and
conditions freely and by themselves;

2. in finding that the respondent possess the legally required capability to make use of the
petitioner's patented compound in the manufacture of a useful product;

3. in affirming the Director's award of the entire patent to the respondent, when only one claim of
the patent was controverted and

4. in considering evidence that UNILABs capability to use the compound was acquired after, not
before, filing its petition for compulsory licensing.

The first assignment of error has no merit. The terms and conditions of the compulsory license were fixed by
the Director of Patents after a hearing and careful consideration of the evidence of the parties and in default of
an agreement between them as to the terms of the license. This he is authorized to do under Section 36 of
Republic Act No. 165 which provides:

Sec. 36. GRANT OF LICENSE.—If the Director finds that a case for the grant of license under
Section 34, hereof made out, he may order the grant of an appropriate license and in default of
agreement among the parties as to the terms and conditions of the license he shall fix the terms
and conditions of the license in the order.

The order of the Director granting a license under this Chapter, when final, shall operate as a
deed granting a- license executed by the patentee and the other patties in interest.

and under Section 35 of P.D. 1263, amending portions of Republic Act No.165 which reads:

Sec. 35. GRANT OF LICENSE.—(1)If the Director finds that a case for the grant of a license
under Sec. 34 hereof has been made out, he shall within one hundred eighty (180) days from the
date the petition was filed, order the grant of an appropriate license. The order shall state the
terms and conditions of the license which he himself must fix in default of an agreement on the
matter manifested or submitted by the parties during the hearing.
The Court of Appeals found that the 2.5% royalty fixed by the Director of Patents 'is just and reasonable.' We
quote its observations hereunder:

Respondent-appellant contends further that the 2.5% royalty rate is unfair to respondent-
appellant as to amount to an undue deprivation of its property right. We do not hold this view.
The royalty rate of 2.5% provided for by the Director of Patents is reasonable. Paragraph 3,
Section 35-B, Republic Act No. 165, as amended by Presidential Decree No. 1263, provides:

(3) A compulsory license shall only be granted subject to the payment of adequate
royalties commensurate with the extent to which the invention is worked.
However, royalty payments shall not exceed five per cent (5%) of the net
wholesale price (as defined in Section 33-A) of the products manufactured under
the license. If the product, substance, or process subject of the compulsory license
is involved in an industrial project approved by the Board of Investments, the
royalty payable to the patentee or patentees shall not exceed three per cent (3%)
of the net wholesale price (as defined in Section 34-A) of the patented commodity
and/or commodity manufactured under the patented process; the same rule of
royalty shall be paid whenever two or more patents are involved, which royalty
shall be distributed to the patentees in rates proportional to the extent of
commercial use by the licensee giving preferential values to the holder of the
oldest subsisting product patent.

Thus, said provision grants to the Director of Patents the use of his sound discretion in fixing the
percentage for the royalty rate and We find that the Director of Patents committed no abuse of
this discretion. Also, there is always a presumption of regularity in the performance of one's
official duties.

Moreover, what UNILAB has with the compulsory license is the bare right to use the patented
chemical compound in the manufacture of a special product, without any technical assistance
from herein respondent-appellant. Besides, the special product to be manufactured by UNILAB
will only be used, distributed, and disposed locally. Therefore, the royalty rate of 2.5% is just
and reasonable. (pp. 10-11, CA Decision, pp. 44-45, Rollo)

Furthermore, as pointed out in the respondent's comment on the petition, Identical terms and conditions had
been prescribed for the grant of compulsory license in a good number of patent cases (United Laboratories, Inc.
vs. Boehringer Ingelhelm, GMBH, IPC 929, July 27, 1981; United Laboratories, Inc. vs. Bristol-Myers
Company, IPC 1179, Aug. 20, 1981; United Laboratories, Inc. vs. E.R. Squibb & Sons, Inc., IPC 1349, Sept.
30, 1981; United Laboratories, Inc. vs. Helmut Weber, et al., IPC 949, Dec. 13,1982; Oceanic Pharmacal Inc.
vs. Gruppo Lepetit S.A. IPC 1549, Dec. 21, 1982; United Laboratories. Inc. vs. Boehringer Ingelheim, IPC
1185, June 8, 1983; United Laboratories, Inc. vs. Pfizer Corp., IPC 1184, June 10,, 1983; Doctors
Pharmaceuticals, Inc. vs. Maggi, et al., July 11, 1983; Drugmaker's Laboratories v. Herningen et al., IPC 1679,
September 22,1983; Superior Pharmacraft Inc. vs. Maggi, et al., IPC 1759, January 10, 1984; United
Laboratories, Inc. vs. Van Gelder et al., IPC 1627, June 29, 1984; Drugmaker's Laboratories, Inc. vs. Janssen
Pharmaceutical N.V. IPC 1555, August 27,1984; United Laboratories Inc. vs. Graham John Durant et al., IPC
1731, August 14, 1987; United Laboratories, Inc. vs. Albert Anthony Carr, IPC 1906, August 31, 1987).

The Director's finding that UNILAB has the capability to use the patented compound in the manufacture of an
anti-ulcer pharmaceutical preparation is a factual finding which is supported by substantial evidence, hence, the
Court of Appeals did not commit a reversible error in affirming it (Philippine Nut Industry, Inc. vs. Standard
Brands, Inc., 65 SCRA 575; Sy Ching vs. Gaw Liu 44 SCRA 143; De Gala Sison vs. Manalo, 8 SCRA 595;
Goduco vs. Court of Appeals, 14 SCRA 282; Ramos vs. Pepsi-Cola Bottling Company of the P.I., 19 SCRA
289. Of indubitable relevance to this point is the evidence that UNILAB has been engaged in the business of
manufacturing drugs and pharmaceutical products for the past thirty (30) years, that it is the leading drug
manufacturer in the country, that it has the necessary equipment and technological expertise for the
development of solid dosage forms or for tablet, capsule, and liquid preparations, and that it maintains standards
and procedures to ensure the quality of its products. Even if it were true, as alleged by the patentee (although it
is denied by UNILAB), that its capability to use the patented compound was only acquired after the petition for
compulsory licensing had been filed, the important thing is that such capability was proven to exist during the
hearing of the petition.

The patented invention in this case relates to medicine and is necessary for public health as it can be used as
component in the manufacture of anti-ulcer medicine. The Director of Patents did not err in granting a
compulsory license over the entire patented invention for there is no law requiring that the license be limited to
a specific embodiment of the invention, or, to a particular claim. The invention in this case relates to new
aminoalkyl derivatives which have histamine H2 blocking activity, having the general formula (I) and
physiologically acceptable salts, Noxides and dehydrates thereof. The compound ranitidine hydrochloride
named in Claim 45 is also covered by General Claim I and several other sub-generic claims. Therefore, a
license for Claim 45 alone would not be fully comprehensive. In any event, since the petitioner will be paid
royalties on the sales of any products the licensee may manufacture using any or all of the patented compounds,
the petitioner cannot complain of a deprivation of property rights without just compensation.

WHEREFORE, the petition for review is denied for lack of merit.

SO ORDERED.

Narvasa, Cruz, Gancayco and Medialdea, JJ., concur.

G.R. No. 121867 July 24, 1997

SMITH KLINE & FRENCH LABORATORIES, LTD., petitioner,

vs.
COURT OF APPEALS, BUREAU OF PATENTS, TRADEMARKS AND TECHNOLOGY TRANSFER
and DOCTORS PHARMACEUTICALS, INC. respondents.

DAVIDE, JR., J.:

This is an appeal under Rule 45 of the Rules of Court from the decision1 4 November 1994 of the Court of
Appeals in CA-G.R. SP No. 33520, which affirmed the 14 February 1994 decision2 of the Director of the
Bureau of Patents, Trademarks and Technology Transfer (BPTTT) granting a compulsory non-exclusive and
non-transferable license to private respondent to manufacture, use and sell in the Philippines its own brands of
pharmaceutical products containing petitioner's patented pharmaceutical product known as Cimetidine.

Petitioner is a foreign corporation with principal office at Welwyn Garden City, England. It owns Philippine
Letters Patent No. 12207 issued by the BPTTT for the patent of the drug Cimetidine.

Private respondent is a domestic corporation engaged in the business of manufacturing and distributing
pharmaceutical products. On 30 March 1987, it filed a petition for compulsory licensing3 with the BPTTT for
authorization to manufacture its own brand of medicine from the drug Cimetidine and to market the resulting
product in the Philippines. The petition was filed pursuant to the provisions of Section 34 of Republic Act No.
165 (An Act Creating a Patent Office Prescribing Its Powers and Duties, Regulating the Issuance of Patents, and
Appropriating Funds Therefor), which provides for the compulsory licensing of a particular patent after the
expiration of two years from the grant of the latter if the patented invention relates to, inter alia, medicine or
that which is necessary for public health or public safety. Private respondent alleged that the grant of Philippine
Letters Patent No. 12207 was issued on 29 November 1978; that the petition was filed beyond the two-year
protective period provided in Section 34 of R.A. No. 165; and that it had the capability to work the patented
product or make use of it in its manufacture of medicine.

Petitioner opposed, arguing that private respondent had no cause of action and lacked the capability to work the
patented product; the petition failed to specifically divulge how private respondent would use or improve the
patented product; and that private respondent was motivated by the pecuniary gain attendant to the grant of a
compulsory license. Petitioner also maintained that it was capable of satisfying the demand of the local market
in the manufacture and marketing of the medicines covered by the patented product. Finally, petitioner
challenged the constitutionality of Sections 34 and 35 of R.A. No. 165 for violating the due process and equal
protection clauses of the Constitution.

After appropriate proceedings, the BPTTT handed down its decision on 14 February 1994, with the dispositive
portion thereof providing:

NOW, THEREFORE, by virtue of the powers vested in this Office by Republic Act No. 165, as
amended by Presidential Decree No. 1263, there is hereby issued a license in favor of the herein [private
respondent], United Laboratories, Inc., [sic] under Letters Patent No. 12207 issued on November 29,
1978, subject to the following terms and conditions:

1. That [private respondent] be hereby granted a non-exclusive and non-transferable license to

manufacture, use and sell in the Philippines its own brands of pharmaceutical products containing
[petitioner's] patented invention which is disclosed and claimed in Letters Patent No. 12207;
2. That the license granted herein shall be for the remaining life of said Letters Patent No. 12207 unless
this license is terminated in the manner hereinafter provided and that no right or license is hereby
granted to [private respondent] under any patent to [petitioner] or [sic] other than recited herein;

5. By virtue of this license, [private respondent] shall pay [petitioner] a royalty on all license products
containing the patented substance made and sold by [private respondent] in the amount equivalent to
TWO AND ONE HALF PERCENT (2.5%) of the net sales in Philippine currency. The term "net scale"
[sic] means the gross amount billed for the product pertaining to Letters Patent No. 12207, less —

(a) Transportation charges or allowances, if any, included in such amount;

(b) Trade, quantity or cash discounts and broker's or agent's or distributor's commissions, if any, allowed
or paid;

(c) Credits or allowances, if any, given or made on account of rejection or return of the patented product
previously delivered; and

(d) Any tax, excise or government charge included in such amount, or measured by the production sale,
transportation, use of delivery of the products.

In case [private respondent's] product containing the patented substance shall contain one or more active
ingredients admixed therewith, said product hereinafter identified as admixed product, the royalty to be
paid shall be determined in accordance with the following formula:

Net Sales on Value of Patented

ROYALTY = Admixed Product x 0.025 x Substance

—————————— ————————

Value of Patented Value of Other

Substance Active Ingredients

4. The royalties shall be computed after the end of each calendar quarter to all goods containing the
patented substance herein involved, made and sold during the precedent quarter and to be paid by
[private respondent] at its place of business on or before the thirtieth day of the month following the end
of each calendar quarter. Payments should be made to [petitioner's] authorized representative in the
Philippines;

5. [Private respondent] shall keep records in sufficient detail to enable [petitioner] to determine the
royalties payable and shall further permit its books and records to be examined from time to time at
[private respondent's] premises during office hours, to the extent necessary to be made at the expense of
[petitioner] by a certified public accountant appointed by [petitioner] and acceptable to [private
respondent].

6. [Private respondent] shall adopt and use its own trademark or labels on all its products containing the
patented substance herein involved;
 7. [Private respondent] shall comply with the laws on drugs and medicine requiring previous clinical
tests and approval of proper government authorities before selling to the public its own products
manufactured under the license;

8. [Petitioner] shall have the right to terminate the license granted to [private respondent] by giving the
latter thirty (30) days notice in writing to that effect, in the event that [private respondent] default [sic] in
the payment of royalty provided herein or if [private respondent] shall default in the performance of
other convenants or conditions of this agreement which are to be performed by [private respondent]:

(a) [Private respondent] shall have the right provided it is not in default to payment or
royalties or other obligations under this agreement, to terminate the license granted to its,
[sic] giving [petitioner] thirty (30) days-notice in writing to that effect;

(b) Any termination of this license as provided for above shall not in any way operate to
deny [petitioner] its rights or remedies, either at laws [sic] or equity, or relieve [private
respondent] of the payment of royalties or satisfaction of other obligations incurred prior
to the effective date of such termination; and

(c) Notice of termination of this license shall be filed with the Bureau of Patents,
Trademarks and Technology Transfer.

9. In case of dispute as to the enforcement of the provisions of this license, the matter shall be submitted
for arbitration before the Director of Bureau of Patents, Trademarks and Technology Transfer or any
ranking official of the Bureau of Patents, Trademarks and Technology Transfer duly delegated by him.

10. This License shall inure to the benefit of each of the parties herein, to the subsidiaries and assigns of
[petitioner] and to the successors and assigns of [private respondent]; and

11. This license take [sic] effect immediately.4

Petitioner then appealed to the Court of Appeals by way of a petition for review, which was docketed as CA-
G.R. SP No. 33520. Petitioner claimed that the appealed decision was erroneous because:

. . . [IT] VIOLATES INTERNATIONAL LAW AS EMBODIED IN THE PARIS CONVENTION FOR

THE PROTECTION OF INDUSTRIAL PROPERTY AND MUST ACCORDINGLY BE SET ASIDE
AND MODIFIED.

II

. . . [IT] IS AN INVALID EXERCISE OF POLICE POWER.

III

CONCEDING ARGUENDO THE QUESTIONED DECISION'S VALIDITY, THE BPTTT'S

PRONOUNCEMENT FIXING THE ROYALTY AT 2.5% OF THE NET WHOLESALE PRICE IN
PHILIPPINE CURRENCY WAS RENDERED WITHOUT ANY FACTUAL BASIS AND AMOUNTS
TO EXPROPRIATION OF PRIVATE PROPERTY WITHOUT JUST COMPENSATION WHICH IS
VIOLATE OF THE CONSTITUTION.
 IV

. . . [IT] SHOULD NOT HAVE PROCEEDED TO DECIDE THE CASE BELOW FOR FAILURE OF
PRIVATE RESPONDENT TO AFFIRMATIVELY PROVE THE JURISDICTIONAL FACT OF
PUBLICATION.5

In its decision of 4 November 1994,6 the Court of Appeals affirmed in toto the challenged decision. We quote
its findings and conclusion upon which the affirmance is anchored, viz.:

An assiduous scrutiny of the impugned decision of the public respondent reveals that the same is
supported by substantial evidence. It appears that at the time of the filing of the petition for compulsory
license on March 24, 1987, the subject letters Patent No. 12207 issued on November 29, 1978 has been
in effect for more than two (2) years. The patented invention relates to compound and compositions used
in inhibiting certain actions of the histamine, hence, it relates to medicine. Moreover, after hearing and
careful consideration of the evidence presented, the Director of Patents ruled that — "there is ample
evidence to show that [private respondent] possesses such capability, having competent personnel,
machines and equipment as well as permit to manufacture different drugs containing patented active
ingredients such as ethambutol of American Cyanamid and Ampicillin and Amoxicillin of Beecham
Groups, Ltd."

As to the claim by the petitioner that it has the capacity to work the patented product although it was not
shown that any pretended abuse has been committed, thus the reason for granting compulsory license "is
intended not only to give a chance to others to supply the public with the quantity of the patented article
but especially to prevent the building up of patent monopolities [sic]." [Parke Davis v. Doctors
Pharmaceuticals, Inc., 14 SCRA 1053].

We find that the granting of compulsory license is not simply because Sec. 34 (1) e, RA 165 allows it in
cases where the invention relates to food and medicine. The Director of Patents also considered in
determining that the applicant has the capability to work or make use of the patented product in the
manufacture of a useful product. In this case, the applicant was able to show that Cimetidine, (subject
matter of latters Patent No. 12207) is necessary for the manufacture of an anti-ulcer drug/medicine,
which is necessary for the promotion of public health. Hence, the award of compulsory license is a valid
exercise of police power.

We do not agree to [sic] petitioner's contention that the fixing of the royalty at 2.5% of the net wholesale
price amounted to expropriation of private property without just compensation.

Paragraph 3, Section 35-B, R.A. No. 165, as amended by P.D. No. 1267, states:

Sec. 35-B. Terms and Conditions of Compulsory License.

(1) . . .

(2) . . .

(3) A compulsory license shall only be granted subject to the payment of adequate royalties
commensurate with the extent to which the invention is worked. However, royalty payments shall not
exceed five percent (5%) of the net wholesale price (as defined in Section 33-A) of the products
manufactured under the license.

If the product, substance, or process subject of the compulsory license is involved in an industrial project
approved by the Board of Investments, the royalty payable to the patentee or patentees shall not exceed
 three percent (3%) of the net wholesale price (as defined in Section 34-A) of the patented commodity
and/or commodity manufactured under the patented process, the same rate of royalty shall be distributed
to the patentees in rates proportional to the extent of commercial use by the licensee giving preferential
values to the holder of the oldest subsisting product patent.

The foregoing provision grants the Director of Patents the use of his sound discretion in fixing the
percentage for the royalty rate. In the instant case, the Director of Patents exercised his discretion and
ruled that a rate of 2.5% of the net wholesale price is fair enough for the parties. In Parke Davis & Co.
vs. DPI and Tiburcio, [L-27004, August 6, 1983, 124 SCRA 115] it was held that — "liberal treatment
in trade relations should be afforded to local industry for as reasoned out by respondent company, it is so
difficult to compete with the industrial grants [sic] of the drug industry, among them being the petitioner
herein, that it always is necessary that the local drug companies should sell at much lower (than) the
prices of said foreign drug entities." Besides, foreign produce licensor can later on ask for an increase in
percentage rate of royalty fixed by the Director of Patents if local sales of license should increase.
Further, in Price vs. UNILAB, the award of royalty rate of 2.5% was deemed to be just and reasonable,
to wit [166 SCRA 133]:

Moreover, what UNILAB has with the compulsory license is the bare right to use the
patented chemical compound in the manufacture of a special product, without any
technical assistance from herein respondent-appellant. Besides, the special product to be
manufactured by UNILAB will only be used, distributed, and disposed locally.
Therefore, the royalty rate of 2.5% is just and reasonable.

It appearing that herein petitioner will be paid royalties on the sales of any products [sic] the licensee
may manufacture using any or all of the patented compounds, the petitioner cannot complain of a
deprivation of property rights without just compensation [Price v. UNILAB, L-82542, September 19,
1988].

We take note of the well-crafted petition submitted by petitioner albeit the legal milieu and a good
number of decided cases militate against the grounds posited by petitioner. In sum, considering the well-
entrenched jurisprudence sustaining the position of respondents, We reiterate the rule in Basay Mining
Corporation vs. SEC, to the effect that —

The legal presumption is that official duty has been performed. And it is particularly
strong as regards administrative agencies vested with powers said to be quasi-judicial in
nature, in connection with the enforcement of laws affecting particular fields of activity,
the proper regulation and/or promotion of which requires a technical or special training,
aside from a good knowledge and grasp of the overall conditions, relevant to said field,
obtaining in the nations. The policy and practice underlying our Administrative Law is
that courts of justice should respect the findings of fact of said administrative agencies,
unless there is absolutely no evidence in support thereof or such evidence is clearly,
manifestly and patently insubstantial. [G.R. No. 76695, October 3, 1988, Minute
Resolution; Beautifont, Inc., et al. v. Court of Appeals, et al., G.R. No. 50141, January
29, 1988]

Its motion for reconsideration having been denied in the resolution7 of 31 August 1995, petitioner filed the
instant petition for review on certiorari with the following assignment of errors:

THE HON. COURT OF APPEALS ERRED IN NOT HOLDING THAT THE BPTTT'S DECISION
VIOLATES INTERNATIONAL LAW AS EMBODIED IN (A) THE PARIS CONVENTION FOR
 THE PROTECTION OF INDUSTRIAL PROPERTY AND (B) THE GATT TREATY, URUGUAY
ROUND, AND MUST ACCORDINGLY BE SET ASIDE AND MODIFIED.

II

THE HON. COURT OF APPEALS ERRED IN NOT HOLDING THAT THE BPTTT'S DECISION IS
AN INVALID EXERCISE OF POLICE POWER, ABSENT ANY SHOWING BY EVIDENCE OF AN
OVERWHELMING PUBLIC NEED FOR A COMPULSORY LICENSE OVER CIMETIDINE IN
FAVOR OF PRIVATE RESPONDENT.

III

THE HON. COURT OF APPEALS ERRED IN NOT HOLDING THAT THE BPTTT'S
PRONOUNCEMENT FIXING THE ROYALTY FOR AN INVOLUNTARY LICENSE AT 2.5% OF
THE NET WHOLESALE PRICE IN PHILIPPINE CURRENCY WAS RENDERED WITHOUT ANY
FACTUAL BASIS AND AMOUNTS TO EXPORTATION OF PRIVATE PROPERTY WITHOUT
JUST COMPENSATION AND IS IN VIOLATION OF THE CONSTITUTIONAL RIGHT TO DUE
PROCESS.

IV

THE HON. COURT OF APPEALS ERRED IN NOT HOLDING THE BPTTT'S ACTION WAS
RENDERED NULL AND VOID FOR FAILURE OF PRIVATE RESPONDENT TO
AFFIRMATIVELY PROVE THE JURISDICTIONAL FACT OF PUBLICATION AS REQUIRED BY
LAW.

We resolved to give due course to the petition and required the parties to submit their respective memoranda,
which they did, with that of public respondent filed only on 7 February 1997.

After a careful perusal of the pleadings and evaluation of the arguments adduced by the parties, we find this
petition to be without merit.

In its first assigned error, petitioner invokes Article 5 of the Paris Convention for the Protection of Industrial
Property,8 or "Paris Convention," for short, of which the Philippines became a party thereto only in 1965.9
Pertinent portions of said Article 5, Section A, provide:

A. . . .

(2) Each country of the union shall have the right to take legislative measures providing for the grant of
compulsory licenses to prevent the abuses which might result from the exercise of the exclusive rights
conferred by the patent, for example, failure to work.

xxx xxx xxx

(4) A compulsory license may not be applied for on the ground of failure to work or insufficient working
before the expiration of a period of four years from the date of filing of the patent application or three
years from the date of the grant of the patent, whichever period expires last; it shall be refused if the
patentee justifies his inaction by legitimate reasons. Such a compulsory license shall be non-exclusive
and shall not be transferable, even in the form of the grant of a sub-license, except with that part of the
enterprise or goodwill which exploits such license.
In is thus clear that Section A (2) of Article 5 above unequivocally and explicitly respects the right of member
countries to adopt legislative measures to provide for the grant of compulsory licenses to prevent abuses which
might result from the exercise of the exclusive rights conferred by the patent. An example provided of possible
abuses is "failure to work;" however, as such is merely supplied by way of an example, it is plain that the treaty
does not preclude the inclusion of other forms or categories of abuses.

Section 34 of R.A. No. 165, even if the Act was enacted prior to the Philippines' adhesion to the Convention,
fits well within the aforequoted provisions of Article 5 of the Paris Convention. In the explanatory note of Bill
No. 1156 which eventually became R.A. No. 165, the legislative intent in the grant of a compulsory license was
not only to afford others an opportunity to provide the public with the quantity of the patented product, but also
to prevent the growth of monopolies.10 Certainly, the growth of monopolies was among the abuses which
Section A, Article 5 of the Convention foresaw, and which our Congress likewise wished to prevent in enacting
R.A. No. 165.

R.A. No. 165, as amended by Presidential Decree No. 1263, promulgated on 14 December 1977, provides for a
system of compulsory licensing under a particular patent. Sections 34 and 35, Article Two, of Chapter VIII read
as follows:

Sec. 34. Grounds for Compulsory Licensing — (1) Any person may apply to the Director for the grant of
a license under a particular patent at any time after the expiration of two years from the date of the grant
of the patent, under any of the following circumstances:

(a) If the patented invention is not being worked within the Philippines on a commercial scale, although
capable of being so worked, without satisfactory reason;

(b) If the demand for the patented article in the Philippines is not being met to an adequate extent and on
reasonable terms;

(c) If, by reason of refusal of the patentee to grant a license or licenses on reasonable terms, or by reason
of the conditions attached by the patentee to licensee or to the purchase, lease or use of the patented
article or working of the patented process or machine for production, the establishment of any new trade
or industry in the Philippines is prevented, or the trade or industry therein is unduly restrained;

(d) If the working of the invention within the country is being prevented or hindered by the importation
of the patented article; or

(e) If the patented invention or article relates to food or medicine or manufactured products or
substances which can be used as food or medicine, or is necessary for public health or public safety.

(2) In any of the above cases, a compulsory license shall be granted to the petitioner provided that he has
proved his capability to work the patented product or to make use of the patented product in the
manufacture of a useful product, or to employ the patented process.

(3) The term "worked" or "working" as used in this section means the manufacture and sale of the
patented article, of the patented machine, or the application of the patented process for production, in or
by means of a definite and substantial establishment or organization in the Philippines and on a scale
which is reasonable and adequate under the circumstances. Importation shall not constitute "working."

xxx xxx xxx

Sec. 35. Grant of License. — (1) If the Director finds that a case for the grant is a license under Section
34 hereof has been made out, he shall, within one hundred eighty days from the date the petition was
 filed, order the grant of an appropriate license. The order shall state the terms and conditions of the
license which he himself must fix in default of an agreement on the matter manifested or submitted by
the parties during the hearing.

(2) A compulsory license sought under Section 34-B shall be issued within one hundred twenty days
from the filing of the proponent's application or receipt of the Board of Investment's endorsement.

The case at bar refers more particularly to subparagraph (e) of paragraph 1 of Section 34 — the patented
invention or article relates to food or medicine or manufactured products or substances which can be used as
food or medicine, or is necessary for public health or public safety. And it may not be doubted that the
aforequoted provisions of R.A. No. 165, as amended, are not in derogation of, but are consistent with, the
recognized right of treaty signatories under Article 5, Section A (2) of the Paris Convention.

Parenthetically, it must be noted that paragraph (4) of Section A, Article 5 of the Paris Convention setting time
limitations in the application for a compulsory license refers only to an instance where the ground therefor is
"failure to work or insufficient working," and not to any ground or circumstance as the treaty signatories may
reasonably determine.

Neither may petitioner validly invoke what it designates as the GATT Treaty, Uruguay Round. This act is better
known as the Uruguay Final Act signed for the Philippines on 15 April 1994 by Trade and Industry Secretary
Rizalino Navarro.11 Forming integral parts thereof are the Agreement Establishing the World Trade
Organization, the Ministerial Declarations and Decisions, and the Understanding on Commitments in Financial
Services.12 The Agreement establishing the World Trade Organization includes various agreements and
associated legal instruments. It was only on 14 December 1994 that the Philippine Senate, in the exercise of its
power under Section 21 of Article VII of the Constitution, adopted Senate Resolution No. 97 concurring in the
ratification by the President of the Agreement. The President signed the instrument of ratification on 16
December 1994.13 But plainly, this treaty has no retroactive effect. Accordingly, since the challenged BPTTT
decision was rendered on 14 February 1994, petitioner cannot avail of the provisions of the GATT treaty.

The second and third assigned errors relate more to the factual findings of the Court of Appeals. Well-
established is the principle that the findings of facts of the latter are conclusive, unless: (1) the conclusion is a
finding grounded entirely on speculation or conjecture; (2) the inference made is manifestly absurd; (3) there is
grave abuse of discretion in the appreciation of facts; (4) the judgment is premised on a misapprehension of
facts; (5) the findings of fact are conflicting; and (6) the Court of Appeals, in making its findings, went beyond
the issues of the case and the same is contrary to the admissions of both the appellant and appellee. 14 Petitioner
has not convinced us that the instant case falls under any of the exceptions. On the contrary, we find the
findings of fact and conclusions of respondent Court of Appeals and that of the BPTTT to be fully supported by
the evidence and the applicable law and jurisprudence on the matter.

Petitioner's claim of violations of the due process and eminent domain clauses of the Bill of Rights are mere
conclusions which it failed to convincingly support. As to due the process argument, suffice it to say that full-
blown adversarial proceedings were conducted before the BPTTT pursuant to the Patent Law. We agree with
the Court of Appeals that the BPTTT exhaustively studied the facts and its findings were fully supported by
substantial evidence.

It cannot likewise be claimed that petitioner was unduly deprived of its property rights, as R.A. No. 165 not
only grants the patent holder a protective period of two years to enjoy his exclusive rights thereto; but
subsequently, the law recognizes just compensation in the form of royalties.15

In Parke, Davis & Co. v. Doctors' Pharmaceuticals, Inc.,16 we held:

 The right to exclude others from the manufacturing, using, or vending an invention relating to, food or
medicine should be conditioned to allowing any person to manufacture, use, or vend the same after a
period of three [now two] years from the date of the grant of the letters patent. After all, the patentee is
not entirely deprived of any proprietary right. In fact, he has been given the period of three years [now
two years] of complete monopoly over the patent. Compulsory licensing of a patent on food or medicine
without regard to the other conditions imposed in Section 34 [now Section 35] is not an undue
deprivation of proprietary interests over a patent right because the law sees to it that even after three
years of complete monopoly something is awarded to the inventor in the form of bilateral and workable
licensing agreement and a reasonable royalty to be agreed upon by the parties and in default of such an
agreement, the Director of Patents may fix the terms and conditions of the license.

As to the fourth assigned error, we hold that petitioner can no longer assail the jurisdiction of the BPTTT,
raising this issue only for the first time on appeal. In Pantranco North Express, Inc. v. Court of Appeals,17 we
ruled that where the issue of jurisdiction is raised for the first time on appeal, the party invoking it is so barred
on the ground of laches or estoppel under the circumstances therein stated. It is now settled that this rule applies
with equal force to quasi-judicial bodies18 such as the BPTTT. Here, petitioner have not furnished any cogent
reason to depart from this rule.

WHEREFORE, the petition is hereby DENIED and the challenged decision of the Court of Appeals in CA-G.R.
SP No. 33520 is AFFIRMED in toto.

Costs against petitioner.

SO ORDERED.
G.R. No. 121267            October 23, 2001

SMITH KLINE & FRENCH LABORATORIES, LTD. plaintiff-appellee,

vs.
COURT OF APPEALS and DANLEX RESEARCH LABORATORIES, INC., defendant-appellant.

KAPUNAN, J.:

This petition for review on certiorari assails the Decision dated January 27, 1995 of the Court of Appeals in CA-
G.R. SP No. 337701 which affirmed the decision of the Bureau of Patents, Trademarks and Technology
Transfer (BPTTT) granting a compulsory license to private respondent Danlex Research Laboratories for the
use of the pharmaceutical product Cimetidine. Likewise assailed is the July 25, 1995 Resolution of the Court of
Appeals denying the motion for reconsideration filed by petitioner Smith Kline and French Laboratories, Ltd.

Petitioner is the assignee of Letters Patent No. 12207 covering the pharmaceutical product Cimetidine, which
relates to derivatives of heterocyclicthio or lower alkoxy or amino lower alkyl thiourea, ureas or guanadines.
Said patent was issued by the BPTTT to Graham John Durant, John Collin Emmett and Robin Genellin on
November 29, 1978.2

On August 21, 1989, private respondent filed with the BPTTT a petition for compulsory license to manufacture
and produce its own brand of medicines using Cimetidine. Private respondent invoked Section 34 (1) (e) of
Republic Act No. 165,3 (the Patent Law) the law then governing patents, which states that an application for the
grant of a compulsory license under a particular patent may be filed with the BPTTT at any time after the lapse
of two (2) years from the date of grant of such patent, if the patented invention or article relates to food or
medicine, or manufactured substances which can be used as food or medicine, or is necessary for public health
or public safety.4 The petition for compulsory license stated that Cimetidine is useful as an antihistamine and in
the treatment of ulcers, and that private respondent is capable of using the patented product in the manufacture
of a useful product.5

Petitioner opposed the petition for compulsory license, arguing that the private respondent had no cause of
action and failed to allege how it intended to work the patented product. Petitioner further stated that its
manufacture, use and sales of Cimetidine satisfied the needs of the Philippine market, hence, there was no need
to grant a compulsory license to private respondent to manufacture, use and sell the same. Finally, petitioner
also claimed that the grant of a compulsory license to private respondent would not promote public safety and
that the latter was only motivated by pecuniary gain.6

After both parties were heard, the BPTTT rendered a decision directing the issuance of a compulsory license to
private respondent to use, manufacture and sell in the Philippines its own brand of pharmaceutical products
containing Cimetidine and ordered the payment by private respondent to petitioner of royalties at the rate of
2.5% of net sales in Philippine currency.7

Petitioner thereafter filed with the Court of Appeals a petition for review of the decision of the BPTTT, raising
the following arguments: (1) the BPTTT's decision is violative of the Paris Convention for the Protection of
Industrial Property; (2) said decision is an invalid exercise of police power; (3) the rate of royalties payable to
petitioner as fixed by the BPTTT was rendered without factual basis and amounts to an expropriation of private
property without just compensation; (4) the petition for compulsory license should have been dismissed by the
BPTTT for failure to prove the jurisdictional requirement of publication.8

On January 27, 1995, the Court of Appeals promulgated its Decision, the dispositive portion of which states:
 WHEREFORE, the petition is DENIED, and the decision of the Bureau of Patents, Trademarks and
Technology Transfer is hereby AFFIRMED, with costs against the Petitioner.

SO ORDERED.9

In affirming the decision of the BPTTT, the appellate court held that the grant of a compulsory license to private
respondent for the manufacture and use of Cimetidine is in accord with the Patent Law since the patented
product is medicinal in nature, and therefore necessary for the promotion of public health and safety. 10 It
explained further that the provisions of the Patent Law permitting the grant of a compulsory license are intended
not only to give a chance to others to supply the public with the quantity of the patented article but especially to
prevent the building up of patent monopolies. 11 Neither did the appellate court find the royalty rate of 2.5% of
net sales fixed by the BPTTT unreasonable, considering that what was granted under the compulsory license is
only the right to manufacture Cimetidine, without any technical assistance from petitioner, and royalty rates
identical to that fixed by the BPTTT have been prescribed for the grant of compulsory license in a good number
of patent cases.12 The Court of Appeals also ruled that contrary to petitioner's claim, private respondent
complied with the requirement of publication under the Patent Law and had submitted proof of such
compliance.13

Not satisfied with the appellate court's decision, petitioner filed a motion for reconsideration thereof as well as a
motion for the issuance of a temporary restraining order against private respondent's sister company, Montreal
Pharmaceutical, Inc. to refrain from marketing a product similar to Cimetidine, but both motions were denied by
the Court of Appeals in its Resolution of July 25, 1995.14

Petitioner thus filed the present petition on September 15, 1995, with the following assignment of errors:

I. The respondent Court erred in upholding the validity of the decision of public respondent BPTTT
which is an arbitrary exercise of police power and is violative of international law.

II. The respondent Court erred in holding that compulsory licensing will not create a confusion that the
patented product is the brainchild of private respondent Danlex and not of petitioner.

III.Assuming that the grant of compulsory license is in order, the respondent Court still erred in holding
that the BPTTT decision fixing the royalty at 2.5% of the net wholesale price in peso does not amount to
expropriation of private property without just compensation.

IV.The respondent Court erred in finding that the jurisdictional requirement of publication in a
newspaper of general circulation for three (3) consecutive weeks has been complied with by private
respondent Danlex.15

While petitioner concedes that the State in the exercise of police power may regulate the manufacture and use of
medicines through the enactment and implementation of pertinent laws, it states that such exercise is valid only
if the means employed are reasonably necessary for the accomplishment of the purpose and if not unduly
oppressive.16 According to petitioner, the grant of a compulsory license to private respondent is an invalid
exercise of police power since it was not shown that there is an overwhelming public necessity for such grant,
considering that petitioner is able to provide an adequate supply of i to satisfy the needs of the Philippine
market. Petitioner also claims that the grant of a compulsory license to private respondent unjustly deprives it of
a reasonable return on its investment. 17 It argues further that the provisions of the Patent Law on compulsory
licensing contravene the Convention of Paris for the Protection of Industrial Property 18 (Paris Convention),
which allegedly permits the granting of a compulsory license over a patented product only to prevent abuses
which might result from the exercise of the exclusive rights conferred by the patent, 19 or on the ground of failure
to work or insufficient working of the patented product, within four years from the date of filing of the patent
application or three years from the date of grant of the patent, whichever expires last.20 Petitioner opines that the
inclusion of grounds for the grant of a compulsory license in Section 34 of the Patent Law other than those
provided under the Paris Convention constitutes a violation of the Philippines' obligation to adhere to the
provisions of said treaty.21

It is also contended by petitioner that the grant of a compulsory license to private respondent will allow the
latter to liberally manufacture and sell medicinal products containing Cimetidine without even extending to
petitioner due recognition for pioneering the development and worldwide acceptance of said invention, and will
unreasonably dilute petitioner's right over the patent.22

Petitioner likewise asseverates that the rate of royalty fixed by the BPTTT at 2.5% of net sales is grossly
inadequate, taking into consideration its huge investments of money, time and other resources in the research
and development, as well as marketing of Cimetidine. It is further alleged that such rate has no factual basis
since the appellate court and the BPTTT relied solely on analogous cases and did not explain how such rate was
arrived at.23

Lastly, petitioner claims that the appellate court erred in ruling that private respondent had complied with the
requirement of publication of the notice of the filing of the petition for compulsory license because private
respondent failed to formally offer in evidence copies of the notice of filing of the petition and notice of the date
of hearing thereof as published and the affidavits of publication thereof. Thus, it says, the BPTTT did not
properly acquire jurisdiction over the petition for compulsory license.24

In its Comment to the Petition, private respondent adopted the reasoning of the Court of Appeals in the assailed
decision and prayed that the petition be denied for lack of merit.25

The petition has no merit.

The Court of Appeals did not err in affirming the validity of the grant by the BPTTT of a compulsory license to
private respondent for the use, manufacture and sale of Cimetidine. The said grant is in accord with Section 34
of the Patent Law which provides:

Grounds for Compulsory Licensing.— (1) Any person may apply to the Director for the grant of a
license under a particular patent at any time after the expiration of two years from the date of the
grant of the patent, under any of the following circumstances:

(a) If the patented invention is not being worked within the Philippines on a commercial scale, although
capable of being so worked, without satisfactory reason;

(b) If the demand of the patented article in the Philippines is not being met to an adequate extent and on
reasonable terms;

(c) If, by reason of refusal of the patentee to grant a license or licenses on reasonable terms, or by reason
of the conditions attached by the patentee to licensee or to the purchase, lease or use of the patented
article or working of the patented process or machine for production, the establishment of any new trade
or industry in the Philippines is prevented, or the trade or industry therein is unduly restrained;

(d) If the working of the invention within the country is being prevented or hindered by the importation
of the patented article;

(e) If the patented invention or article relates to food or medicine or manufactured substances
which can be used as food or medicine, or is necessary for public health or public safety.
 (2) In any of the above cases, a compulsory license shall be granted to the petitioner provided that
he has proved his capability to work the patented product or to make use of the patented product
in the manufacture of a useful product, or to employ the patented process.

(3) The term "worked" or "working" as used in this section means the manufacture and sale of the
patented article, of patented machine, or the application of the patented process for production, in or by
means of a definite and substantial establishment or organization in the Philippines and on a scale which
is reasonable and adequate under the circumstances. Importation shall not constitute "working".
(Emphasis supplied.)

The grant of the compulsory license satisfies the requirements of the foregoing provision. More than ten years
have passed since the patent for Cimetidine was issued to petitioner and its predecessors-in-interest, and the
compulsory license applied for by private respondent is for the use, manufacture and sale of a medicinal
product. Furthermore, both the appellate court and the BPTTT found that private respondent had the capability
to work Cimetidine or to make use thereof in the manufacture of a useful product.

Petitioner's contention that Section 34 of the Patent Law contravenes the Paris Convention because the former
provides for grounds for the grant of a compulsory license in addition to those found in the latter, is likewise
incorrect. Article 5, Section A(2) of the Paris Convention states:

Each country of the union shall have the right to take legislative measures providing for the grant of
compulsory licenses to prevent the abuses which might result from the exercise of the exclusive rights
conferred by the patent, for example, failure to work.26

This issue has already been resolved by this Court in the case of Smith Kline & French Laboratories, Ltd. vs.
Court of Appeals,27 where petitioner herein questioned the BPTTT's grant of a compulsory license to Doctors
Pharmaceuticals, Inc. also for the manufacture, use and sale of Cimetidine. We found no inconsistency between
Section 34 and the Paris Convention and held that:

It is thus clear that Section A(2) of Article 5 [of the Paris Convention] unequivocally and explicitly respects
the right of member countries to adopt legislative measures to provide for the grant of compulsory
licenses to prevent abuses which might result from the exercise of the exclusive rights conferred by the
patent. An example provided of possible abuses is "failure to work;" however, as such, is merely supplied
by way of an example, it is plain that the treaty does not preclude the inclusion of other forms of
categories of abuses.

Section 34 of R.A. No. 165, even if the Act was enacted prior to the Philippines' adhesion to the Convention,
fits well within the aforequoted provisions of Article 5 of the Paris Convention. In the explanatory note of Bill
No. 1156 which eventually became R.A. No. 165, the legislative intent in the grant of a compulsory license
was not only to afford others an opportunity to provide the public with the quantity of the patented
product, but also to prevent the growth of monopolies [Congressional Record, House of Representatives, 12
May 957, 998]. Certainly, the growth of monopolies was among the abuses which Section A, Article 5 of
the Convention foresaw, and which our Congress likewise wished to prevent in enacting R.A. No. 165. 28
(Emphasis supplied.)

Neither does the Court agree with petitioner that the grant of the compulsory license to private respondent was
erroneous because the same would lead the public to think that the Cimetidine is the invention of private
respondent and not of petitioner. Such fears are unfounded since, as the appellate court pointed out in the
assailed decision, by the grant of the compulsory license, private respondent as licensee explicitly acknowledges
that petitioner is the source of the patented product Cimetidine.29 Even assuming arguendo that such confusion
may indeed occur, the disadvantage is far outweighed by the benefits resulting from the grant of the compulsory
license, such as an increased supply of pharmaceutical products containing Cimetidine, and the consequent
reduction in the prices thereof.30

There is likewise no basis for the allegation that the grant of a compulsory license to private respondent results
in the deprivation of petitioner's property without just compensation. It must be pointed out that as owner of
Letters Patent No. 12207, petitioner had already enjoyed exclusive rights to manufacture, use and sell
Cimetidine for at least two years from its grant in November, 1978. Even if other entities like private respondent
are subsequently allowed to manufacture, use and sell the patented invention by virtue of a compulsory license,
petitioner as owner of the patent would still receive remuneration for the use of such product in the form of
royalties.

Anent the perceived inadequacy of the royalty awarded to petitioner, the Court of Appeals correctly held that
the rate of 2.5% of net wholesale price fixed by the Director of the BPTTT is in accord with the Patent Law.
Said law provides:

Sec. 35. Grant of License.—(1) If the Director finds that a case for the grant of a license under Section
34 hereof has been made out, he shall, within one hundred eighty days from the date the petition was
filed, order the grant of an appropriate license. The order shall state the terms and conditions of the
license which he himself must fix in default of an agreement on the matter manifested or
submitted by the parties during the hearing.

xxx

Section 35-B. Terms and Conditions of Compulsory License. – (1) A compulsory license shall be non-
exclusive, but this shall be without prejudice to the licensee's right to oppose an application for such a
new license.

(2) The terms and conditions of a compulsory license, fixed in accordance with Section 35, may contain
obligations and restrictions both for the licensee and for the registered owner of the patent.

(3) A compulsory license shall only be granted subject to the payment of adequate royalties
commensurate with the extent to which the invention is worked. However, royalty payments shall
not exceed five percent (5%) of the net wholesale price (as defined in Section 33-A) of the products
manufactured under the license. If the product, substance, or process subject of the compulsory license is
involved in an industrial project approved by the Board of Investments, the royalty payable to the
patentee or patentees shall not exceed three percent (3%) of the net wholesale price (as defined in
Section 33-A) of the patented commodity/and or commodity manufactured under the patented process;
the same rate of royalty shall be paid whenever two or more patents are involved; which royalty shall be
distributed to the patentees in rates proportional to the extent of commercial use by the licensee giving
preferential values to the holder of the oldest subsisting product patent.

xxx

Under the aforequoted provisions, in the absence of any agreement between the parties with respect to a
compulsory license, the Director of the BPTTT may fix the terms thereof, including the rate of the royalty
payable to the licensor. The law explicitly provides that the rate of royalty shall not exceed five percent (5%) of
the net wholesale price.

The Court agrees with the appellate court's ruling that the rate of royalty payments fixed by the Director of the
BPTTT is reasonable. The appellate court, citing Price vs. United Laboratories,31 ruled as such, considering that
the compulsory license awarded to private respondent consists only of the bare right to use the patented
invention in the manufacture of another product, without any technical assistance from the licensor. 32
Furthermore, this Court had earlier noted in the Price case that identical royalty rates have been prescribed by
the Director of the BPTTT in numerous patent cases.33

There was thus no error on the part of the Court of Appeals in affirming the royalty rate fixed by the Director of
the BPTTT, since it was not shown that the latter erred or abused his discretion in prescribing said rate. The rule
is that factual findings of administrative bodies, which are considered as experts in their respective fields, are
accorded not only respect but even finality if the same are supported by substantial evidence.34

Finally, as to the alleged lack of jurisdiction of the BPTTT over the petition filed by private respondent for
failure to comply with the publication requirement under Section 35-F of R.A. No. 165, the Court holds that
petitioner is estopped from questioning the same since it did not raise the issue of lack of jurisdiction at the
earliest possible opportunity, i.e., during the hearings before the BPTTT. 35 The Court notes that petitioner raised
this contention for the first time when it appealed the case to the appellate court.

WHEREFORE, the petition is hereby DENIED for lack of merit and the Decision of the Court of Appeals is
hereby AFFIRMED.

SO ORDERED.
G.R. No. L-4572             May 22, 1953

DOLORITO M. FELICIANO and MAXIMO B. TAPINIO, applicants-appellees.

MELITON D ALBAÑA, petitioner-appellant,
vs.
THE DIRECTOR OF PATENT, respondent-appelle.

Meliton D. Albaña in his own behalf.

Office of the Solicitor General Pompeyo Diaz and Solicitor Pacifico P. de Castro for respondent and appellee.

PADILLA, J.:

An application for patent was filed with the Patent Office.

Pending examination of the application, Meliton D. Albaña filed a motion to intervene claiming that the
applicant-inventors had "sold and/or bartered and assigned to him their right to contract or deal the sale of their
invention called Fel-Tap Meter Guard and Detector to or though the Corporation that they were then organizing
under his direction and to fix and decide on the purchase price of it to at least P200,000 in installments cash and
P300,000 in shares of stock of said Corporation . . ." and praying that applicant-inventor Maximo D. Tapinio be
compelled to sign a contract (Appendix I) and, together with the other applicant-inventor Dolorito M. Feliciano
who had already signed it, to acknowledge it and another contract (Appendix II) before a notary public, to have
both contracts recorded in the Patent Office and in the Office of the Register of Deeds, and that the patent for
the invention be issued in his name and in the name of the inventors.

The motion was denied on the ground under the provisions of the Patent Law (Republic Act No. 165) the
Director of Patents has no jurisdiction or power to decide the question submitted to him.

The movant filed an amended motion to intervene claiming "that he is the assignee of inventors Dolorito M.
Feliciano and Maximo Tapinio of the undivided part interest in the invention for whose letter-patent the named
petitioners Dolorito M. Feliciano and Maximo Tapinio are herein applying."

The amended motion was denied on the ground that the assignment made to the movant is not one of exclusive
right to make, use the sell1 the electrical contrivance for which a patent is applied for; that it is just an authority
to act as the selling agent for the inventors of the patent, if granted, and the invention covered thereby and to
receive compensation therefor; and that not being entitled to have his name included as one of the patentees, if
patent for the invention be granted, the movant has no right to intervene in the proceedings for the grant of the
patent.

An exception to and a motion for reconsideration of the proceeding order were noted and denied.

From the orders denying his motions to intervene the movant has appealed.2

What the appellant attempted to secure by his motion to intervene is clearly beyond the jurisdiction and
authority of the Director of Patents to grant. Despite the amendment to the first motion to the intervene by
which he claims assignment of the invention, still it remains that the alleged assignment is not the invention but
it is an agreement whereby he is to act as selling agent for the inventors of the patent (if granted) and of the
invention covered thereby and to receive compensation therefor. This finding of the Director of Patents is
supported by the following clauses found in the contract (Appendix I): "We (the inventors) . . . hereby declare
and ratify that both of us are the co-inventors and joint fifty-fifty owners of the "Fel-Tap Electric Meter Guard
& Detector' . . . ." "We are now organizing a Corporation under the direction of Mr. Albaña (Meliton D.
Albaña) to exploit and industrialize the invention . . . which we promise hereby to sell to said Corporation with
its letter-patent . . . except the Royalty Right of the same, . . . ." "For and in consideration of the monetary and
other helps (help) that said Mr. Meliton D. Albaña . . . has rendered and is rendering us . . . of approaching,
interesting and looking for subscribers and prayers to the capital stocks (stock) of said Corporation to be . . . we
hereby promise and actually pay to said Mr. Albaña in installment fifty thousand pesos (P50,000) of said
P200,000 installments cash purchase price . . . ." The above quoted terms and stipulations of the executory
contract clearly show that it was not an assignment of the invention and the patent applied for.

Assignments of patents and inventions covered thereby may be recorded in books and records kept for the
purpose in the Patent Office is presented in due form; 3 but the appellant does not ask for the registration of the
alleged agreement between him and the inventors, because as it is not in due form it cannot be recorded, but
prays that the Director of Patents compel applicant-inventor Maximo B. Tapinio to sign the contract executed
and signed by the other applicant-inventor Dolorito M. Feliciano on 14 March 1950 (Appendix I) and both
applicant-inventors to acknowledge it and another document which by all indication refers to the minutes of a
meeting of the organizers of the Manufacturing Corporation held on 30 March 1950, before a notary public, and
then to have both documents recorded in the Patent Office and in the office of the Registrar of Deeds. Under the
provisions of the Patent Law (Republic Act No. 165), the Director of Patent has no power and authority to
compel the applicant-inventors to do what the appellant is asking them to perform. What the appellant asked the
Director Patents to do for him is essentially a judicial function which would require the determination or finding
by a court of competent jurisdiction as to whether there was a meeting of the minds of the contracting parties
before it could compel the applicant-inventors to perform what the appellant prays the court to order them to do.
Aside from want of authority and power, the Director of Patent lacks the means to make such determination and
finding which would be necessary before he could act on the appellant's motion.

The orders appealed from are affirmed, with costs against the appellant.
G.R. No. 161295               June 29, 2005

JESSIE G. CHING, petitioner,

vs.
WILLIAM M. SALINAS, SR., WILLIAM M. SALINAS, JR., JOSEPHINE L. SALINAS, JENNIFER Y.
SALINAS, ALONTO SOLAIMAN SALLE, JOHN ERIC I. SALINAS, NOEL M. YABUT (Board of
Directors and Officers of WILAWARE PRODUCT CORPORATION), respondents.

DECISION

CALLEJO, SR., J.:

This petition for review on certiorari assails the Decision1 and Resolution2 of the Court of Appeals (CA) in CA-
G.R. SP No. 70411 affirming the January 3, 2002 and February 14, 2002 Orders 3 of the Regional Trial Court
(RTC) of Manila, Branch 1, which quashed and set aside Search Warrant Nos. 01-2401 and 01-2402 granted in
favor of petitioner Jessie G. Ching.

Jessie G. Ching is the owner and general manager of Jeshicris Manufacturing Co., the maker and manufacturer
of a Utility Model, described as "Leaf Spring Eye Bushing for Automobile" made up of plastic.

On September 4, 2001, Ching and Joseph Yu were issued by the National Library Certificates of Copyright
Registration and Deposit of the said work described therein as "Leaf Spring Eye Bushing for Automobile."4

On September 20, 2001, Ching requested the National Bureau of Investigation (NBI) for police/investigative
assistance for the apprehension and prosecution of illegal manufacturers, producers and/or distributors of the
works.5

After due investigation, the NBI filed applications for search warrants in the RTC of Manila against William
Salinas, Sr. and the officers and members of the Board of Directors of Wilaware Product Corporation. It was
alleged that the respondents therein reproduced and distributed the said models penalized under Sections 177.1
and 177.3 of Republic Act (R.A.) No. 8293. The applications sought the seizure of the following:

a.) Undetermined quantity of Leaf spring eye bushing for automobile that are made up of plastic
polypropylene;

b.) Undetermined quantity of Leaf spring eye bushing for automobile that are made up of polyvinyl
chloride plastic;

c.) Undetermined quantity of Vehicle bearing cushion that is made up of polyvinyl chloride plastic;

d.) Undetermined quantity of Dies and jigs, patterns and flasks used in the manufacture/fabrication of
items a to d;

e.) Evidences of sale which include delivery receipts, invoices and official receipts.6

The RTC granted the application and issued Search Warrant Nos. 01-2401 and 01-2402 for the seizure of the
aforecited articles.7 In the inventory submitted by the NBI agent, it appears that the following articles/items
were seized based on the search warrants:

Leaf Spring eye bushing

 a) Plastic Polypropylene

- C190 27 }

- C240 rear 40 }

- C240 front 41 } BAG 1

b) Polyvinyl Chloride Plastic

- C190 13 }

c) Vehicle bearing cushion

- center bearing cushion 11 }

Budder for C190 mold 8 }

Diesel Mold

a) Mold for spring eye bushing rear 1 set

b) Mold for spring eye bushing front 1 set

c) Mold for spring eye bushing for C190 1 set

d) Mold for C240 rear 1 piece of the set

e) Mold for spring eye bushing for L300 2 sets

f) Mold for leaf spring eye bushing C190 with metal 1 set

g) Mold for vehicle bearing cushion 1 set8

The respondents filed a motion to quash the search warrants on the following grounds:

2. The copyright registrations were issued in violation of the Intellectual Property Code on the ground that:

a) the subject matter of the registrations are not artistic or literary;

b) the subject matter of the registrations are spare parts of automobiles meaning – there (sic) are original
parts that they are designed to replace. Hence, they are not original.9

The respondents averred that the works covered by the certificates issued by the National Library are not artistic
in nature; they are considered automotive spare parts and pertain to technology. They aver that the models are
not original, and as such are the proper subject of a patent, not copyright.10

In opposing the motion, the petitioner averred that the court which issued the search warrants was not the proper
forum in which to articulate the issue of the validity of the copyrights issued to him. Citing the ruling of the
Court in Malaloan v. Court of Appeals,11 the petitioner stated that a search warrant is merely a judicial process
designed by the Rules of Court in anticipation of a criminal case. Until his copyright was nullified in a proper
proceeding, he enjoys rights of a registered owner/holder thereof.

On January 3, 2002, the trial court issued an Order 12 granting the motion, and quashed the search warrant on its
finding that there was no probable cause for its issuance. The court ruled that the work covered by the
certificates issued to the petitioner pertained to solutions to technical problems, not literary and artistic as
provided in Article 172 of the Intellectual Property Code.

His motion for reconsideration of the order having been denied by the trial court’s Order of February 14, 2002,
the petitioner filed a petition for certiorari in the CA, contending that the RTC had no jurisdiction to delve into
and resolve the validity of the copyright certificates issued to him by the National Library. He insisted that his
works are covered by Sections 172.1 and 172.2 of the Intellectual Property Code. The petitioner averred that the
copyright certificates are prima facie evidence of its validity, citing the ruling of the United States Court of
Appeals in Wildlife Express Corporation v. Carol Wright Sales, Inc.13 The petitioner asserted that the
respondents failed to adduce evidence to support their motion to quash the search warrants. The petitioner noted
that respondent William Salinas, Jr. was not being honest, as he was able to secure a similar copyright
registration of a similar product from the National Library on January 14, 2002.

On September 26, 2003, the CA rendered judgment dismissing the petition on its finding that the RTC did not
commit any grave abuse of its discretion in issuing the assailed order, to wit:

It is settled that preliminarily, there must be a finding that a specific offense must have been committed to
justify the issuance of a search warrant. In a number of cases decided by the Supreme Court, the same is
explicitly provided, thus:

"The probable cause must be in connection with one specific offense, and the judge must, before issuing the
warrant, personally examine in the form of searching questions and answers, in writing and under oath, the
complainant and any witness he may produce, on facts personally known to them and attach to the record their
sworn statements together with any affidavit submitted.

"In the determination of probable cause, the court must necessarily resolve whether or not an offense exists to
justify the issuance or quashal of the search warrant."

In the instant case, the petitioner is praying for the reinstatement of the search warrants issued, but subsequently
quashed, for the offense of Violation of Class Designation of Copyrightable Works under Section 177.1 in
relation to Section 177.3 of Republic Act 8293, when the objects subject of the same, are patently not
copyrightable.

It is worthy to state that the works protected under the Law on Copyright are: literary or artistic works (Sec.
172) and derivative works (Sec. 173). The Leaf Spring Eye Bushing and Vehicle Bearing Cushion fall on
neither classification. Accordingly, if, in the first place, the item subject of the petition is not entitled to be
protected by the law on copyright, how can there be any violation?14

The petitioner’s motion for reconsideration of the said decision suffered the same fate. The petitioner forthwith
filed the present petition for review on certiorari, contending that the revocation of his copyright certificates
should be raised in a direct action and not in a search warrant proceeding.

The petitioner posits that even assuming ex argumenti that the trial court may resolve the validity of his
copyright in a proceeding to quash a search warrant for allegedly infringing items, the RTC committed a grave
abuse of its discretion when it declared that his works are not copyrightable in the first place. He claims that
R.A. No. 8293, otherwise known as the Intellectual Property Code of the Philippines, which took effect on
January 1, 1998, provides in no uncertain terms that copyright protection automatically attaches to a work by
the sole fact of its creation, irrespective of its mode or form of expression, as well as of its content, quality or
purpose.15 The law gives a non-inclusive definition of "work" as referring to original intellectual creations in the
literary and artistic domain protected from the moment of their creation; and includes original ornamental
designs or models for articles of manufacture, whether or not registrable as an industrial design and other works
of applied art under Section 172.1(h) of R.A. No. 8293.lawphil.net

As such, the petitioner insists, notwithstanding the classification of the works as either literary and/or artistic,
the said law, likewise, encompasses works which may have a bearing on the utility aspect to which the
petitioner’s utility designs were classified. Moreover, according to the petitioner, what the Copyright Law
protects is the author’s intellectual creation, regardless of whether it is one with utilitarian functions or
incorporated in a useful article produced on an industrial scale.

The petitioner also maintains that the law does not provide that the intended use or use in industry of an article
eligible for patent bars or invalidates its registration under the Law on Copyright. The test of protection for the
aesthetic is not beauty and utility, but art for the copyright and invention of original and ornamental design for
design patents.16 In like manner, the fact that his utility designs or models for articles of manufacture have been
expressed in the field of automotive parts, or based on something already in the public domain does not
automatically remove them from the protection of the Law on Copyright.17

The petitioner faults the CA for ignoring Section 218 of R.A. No. 8293 which gives the same presumption to an
affidavit executed by an author who claims copyright ownership of his work.

The petitioner adds that a finding of probable cause to justify the issuance of a search warrant means merely a
reasonable suspicion of the commission of the offense. It is not equivalent to absolute certainty or a finding of
actual and positive cause.18 He assists that the determination of probable cause does not concern the issue of
whether or not the alleged work is copyrightable. He maintains that to justify a finding of probable cause in the
issuance of a search warrant, it is enough that there exists a reasonable suspicion of the commission of the
offense.

The petitioner contends that he has in his favor the benefit of the presumption that his copyright is valid; hence,
the burden of overturning this presumption is on the alleged infringers, the respondents herein. But this burden
cannot be carried in a hearing on a proceeding to quash the search warrants, as the issue therein is whether there
was probable cause for the issuance of the search warrant. The petitioner concludes that the issue of probable
cause should be resolved without invalidating his copyright.

In their comment on the petition, the respondents aver that the work of the petitioner is essentially a technical
solution to the problem of wear and tear in automobiles, the substitution of materials, i.e., from rubber to plastic
matter of polyvinyl chloride, an oil resistant soft texture plastic material strong enough to endure pressure
brought about by the vibration of the counter bearing and thus brings bushings. Such work, the respondents
assert, is the subject of copyright under Section 172.1 of R.A. No. 8293. The respondents posit that a technical
solution in any field of human activity which is novel may be the subject of a patent, and not of a copyright.
They insist that the certificates issued by the National Library are only certifications that, at a point in time, a
certain work was deposited in the said office. Furthermore, the registration of copyrights does not provide for
automatic protection. Citing Section 218.2(b) of R.A. No. 8293, the respondents aver that no copyright is said to
exist if a party categorically questions its existence and legality. Moreover, under Section 2, Rule 7 of the
Implementing Rules of R.A. No. 8293, the registration and deposit of work is not conclusive as to copyright
outlay or the time of copyright or the right of the copyright owner. The respondents maintain that a copyright
exists only when the work is covered by the protection of R.A. No. 8293.

The petition has no merit.

The RTC had jurisdiction to delve into and resolve the issue whether the petitioner’s utility models are
copyrightable and, if so, whether he is the owner of a copyright over the said models. It bears stressing that
upon the filing of the application for search warrant, the RTC was duty-bound to determine whether probable
cause existed, in accordance with Section 4, Rule 126 of the Rules of Criminal Procedure:

SEC. 4. Requisite for issuing search warrant. – A search warrant shall not issue but upon probable cause in
connection with one specific offense to be determined personally by the judge after examination under oath or
affirmation of the complainant and the witnesses he may produce, and, particularly, describing the place to be
searched and the things to be seized.

In Solid Triangle Sales Corporation v. The Sheriff of RTC QC, Br. 93,19 the Court held that in the determination
of probable cause, the court must necessarily resolve whether or not an offense exists to justify the issuance of a
search warrant or the quashal of one already issued by the court. Indeed, probable cause is deemed to exist only
where facts and circumstances exist which could lead a reasonably cautious and prudent man to believe that an
offense has been committed or is being committed. Besides, in Section 3, Rule 126 of the Rules of Criminal
Procedure, a search warrant may be issued for the search and seizure of personal property (a) subject of the
offense; (b) stolen or embezzled and other proceeds or fruits of the offense; or (c) used or intended to be used as
the means of committing an offense.

The RTC is mandated under the Constitution and Rules of Criminal Procedure to determine probable cause. The
court cannot abdicate its constitutional obligation by refusing to determine whether an offense has been
committed.20 The absence of probable cause will cause the outright nullification of the search warrant.21

For the RTC to determine whether the crime for infringement under R.A. No. 8293 as alleged in an application
is committed, the petitioner-applicant was burdened to prove that (a) respondents Jessie Ching and Joseph Yu
were the owners of copyrighted material; and (b) the copyrighted material was being copied and distributed by
the respondents. Thus, the ownership of a valid copyright is essential.22

Ownership of copyrighted material is shown by proof of originality and copyrightability. By originality is meant
that the material was not copied, and evidences at least minimal creativity; that it was independently created by
the author and that it possesses at least same minimal degree of creativity. 23 Copying is shown by proof of
access to copyrighted material and substantial similarity between the two works. 24 The applicant must thus
demonstrate the existence and the validity of his copyright because in the absence of copyright protection, even
original creation may be freely copied.25

By requesting the NBI to investigate and, if feasible, file an application for a search warrant for infringement
under R.A. No. 8293 against the respondents, the petitioner thereby authorized the RTC (in resolving the
application), to delve into and determine the validity of the copyright which he claimed he had over the utility
models. The petitioner cannot seek relief from the RTC based on his claim that he was the copyright owner over
the utility models and, at the same time, repudiate the court’s jurisdiction to ascertain the validity of his claim
without running afoul to the doctrine of estoppel.

To discharge his burden, the applicant may present the certificate of registration covering the work or, in its
absence, other evidence.26 A copyright certificate provides prima facie evidence of originality which is one
element of copyright validity. It constitutes prima facie evidence of both validity and ownership27 and the
validity of the facts stated in the certificate. 28 The presumption of validity to a certificate of copyright
registration merely orders the burden of proof. The applicant should not ordinarily be forced, in the first
instance, to prove all the multiple facts that underline the validity of the copyright unless the respondent,
effectively challenging them, shifts the burden of doing so to the applicant. 29 Indeed, Section 218.2 of R.A. No.
8293 provides:

218.2. In an action under this Chapter:

 (a) Copyright shall be presumed to subsist in the work or other subject matter to which the action relates
if the defendant does not put in issue the question whether copyright subsists in the work or other subject
matter; and

(b) Where the subsistence of the copyright is established, the plaintiff shall be presumed to be the owner
of the copyright if he claims to be the owner of the copyright and the defendant does not put in issue the
question of his ownership.

A certificate of registration creates no rebuttable presumption of copyright validity where other evidence in the
record casts doubt on the question. In such a case, validity will not be presumed.30

To discharge his burden of probable cause for the issuance of a search warrant for violation of R.A. No. 8293,
the petitioner-applicant submitted to the RTC Certificate of Copyright Registration Nos. 2001-197 and 2001-
204 dated September 3, 2001 and September 4, 2001, respectively, issued by the National Library covering
work identified as Leaf Spring Eye Bushing for Automobile and Vehicle Bearing Cushion both classified under
Section 172.1(h) of R.A. No. 8293, to wit:

SEC. 172. Literary and Artistic Works. – 172.1. Literary and artistic works, hereinafter referred to as "works,"
are original intellectual creations in the literary and artistic domain protected from the moment of their creation
and shall include in particular:

...

(h) Original ornamental designs or models for articles of manufacture, whether or not registrable as an industrial
design, and other works of applied art.

Related to the provision is Section 171.10, which provides that a "work of applied art" is an artistic creation
with utilitarian functions or incorporated in a useful article, whether made by hand or produced on an industrial
scale.

But, as gleaned from the specifications appended to the application for a copyright certificate filed by the
petitioner, the said Leaf Spring Eye Bushing for Automobile is merely a utility model described as comprising a
generally cylindrical body having a co-axial bore that is centrally located and provided with a perpendicular
flange on one of its ends and a cylindrical metal jacket surrounding the peripheral walls of said body, with the
bushing made of plastic that is either polyvinyl chloride or polypropylene. 31 Likewise, the Vehicle Bearing
Cushion is illustrated as a bearing cushion comprising a generally semi-circular body having a central hole to
secure a conventional bearing and a plurality of ridges provided therefore, with said cushion bearing being
made of the same plastic materials. 32 Plainly, these are not literary or artistic works. They are not intellectual
creations in the literary and artistic domain, or works of applied art. They are certainly not ornamental designs
or one having decorative quality or value.

It bears stressing that the focus of copyright is the usefulness of the artistic design, and not its marketability.
The central inquiry is whether the article is a work of art. 33 Works for applied art include all original pictorials,
graphics, and sculptural works that are intended to be or have been embodied in useful article regardless of
factors such as mass production, commercial exploitation, and the potential availability of design patent
protection.34

As gleaned from the description of the models and their objectives, these articles are useful articles which are
defined as one having an intrinsic utilitarian function that is not merely to portray the appearance of the article
or to convey information. Indeed, while works of applied art, original intellectual, literary and artistic works are
copyrightable, useful articles and works of industrial design are not. 35 A useful article may be copyrightable
only if and only to the extent that such design incorporates pictorial, graphic, or sculptural features that can be
identified separately from, and are capable of existing independently of the utilitarian aspects of the article.

We agree with the contention of the petitioner (citing Section 171.10 of R.A. No. 8293), that the author’s
intellectual creation, regardless of whether it is a creation with utilitarian functions or incorporated in a useful
article produced on an industrial scale, is protected by copyright law. However, the law refers to a "work of
applied art which is an artistic creation." It bears stressing that there is no copyright protection for works of
applied art or industrial design which have aesthetic or artistic features that cannot be identified separately from
the utilitarian aspects of the article.36 Functional components of useful articles, no matter how artistically
designed, have generally been denied copyright protection unless they are separable from the useful article.37

In this case, the petitioner’s models are not works of applied art, nor artistic works. They are utility models,
useful articles, albeit with no artistic design or value. Thus, the petitioner described the utility model as follows:

LEAF SPRING EYE BUSHING FOR AUTOMOBILE

Known bushings inserted to leaf-spring eye to hold leaf-springs of automobile are made of hard rubber. These
rubber bushings after a time, upon subjecting them to so much or intermittent pressure would eventually wore
(sic) out that would cause the wobbling of the leaf spring.

The primary object of this utility model, therefore, is to provide a leaf-spring eye bushing for automobile that is
made up of plastic.

Another object of this utility model is to provide a leaf-spring eye bushing for automobiles made of polyvinyl
chloride, an oil resistant soft texture plastic or polypropylene, a hard plastic, yet both causes cushion to the leaf
spring, yet strong enough to endure pressure brought about by the up and down movement of said leaf spring.

Yet, an object of this utility model is to provide a leaf-spring eye bushing for automobiles that has a much
longer life span than the rubber bushings.

Still an object of this utility model is to provide a leaf-spring eye bushing for automobiles that has a very simple
construction and can be made using simple and ordinary molding equipment.

A further object of this utility model is to provide a leaf-spring eye bushing for automobile that is supplied with
a metal jacket to reinforce the plastic eye bushing when in engaged with the steel material of the leaf spring.

These and other objects and advantages will come to view and be understood upon a reading of the detailed
description when taken in conjunction with the accompanying drawings.

Figure 1 is an exploded perspective of a leaf-spring eye bushing according to the present utility model;

Figure 2 is a sectional view taken along line 2-2 of Fig. 1;

Figure 3 is a longitudinal sectional view of another embodiment of this utility model;

Figure 4 is a perspective view of a third embodiment; and

Figure 5 is a sectional view thereof.

Referring now to the several views of the drawings wherein like reference numerals designated same parts
throughout, there is shown a utility model for a leaf-spring eye bushing for automobile generally designated as
reference numeral 10.

Said leaf-spring eye bushing 10 comprises a generally cylindrical body 11 having a co-axial bore 12 centrally
provided thereof.

As shown in Figs. 1 and 2, said leaf-spring eye bushing 10 is provided with a perpendicular flange 13 on one of
its ends and a cylindrical metal jacket 14 surrounding the peripheral walls 15 of said body 11. When said leaf-
spring bushing 10 is installed, the metal jacket 14 acts with the leaf-spring eye (not shown), which is also made
of steel or cast steel. In effect, the bushing 10 will not be directly in contact with steel, but rather the metal
jacket, making the life of the bushing 10 longer than those without the metal jacket.

In Figure 2, the bushing 10 as shown is made of plastic, preferably polyvinyl chloride, an oil resistant soft
texture plastic or a hard polypropylene plastic, both are capable to endure the pressure applied thereto, and, in
effect, would lengthen the life and replacement therefor.

Figure 3, on the other hand, shows the walls 16 of the co-axial bore 12 of said bushing 10 is insertably provided
with a steel tube 17 to reinforce the inner portion thereof. This steel tube 17 accommodates or engages with the
leaf-spring bolt (not shown) connecting the leaf spring and the automobile’s chassis.

Figures 4 and 5 show another embodiment wherein the leaf eye bushing 10 is elongated and cylindrical as to its
construction. Said another embodiment is also made of polypropylene or polyvinyl chloride plastic material.
The steel tube 17 and metal jacket 14 may also be applied to this embodiment as an option thereof.38

VEHICLE BEARING CUSHION

Known bearing cushions inserted to bearing housings for vehicle propeller shafts are made of hard rubber.
These rubber bushings after a time, upon subjecting them to so much or intermittent pressure would eventually
be worn out that would cause the wobbling of the center bearing.

The primary object of this utility model therefore is to provide a vehicle-bearing cushion that is made up of
plastic.

Another object of this utility model is to provide a vehicle bearing cushion made of polyvinyl chloride, an oil
resistant soft texture plastic material which causes cushion to the propeller’s center bearing, yet strong enough
to endure pressure brought about by the vibration of the center bearing.

Yet, an object of this utility model is to provide a vehicle-bearing cushion that has a much longer life span than
rubber bushings.

Still an object of this utility model is to provide a vehicle bearing cushion that has a very simple construction
and can be made using simple and ordinary molding equipment.

These and other objects and advantages will come to view and be understood upon a reading of the detailed
description when taken in conjunction with the accompanying drawings.

Figure 1 is a perspective view of the present utility model for a vehicle-bearing cushion; and

Figure 2 is a sectional view thereof.

Referring now to the several views of the drawing, wherein like reference numeral designate same parts
throughout, there is shown a utility model for a vehicle-bearing cushion generally designated as reference
numeral 10.

Said bearing cushion 10 comprises of a generally semi-circular body 11, having central hole 12 to house a
conventional bearing (not shown). As shown in Figure 1, said body 11 is provided with a plurality of ridges 13
which serves reinforcing means thereof.

The subject bearing cushion 10 is made of polyvinyl chloride, a soft texture oil and chemical resistant plastic
material which is strong, durable and capable of enduring severe pressure from the center bearing brought about
by the rotating movement of the propeller shaft of the vehicle.39

A utility model is a technical solution to a problem in any field of human activity which is new and industrially
applicable. It may be, or may relate to, a product, or process, or an improvement of any of the aforesaid. 40
Essentially, a utility model refers to an invention in the mechanical field. This is the reason why its object is
sometimes described as a device or useful object.41 A utility model varies from an invention, for which a patent
for invention is, likewise, available, on at least three aspects: first, the requisite of "inventive step" 42 in a patent
for invention is not required; second, the maximum term of protection is only seven years 43 compared to a
patent which is twenty years,44 both reckoned from the date of the application; and third, the provisions on
utility model dispense with its substantive examination45 and prefer for a less complicated system.

Being plain automotive spare parts that must conform to the original structural design of the components they
seek to replace, the Leaf Spring Eye Bushing and Vehicle Bearing Cushion are not ornamental. They lack the
decorative quality or value that must characterize authentic works of applied art. They are not even artistic
creations with incidental utilitarian functions or works incorporated in a useful article. In actuality, the personal
properties described in the search warrants are mechanical works, the principal function of which is utility sans
any aesthetic embellishment.

Neither are we to regard the Leaf Spring Eye Bushing and Vehicle Bearing Cushion as included in the catch-all
phrase "other literary, scholarly, scientific and artistic works" in Section 172.1(a) of R.A. No. 8293. Applying
the principle of ejusdem generis which states that "where a statute describes things of a particular class or kind
accompanied by words of a generic character, the generic word will usually be limited to things of a similar
nature with those particularly enumerated, unless there be something in the context of the state which would
repel such inference,"46 the Leaf Spring Eye Bushing and Vehicle Bearing Cushion are not copyrightable, being
not of the same kind and nature as the works enumerated in Section 172 of R.A. No. 8293.

No copyright granted by law can be said to arise in favor of the petitioner despite the issuance of the certificates
of copyright registration and the deposit of the Leaf Spring Eye Bushing and Vehicle Bearing Cushion. Indeed,
in Joaquin, Jr. v. Drilon47 and Pearl & Dean (Phil.), Incorporated v. Shoemart, Incorporated,48 the Court ruled
that:

Copyright, in the strict sense of the term, is purely a statutory right. It is a new or independent right granted by
the statute, and not simply a pre-existing right regulated by it. Being a statutory grant, the rights are only such as
the statute confers, and may be obtained and enjoyed only with respect to the subjects and by the persons, and
on terms and conditions specified in the statute. Accordingly, it can cover only the works falling within the
statutory enumeration or description.

That the works of the petitioner may be the proper subject of a patent does not entitle him to the issuance of a
search warrant for violation of copyright laws. In Kho v. Court of Appeals49 and Pearl & Dean (Phil.),
Incorporated v. Shoemart, Incorporated,50 the Court ruled that "these copyright and patent rights are completely
distinct and separate from one another, and the protection afforded by one cannot be used interchangeably to
cover items or works that exclusively pertain to the others." The Court expounded further, thus:
Trademark, copyright and patents are different intellectual property rights that cannot be interchanged with one
another. A trademark is any visible sign capable of distinguishing the goods (trademark) or services (service
mark) of an enterprise and shall include a stamped or marked container of goods. In relation thereto, a trade
name means the name or designation identifying or distinguishing an enterprise. Meanwhile, the scope of a
copyright is confined to literary and artistic works which are original intellectual creations in the literary and
artistic domain protected from the moment of their creation. Patentable inventions, on the other hand, refer to
any technical solution of a problem in any field of human activity which is new, involves an inventive step and
is industrially applicable.

The petitioner cannot find solace in the ruling of the United States Supreme Court in Mazer v. Stein51 to buttress
his petition. In that case, the artifacts involved in that case were statuettes of dancing male and female figures
made of semi-vitreous china. The controversy therein centered on the fact that although copyrighted as "works
of art," the statuettes were intended for use and used as bases for table lamps, with electric wiring, sockets and
lampshades attached. The issue raised was whether the statuettes were copyright protected in the United States,
considering that the copyright applicant intended primarily to use them as lamp bases to be made and sold in
quantity, and carried such intentions into effect. At that time, the Copyright Office interpreted the 1909
Copyright Act to cover works of artistic craftsmanship insofar as their form, but not the utilitarian aspects, were
concerned. After reviewing the history and intent of the US Congress on its copyright legislation and the
interpretation of the copyright office, the US Supreme Court declared that the statuettes were held copyrightable
works of art or models or designs for works of art. The High Court ruled that:

"Works of art (Class G) – (a) – In General. This class includes works of artistic craftsmanship, in so far as their
form but not their mechanical or utilitarian aspects are concerned, such as artistic jewelry, enamels, glassware,
and tapestries, as well as all works belonging to the fine arts, such as paintings, drawings and sculpture. …"

So we have a contemporaneous and long-continued construction of the statutes by the agency charged to
administer them that would allow the registration of such a statuette as is in question here.52

The High Court went on to state that "[t]he dichotomy of protection for the aesthetic is not beauty and utility but
art for the copyright and the invention of original and ornamental design for design patents." Significantly, the
copyright office promulgated a rule to implement Mazer to wit:

… [I]f "the sole intrinsic function of an article is its utility, the fact that the work is unique and attractively
shaped will not qualify it as a work of art."

In this case, the bushing and cushion are not works of art. They are, as the petitioner himself admitted, utility
models which may be the subject of a patent.

IN LIGHT OF ALL THE FOREGOING, the instant petition is hereby DENIED for lack of merit. The
assailed Decision and Resolution of the Court of Appeals in CA-G.R. SP No. 70411 are AFFIRMED. Search
Warrant Nos. 01-2401 and 01-2402 issued on October 15, 2001 are ANNULLED AND SET ASIDE. Costs
against the petitioner.

SO ORDERED.
G.R. No. 172835               December 13, 2007

AIR PHILIPPINES CORPORATION, Petitioner,

vs.
PENNSWELL, INC. Respondent.

DECISION

CHICO-NAZARIO, J.:

Petitioner Air Philippines Corporation seeks, via the instant Petition for Review under Rule 45 of the Rules of
Court, the nullification of the 16 February 2006 Decision 1 and the 25 May 2006 Resolution 2 of the Court of
Appeals in CA-G.R. SP No. 86329, which affirmed the Order 3 dated 30 June 2004 of the Regional Trial Court
(RTC), Makati City, Branch 64, in Civil Case No. 00-561.

Petitioner Air Philippines Corporation is a domestic corporation engaged in the business of air transportation
services. On the other hand, respondent Pennswell, Inc. was organized to engage in the business of
manufacturing and selling industrial chemicals, solvents, and special lubricants.

On various dates, respondent delivered and sold to petitioner sundry goods in trade, covered by Sales Invoices
No. 8846,4 9105,5 8962,6 and 8963,7 which correspond to Purchase Orders No. 6433, 6684, 6634 and 6633,
respectively. Under the contracts, petitioner’s total outstanding obligation amounted to ₱449,864.98 with
interest at 14% per annum until the amount would be fully paid. For failure of the petitioner to comply with its
obligation under said contracts, respondent filed a Complaint8 for a Sum of Money on 28 April 2000 with the
RTC.

In its Answer,9 petitioner contended that its refusal to pay was not without valid and justifiable reasons. In
particular, petitioner alleged that it was defrauded in the amount of ₱592,000.00 by respondent for its previous
sale of four items, covered by Purchase Order No. 6626. Said items were misrepresented by respondent as
belonging to a new line, but were in truth and in fact, identical with products petitioner had previously
purchased from respondent. Petitioner asserted that it was deceived by respondent which merely altered the
names and labels of such goods. Petitioner specifically identified the items in question, as follows:

Label/Description Item No. Amount P.O. Date

1. a. Anti-Friction Fluid MPL-800 153,941.40 5714 05/20/99
b. Excellent Rust Corrosion (fake) MPL-008 155,496.00 5888 06/20/99

2. a. Contact Grease COG #2 115,236.00 5540 04/26/99

b. Connector Grease (fake) CG 230,519.52 6327 08/05/99

3. a. Trixohtropic Grease EPC 81,876.96 4582 01/29/99

b. Di-Electric Strength Protective EPC#2 81,876.96 5446 04/21/99
Coating (fake)

4. a. Dry Lubricant ASC-EP 87,346.52 5712 05/20/99

b. Anti-Seize Compound (fake) ASC-EP 124,108.10 4763 & 02/16/99 &
2000 5890 06/24/99
According to petitioner, respondent’s products, namely Excellent Rust Corrosion, Connector Grease, Electric
Strength Protective Coating, and Anti-Seize Compound, are identical with its Anti-Friction Fluid, Contact
Grease, Thixohtropic Grease, and Dry Lubricant, respectively. Petitioner asseverated that had respondent been
forthright about the identical character of the products, it would not have purchased the items complained of.
Moreover, petitioner alleged that when the purported fraud was discovered, a conference was held between
petitioner and respondent on 13 January 2000, whereby the parties agreed that respondent would return to
petitioner the amount it previously paid. However, petitioner was surprised when it received a letter from the
respondent, demanding payment of the amount of ₱449,864.94, which later became the subject of respondent’s
Complaint for Collection of a Sum of Money against petitioner.

During the pendency of the trial, petitioner filed a Motion to Compel 10 respondent to give a detailed list of the
ingredients and chemical components of the following products, to wit: (a) Contact Grease and Connector
Grease; (b) Thixohtropic Grease and Di-Electric Strength Protective Coating; and (c) Dry Lubricant and Anti-
Seize Compound.11 It appears that petitioner had earlier requested the Philippine Institute of Pure and Applied
Chemistry (PIPAC) for the latter to conduct a comparison of respondent’s goods.

On 15 March 2004, the RTC rendered an Order granting the petitioner’s motion. It disposed, thus:

The Court directs [herein respondent] Pennswell, Inc. to give [herein petitioner] Air Philippines Corporation[,] a
detailed list of the ingredients or chemical components of the following chemical products:

a. Contact Grease to be compared with Connector Grease;

b. Thixohtropic Grease to be compared with Di-Electric Strength Protective Coating; and

c. Dry Lubricant to be compared with Anti-Seize Compound[.]

[Respondent] Pennswell, Inc. is given fifteen (15) days from receipt of this Order to submit to [petitioner] Air
Philippines Corporation the chemical components of all the above-mentioned products for chemical
comparison/analysis.12

Respondent sought reconsideration of the foregoing Order, contending that it cannot be compelled to disclose
the chemical components sought because the matter is confidential. It argued that what petitioner endeavored to
inquire upon constituted a trade secret which respondent cannot be forced to divulge. Respondent maintained
that its products are specialized lubricants, and if their components were revealed, its business competitors may
easily imitate and market the same types of products, in violation of its proprietary rights and to its serious
damage and prejudice.

The RTC gave credence to respondent’s reasoning, and reversed itself. It issued an Order dated 30 June 2004,
finding that the chemical components are respondent’s trade secrets and are privileged in character. A priori, it
rationalized:

The Supreme Court held in the case of Chavez vs. Presidential Commission on Good Government, 299 SCRA
744, p. 764, that "the drafters of the Constitution also unequivocally affirmed that aside from national security
matters and intelligence information, trade or industrial secrets (pursuant to the Intellectual Property Code and
other related laws) as well as banking transactions (pursuant to the Secrecy of Bank Deposit Act) are also
exempted from compulsory disclosure."

Trade secrets may not be the subject of compulsory disclosure. By reason of [their] confidential and privileged
character, ingredients or chemical components of the products ordered by this Court to be disclosed constitute
trade secrets lest [herein respondent] would eventually be exposed to unwarranted business competition with
others who may imitate and market the same kinds of products in violation of [respondent’s] proprietary rights.
Being privileged, the detailed list of ingredients or chemical components may not be the subject of mode of
discovery under Rule 27, Section 1 of the Rules of Court, which expressly makes privileged information an
exception from its coverage.13

Alleging grave abuse of discretion on the part of the RTC, petitioner filed a Petition for Certiorari under Rule 65
of the Rules of Court with the Court of Appeals, which denied the Petition and affirmed the Order dated 30 June
2004 of the RTC.

The Court of Appeals ruled that to compel respondent to reveal in detail the list of ingredients of its lubricants is
to disregard respondent’s rights over its trade secrets. It was categorical in declaring that the chemical
formulation of respondent’s products and their ingredients are embraced within the meaning of "trade secrets."
In disallowing the disclosure, the Court of Appeals expounded, thus:

The Supreme Court in Garcia v. Board of Investments (177 SCRA 374 [1989]) held that trade secrets and
confidential, commercial and financial information are exempt from public scrutiny. This is reiterated in Chavez
v. Presidential Commission on Good Government (299 SCRA 744 [1998]) where the Supreme Court
enumerated the kinds of information and transactions that are recognized as restrictions on or privileges against
compulsory disclosure. There, the Supreme Court explicitly stated that:

"The drafters of the Constitution also unequivocally affirmed that, aside from national security matters and
intelligence information, trade or industrial secrets (pursuant to the Intellectual Property Code and other related
laws) as well as banking transactions (pursuant to the Secrecy of Bank Deposits Act) re also exempt from
compulsory disclosure."

It is thus clear from the foregoing that a party cannot be compelled to produce, release or disclose documents,
papers, or any object which are considered trade secrets.

In the instant case, petitioner [Air Philippines Corporation] would have [respondent] Pennswell produce a
detailed list of ingredients or composition of the latter’s lubricant products so that a chemical comparison and
analysis thereof can be obtained. On this note, We believe and so hold that the ingredients or composition of
[respondent] Pennswell’s lubricants are trade secrets which it cannot be compelled to disclose.

[Respondent] Pennswell has a proprietary or economic right over the ingredients or components of its lubricant
products. The formulation thereof is not known to the general public and is peculiar only to [respondent]
Pennswell. The legitimate and economic interests of business enterprises in protecting their manufacturing and
business secrets are well-recognized in our system.

[Respondent] Pennswell has a right to guard its trade secrets, manufacturing formulas, marketing strategies and
other confidential programs and information against the public. Otherwise, such information can be illegally
and unfairly utilized by business competitors who, through their access to [respondent] Pennswell’s business
secrets, may use the same for their own private gain and to the irreparable prejudice of the latter.

xxxx

In the case before Us, the alleged trade secrets have a factual basis, i.e., it comprises of the ingredients and
formulation of [respondent] Pennswell’s lubricant products which are unknown to the public and peculiar only
to Pennswell.

All told, We find no grave abuse of discretion amounting to lack or excess of jurisdiction on the part of public
respondent Judge in finding that the detailed list of ingredients or composition of the subject lubricant products
which petitioner [Air Philippines Corporation] seeks to be disclosed are trade secrets of [respondent] Pennswell;
hence, privileged against compulsory disclosure.14
Petitioner’s Motion for Reconsideration was denied.

Unyielding, petitioner brought the instant Petition before us, on the sole issue of:

WHETHER THE COURT OF APPEALS RULED IN ACCORDANCE WITH PREVAILING LAWS AND
JURISPRUDENCE WHEN IT UPHELD THE RULING OF THE TRIAL COURT THAT THE CHEMICAL
COMPONENTS OR INGREDIENTS OF RESPONDENT’S PRODUCTS ARE TRADE SECRETS OR
INDUSTRIAL SECRETS THAT ARE NOT SUBJECT TO COMPULSORY DISCLOSURE. 15

Petitioner seeks to convince this Court that it has a right to obtain the chemical composition and ingredients of
respondent’s products to conduct a comparative analysis of its products. Petitioner assails the conclusion
reached by the Court of Appeals that the matters are trade secrets which are protected by law and beyond public
scrutiny. Relying on Section 1, Rule 27 of the Rules of Court, petitioner argues that the use of modes of
discovery operates with desirable flexibility under the discretionary control of the trial court. Furthermore,
petitioner posits that its request is not done in bad faith or in any manner as to annoy, embarrass, or oppress
respondent.

A trade secret is defined as a plan or process, tool, mechanism or compound known only to its owner and those
of his employees to whom it is necessary to confide it.16 The definition also extends to a secret formula or
process not patented, but known only to certain individuals using it in compounding some article of trade
having a commercial value.17 A trade secret may consist of any formula, pattern, device, or compilation of
information that: (1) is used in one's business; and (2) gives the employer an opportunity to obtain an advantage
over competitors who do not possess the information. 18 Generally, a trade secret is a process or device intended
for continuous use in the operation of the business, for example, a machine or formula, but can be a price list or
catalogue or specialized customer list.19 It is indubitable that trade secrets constitute proprietary rights. The
inventor, discoverer, or possessor of a trade secret or similar innovation has rights therein which may be treated
as property, and ordinarily an injunction will be granted to prevent the disclosure of the trade secret by one who
obtained the information "in confidence" or through a "confidential relationship." 20 American jurisprudence has
utilized the following factors21 to determine if an information is a trade secret, to wit:

(1) the extent to which the information is known outside of the employer's business;

(2) the extent to which the information is known by employees and others involved in the business;

(3) the extent of measures taken by the employer to guard the secrecy of the information;

(4) the value of the information to the employer and to competitors;

(5) the amount of effort or money expended by the company in developing the information; and

(6) the extent to which the information could be easily or readily obtained through an independent
source.22

In Cocoland Development Corporation v. National Labor Relations Commission, 23 the issue was the legality of
an employee’s termination on the ground of unauthorized disclosure of trade secrets. The Court laid down the
rule that any determination by management as to the confidential nature of technologies, processes, formulae or
other so-called trade secrets must have a substantial factual basis which can pass judicial scrutiny. The Court
rejected the employer’s naked contention that its own determination as to what constitutes a trade secret should
be binding and conclusive upon the NLRC. As a caveat, the Court said that to rule otherwise would be to permit
an employer to label almost anything a trade secret, and thereby create a weapon with which he/it may
arbitrarily dismiss an employee on the pretext that the latter somehow disclosed a trade secret, even if in fact
there be none at all to speak of.24 Hence, in Cocoland, the parameters in the determination of trade secrets were
set to be such substantial factual basis that can withstand judicial scrutiny.

The chemical composition, formulation, and ingredients of respondent’s special lubricants are trade secrets
within the contemplation of the law. Respondent was established to engage in the business of general
manufacturing and selling of, and to deal in, distribute, sell or otherwise dispose of goods, wares, merchandise,
products, including but not limited to industrial chemicals, solvents, lubricants, acids, alkalies, salts, paints, oils,
varnishes, colors, pigments and similar preparations, among others. It is unmistakable to our minds that the
manufacture and production of respondent’s products proceed from a formulation of a secret list of ingredients.
In the creation of its lubricants, respondent expended efforts, skills, research, and resources. What it had
achieved by virtue of its investments may not be wrested from respondent on the mere pretext that it is
necessary for petitioner’s defense against a collection for a sum of money. By and large, the value of the
information to respondent is crystal clear. The ingredients constitute the very fabric of respondent’s production
and business. No doubt, the information is also valuable to respondent’s competitors. To compel its disclosure
is to cripple respondent’s business, and to place it at an undue disadvantage. If the chemical composition of
respondent’s lubricants are opened to public scrutiny, it will stand to lose the backbone on which its business is
founded. This would result in nothing less than the probable demise of respondent’s business. Respondent’s
proprietary interest over the ingredients which it had developed and expended money and effort on is
incontrovertible. Our conclusion is that the detailed ingredients sought to be revealed have a commercial value
to respondent. Not only do we acknowledge the fact that the information grants it a competitive advantage; we
also find that there is clearly a glaring intent on the part of respondent to keep the information confidential and
not available to the prying public.

We now take a look at Section 1, Rule 27 of the Rules of Court, which permits parties to inspect documents or
things upon a showing of good cause before the court in which an action is pending. Its entire provision reads:

SECTION 1. Motion for production or inspection order. – Upon motion of any party showing good cause
therefore, the court in which an action is pending may (a) order any party to produce and permit the inspection
and copying or photographing, by or on behalf of the moving party, of any designated documents, papers,
books, accounts, letters, photographs, objects or tangible things, not privileged, which constitute or contain
evidence material to any matter involved in the action and which are in his possession, custody or control; or (b)
order any party to permit entry upon designated land or other property in his possession or control for the
purpose of inspecting, measuring, surveying, or photographing the property or any designated relevant object or
operation thereon. The order shall specify the time, place and manner of making the inspection and taking
copies and photographs, and may prescribe such terms and conditions as are just.

A more than cursory glance at the above text would show that the production or inspection of documents or
things as a mode of discovery sanctioned by the Rules of Court may be availed of by any party upon a showing
of good cause therefor before the court in which an action is pending. The court may order any party: a) to
produce and permit the inspection and copying or photographing of any designated documents, papers, books,
accounts, letters, photographs, objects or tangible things, which are not privileged; 25 which constitute or contain
evidence material to any matter involved in the action; and which are in his possession, custody or control; or b)
to permit entry upon designated land or other property in his possession or control for the purpose of inspecting,
measuring, surveying, or photographing the property or any designated relevant object or operation thereon.

Rule 27 sets an unequivocal proviso that the documents, papers, books, accounts, letters, photographs, objects
or tangible things that may be produced and inspected should not be privileged. 26 The documents must not be
privileged against disclosure.27 On the ground of public policy, the rules providing for production and inspection
of books and papers do not authorize the production or inspection of privileged matter; that is, books and papers
which, because of their confidential and privileged character, could not be received in evidence. 28 Such a
condition is in addition to the requisite that the items be specifically described, and must constitute or contain
evidence material to any matter involved in the action and which are in the party’s possession, custody or
control.

Section 2429 of Rule 130 draws the types of disqualification by reason of privileged communication, to wit: (a)
communication between husband and wife; (b) communication between attorney and client; (c) communication
between physician and patient; (d) communication between priest and penitent; and (e) public officers and
public interest. There are, however, other privileged matters that are not mentioned by Rule 130. Among them
are the following: (a) editors may not be compelled to disclose the source of published news; (b) voters may not
be compelled to disclose for whom they voted; (c) trade secrets; (d) information contained in tax census returns;
and (d) bank deposits. 30

We, thus, rule against the petitioner. We affirm the ruling of the Court of Appeals which upheld the finding of
the RTC that there is substantial basis for respondent to seek protection of the law for its proprietary rights over
the detailed chemical composition of its products.

That trade secrets are of a privileged nature is beyond quibble. The protection that this jurisdiction affords to
trade secrets is evident in our laws. The Interim Rules of Procedure on Government Rehabilitation, effective 15
December 2000, which applies to: (1) petitions for rehabilitation filed by corporations, partnerships, and
associations pursuant to Presidential Decree No. 902-A,31 as amended; and (2) cases for rehabilitation
transferred from the Securities and Exchange Commission to the RTCs pursuant to Republic Act No. 8799,
otherwise known as The Securities Regulation Code, expressly provides that the court may issue an order to
protect trade secrets or other confidential research, development, or commercial information belonging to the
debtor.32 Moreover, the Securities Regulation Code is explicit that the Securities and Exchange Commission is
not required or authorized to require the revelation of trade secrets or processes in any application, report or
document filed with the Commission.33 This confidentiality is made paramount as a limitation to the right of any
member of the general public, upon request, to have access to all information filed with the Commission.34

Furthermore, the Revised Penal Code endows a cloak of protection to trade secrets under the following articles:

Art. 291. Revealing secrets with abuse of office. — The penalty of arresto mayor and a fine not exceeding 500
pesos shall be imposed upon any manager, employee or servant who, in such capacity, shall learn the secrets of
his principal or master and shall reveal such secrets.

Art. 292. Revelation of industrial secrets. — The penalty of prision correccional in its minimum and medium
periods and a fine not exceeding 500 pesos shall be imposed upon the person in charge, employee or workman
of any manufacturing or industrial establishment who, to the prejudice of the owner thereof, shall reveal the
secrets of the industry of
the latter.

Similarly, Republic Act No. 8424, otherwise known as the National Internal Revenue Code of 1997, has a
restrictive provision on trade secrets, penalizing the revelation thereof by internal revenue officers or
employees, to wit:

SECTION 278. Procuring Unlawful Divulgence of Trade Secrets. - Any person who causes or procures an
officer or employee of the Bureau of Internal Revenue to divulge any confidential information regarding the
business, income or inheritance of any taxpayer, knowledge of which was acquired by him in the discharge of
his official duties, and which it is unlawful for him to reveal, and any person who publishes or prints in any
manner whatever, not provided by law, any income, profit, loss or expenditure appearing in any income tax
return, shall be punished by a fine of not more than two thousand pesos (₱2,000), or suffer imprisonment of not
less than six (6) months nor more than five (5) years, or both.
Republic Act No. 6969, or the Toxic Substances and Hazardous and Nuclear Wastes Control Act of 1990,
enacted to implement the policy of the state to regulate, restrict or prohibit the importation, manufacture,
processing, sale, distribution, use and disposal of chemical substances and mixtures that present unreasonable
risk and/or injury to health or the environment, also contains a provision that limits the right of the public to
have access to records, reports or information concerning chemical substances and mixtures including
safety data submitted and data on emission or discharge into the environment, if the matter is
confidential such that it would divulge trade secrets, production or sales figures; or methods, production
or processes unique to such manufacturer, processor or distributor; or would otherwise tend to affect
adversely the competitive position of such manufacturer, processor or distributor.35

Clearly, in accordance with our statutory laws, this Court has declared that intellectual and industrial property
rights cases are not simple property cases. 36 Without limiting such industrial property rights to trademarks and
trade names, this Court has ruled that all agreements concerning intellectual property are intimately connected
with economic development.37 The protection of industrial property encourages investments in new ideas and
inventions and stimulates creative efforts for the satisfaction of human needs. It speeds up transfer of
technology and industrialization, and thereby bring about social and economic progress.38 Verily, the protection
of industrial secrets is inextricably linked to the advancement of our economy and fosters healthy competition in
trade.

Jurisprudence has consistently acknowledged the private character of trade secrets.1âwphi1 There is a privilege
not to disclose one’s trade secrets.39 Foremost, this Court has declared that trade secrets and banking
transactions are among the recognized restrictions to the right of the people to information as embodied in the
Constitution.40 We said that the drafters of the Constitution also unequivocally affirmed that, aside from national
security matters and intelligence information, trade or industrial secrets (pursuant to the Intellectual Property
Code and other related laws) as well as banking transactions (pursuant to the Secrecy of Bank Deposits Act),
are also exempted from compulsory disclosure.41

Significantly, our cases on labor are replete with examples of a protectionist stance towards the trade secrets of
employers. For instance, this Court upheld the validity of the policy of a pharmaceutical company prohibiting
its employees from marrying employees of any competitor company, on the rationalization that the company
has a right to guard its trade secrets, manufacturing formulas, marketing strategies and other confidential
programs and information from competitors.42 Notably, it was in a labor-related case that this Court made a
stark ruling on the proper determination of trade secrets.

In the case at bar, petitioner cannot rely on Section 77 43 of Republic Act 7394, or the Consumer Act of the
Philippines, in order to compel respondent to reveal the chemical components of its products. While it is true
that all consumer products domestically sold, whether manufactured locally or imported, shall indicate their
general make or active ingredients in their respective labels of packaging, the law does not apply to respondent.
Respondent’s specialized lubricants -- namely, Contact Grease, Connector Grease, Thixohtropic Grease, Di-
Electric Strength Protective Coating, Dry Lubricant and Anti-Seize Compound -- are not consumer products.
"Consumer products," as it is defined in Article 4(q),44 refers to goods, services and credits, debts or obligations
which are primarily for personal, family, household or agricultural purposes, which shall include, but not be
limited to, food, drugs, cosmetics, and devices. This is not the nature of respondent’s products. Its products are
not intended for personal, family, household or agricultural purposes. Rather, they are for industrial use,
specifically for the use of aircraft propellers and engines.

Petitioner’s argument that Republic Act No. 8203, or the Special Law on Counterfeit Drugs, requires the
disclosure of the active ingredients of a drug is also on faulty ground. 45 Respondent’s products are outside the
scope of the cited law. They do not come within the purview of a drug 46 which, as defined therein, refers to any
chemical compound or biological substance, other than food, that is intended for use in the treatment,
prevention or diagnosis of disease in man or animals. Again, such are not the characteristics of respondent’s
products.
What is clear from the factual findings of the RTC and the Court of Appeals is that the chemical formulation of
respondent’s products is not known to the general public and is unique only to it. Both courts uniformly ruled
that these ingredients are not within the knowledge of the public. Since such factual findings are generally not
reviewable by this Court, it is not duty-bound to analyze and weigh all over again the evidence already
considered in the proceedings below.47 We need not delve into the factual bases of such findings as questions of
fact are beyond the pale of Rule 45 of the Rules of Court. Factual findings of the trial court when affirmed by
the Court of Appeals, are binding and conclusive on the Supreme Court.48

We do not find merit or applicability in petitioner’s invocation of Section 12 49 of the Toxic Substances and
Hazardous and Nuclear Wastes Control Act of 1990, which grants the public access to records, reports or
information concerning chemical substances and mixtures, including safety data submitted, and data on
emission or discharge into the environment. To reiterate, Section 1250 of said Act deems as confidential
matters, which may not be made public, those that would divulge trade secrets, including production or sales
figures or methods; production or processes unique to such manufacturer, processor or distributor, or would
otherwise tend to affect adversely the competitive position of such manufacturer, processor or distributor. It is
true that under the same Act, the Department of Environment and Natural Resources may release information;
however, the clear import of the law is that said authority is limited by the right to confidentiality of the
manufacturer, processor or distributor, which information may be released only to a medical research or
scientific institution where the information is needed for the purpose of medical diagnosis or treatment of a
person exposed to the chemical substance or mixture. The right to confidentiality is recognized by said Act as
primordial. Petitioner has not made the slightest attempt to show that these circumstances are availing in the
case at bar.

Indeed, the privilege is not absolute; the trial court may compel disclosure where it is indispensable for doing
justice.51 We do not, however, find reason to except respondent’s trade secrets from the application of the rule
on privilege. The revelation of respondent’s trade secrets serves no better purpose to the disposition of the main
case pending with the RTC, which is on the collection of a sum of money. As can be gleaned from the facts,
petitioner received respondent’s goods in trade in the normal course of business. To be sure, there are defenses
under the laws of contracts and sales available to petitioner. On the other hand, the greater interest of justice
ought to favor respondent as the holder of trade secrets. If we were to weigh the conflicting interests between
the parties, we rule in favor of the greater interest of respondent. Trade secrets should receive greater protection
from discovery, because they derive economic value from being generally unknown and not readily
ascertainable by the public.52 To the mind of this Court, petitioner was not able to show a compelling reason for
us to lift the veil of confidentiality which shields respondent’s trade secrets.

WHEREFORE, the Petition is DENIED. The Decision dated 16 February 2006, and the Resolution dated 25
May 2006, of the Court of Appeals in CA-G.R. SP No. 86329 are AFFIRMED. No costs.

SO ORDERED.
G.R. Nos. 160054-55             July 21, 2004

MANOLO P. SAMSON, petitioner,

vs.
HON. REYNALDO B. DAWAY, in his capacity as Presiding Judge, Regional Trial Court of Quezon
City, Branch 90, PEOPLE OF THE PHILIPPINES and CATERPILLAR, INC., respondents.

DECISION

YNARES-SANTIAGO, J.:

Assailed in this petition for certiorari is the March 26, 2003 Order1 of the Regional Trial Court of Quezon City,
Branch 90, which denied petitioner’s – (1) motion to quash the information; and (2) motion for reconsideration
of the August 9, 2002 Order denying his motion to suspend the arraignment and other proceedings in Criminal
Case Nos. Q-02-108043-44. Petitioner also questioned its August 5, 2003 Order2 which denied his motion for
reconsideration.

The undisputed facts show that on March 7, 2002, two informations for unfair competition under Section 168.3
(a), in relation to Section 170, of the Intellectual Property Code (Republic Act No. 8293), similarly worded save
for the dates and places of commission, were filed against petitioner Manolo P. Samson, the registered owner of
ITTI Shoes. The accusatory portion of said informations read:

That on or about the first week of November 1999 and sometime prior or subsequent thereto, in Quezon
City, Philippines, and within the jurisdiction of this Honorable Court, above-named accused,
owner/proprietor of ITTI Shoes/Mano Shoes Manufactuirng Corporation located at Robinson’s Galleria,
EDSA corner Ortigas Avenue, Quezon City, did then and there willfully, unlawfully and feloniously
distribute, sell and/or offer for sale CATERPILLAR products such as footwear, garments, clothing,
bags, accessories and paraphernalia which are closely identical to and/or colorable imitations of the
authentic Caterpillar products and likewise using trademarks, symbols and/or designs as would cause
confusion, mistake or deception on the part of the buying public to the damage and prejudice of
CATERPILLAR, INC., the prior adopter, user and owner of the following internationally:
"CATERPILLAR", "CAT", "CATERPILLAR & DESIGN", "CAT AND DESIGN", "WALKING
MACHINES" and "TRACK-TYPE TRACTOR & DESIGN."

CONTRARY TO LAW.3

On April 19, 2002, petitioner filed a motion to suspend arraignment and other proceedings in view of the
existence of an alleged prejudicial question involved in Civil Case No. Q-00-41446 for unfair competition
pending with the same branch; and also in view of the pendency of a petition for review filed with the Secretary
of Justice assailing the Chief State Prosecutor’s resolution finding probable cause to charge petitioner with
unfair competition. In an Order dated August 9, 2002, the trial court denied the motion to suspend arraignment
and other proceedings.

On August 20, 2002, petitioner filed a twin motion to quash the informations and motion for reconsideration of
the order denying motion to suspend, this time challenging the jurisdiction of the trial court over the offense
charged. He contended that since under Section 170 of R.A. No. 8293, the penalty4 of imprisonment for unfair
competition does not exceed six years, the offense is cognizable by the Municipal Trial Courts and not by the
Regional Trial Court, per R.A. No. 7691.

In its assailed March 26, 2003 Order, the trial court denied petitioner’s twin motions.6 A motion for
reconsideration thereof was likewise denied on August 5, 2003.

Hence, the instant petition alleging that respondent Judge gravely abused its discretion in issuing the assailed
orders.

The issues posed for resolution are – (1) Which court has jurisdiction over criminal and civil cases for violation
of intellectual property rights? (2) Did the respondent Judge gravely abuse his discretion in refusing to suspend
the arraignment and other proceedings in Criminal Case Nos. Q-02-108043-44 on the ground of – (a) the
existence of a prejudicial question; and (b) the pendency of a petition for review with the Secretary of Justice on
the finding of probable cause for unfair competition?

Under Section 170 of R.A. No. 8293, which took effect on January 1, 1998, the criminal penalty for
infringement of registered marks, unfair competition, false designation of origin and false description or
representation, is imprisonment from 2 to 5 years and a fine ranging from Fifty Thousand Pesos to Two
Hundred Thousand Pesos, to wit:

SEC. 170. Penalties. – Independent of the civil and administrative sanctions imposed by law, a criminal
penalty of imprisonment from two (2) years to five (5) years and a fine ranging from Fifty thousand
pesos (P50,000.00) to Two hundred thousand pesos (P200,000.00), shall be imposed on any person who
is found guilty of committing any of the acts mentioned in Section 155 [Infringement], Section 168
[Unfair Competition] and Section 169.1 [False Designation of Origin and False Description or
Representation].

Corollarily, Section 163 of the same Code states that actions (including criminal and civil) under Sections 150,
155, 164, 166, 167, 168 and 169 shall be brought before the proper courts with appropriate jurisdiction under
existing laws, thus –

SEC. 163. Jurisdiction of Court. – All actions under Sections 150, 155, 164 and 166 to 169 shall be
brought before the proper courts with appropriate jurisdiction under existing laws. (Emphasis
supplied)

The existing law referred to in the foregoing provision is Section 27 of R.A. No. 166 (The Trademark Law)
which provides that jurisdiction over cases for infringement of registered marks, unfair competition, false
designation of origin and false description or representation, is lodged with the Court of First Instance (now
Regional Trial Court) –

SEC. 27. Jurisdiction of Court of First Instance. – All actions under this Chapter [V – Infringement] and
Chapters VI [Unfair Competition] and VII [False Designation of Origin and False Description or
Representation], hereof shall be brought before the Court of First Instance.

We find no merit in the claim of petitioner that R.A. No. 166 was expressly repealed by R.A. No. 8293. The
repealing clause of R.A. No. 8293, reads –

SEC. 239. Repeals. – 239.1. All Acts and parts of Acts inconsistent herewith, more particularly
Republic Act No. 165, as amended; Republic Act No. 166, as amended; and Articles 188 and 189 of the
Revised Penal Code; Presidential Decree No. 49, including Presidential Decree No. 285, as amended,
are hereby repealed. (Emphasis added)
Notably, the aforequoted clause did not expressly repeal R.A. No. 166 in its entirety, otherwise, it would not
have used the phrases "parts of Acts" and "inconsistent herewith;" and it would have simply stated "Republic
Act No. 165, as amended; Republic Act No. 166, as amended; and Articles 188 and 189 of the Revised Penal
Code; Presidential Decree No. 49, including Presidential Decree No. 285, as amended are hereby repealed." It
would have removed all doubts that said specific laws had been rendered without force and effect. The use of
the phrases "parts of Acts" and "inconsistent herewith" only means that the repeal pertains only to provisions
which are repugnant or not susceptible of harmonization with R.A. No. 8293.6 Section 27 of R.A. No. 166,
however, is consistent and in harmony with Section 163 of R.A. No. 8293. Had R.A. No. 8293 intended to vest
jurisdiction over violations of intellectual property rights with the Metropolitan Trial Courts, it would have
expressly stated so under Section 163 thereof.

Moreover, the settled rule in statutory construction is that in case of conflict between a general law and a special
law, the latter must prevail. Jurisdiction conferred by a special law to Regional Trial Courts must prevail over
that granted by a general law to Municipal Trial Courts.7

In the case at bar, R.A. No. 8293 and R.A. No. 166 are special laws8 conferring jurisdiction over violations of
intellectual property rights to the Regional Trial Court. They should therefore prevail over R.A. No. 7691,
which is a general law.9 Hence, jurisdiction over the instant criminal case for unfair competition is properly
lodged with the Regional Trial Court even if the penalty therefor is imprisonment of less than 6 years, or from 2
to 5 years and a fine ranging from P50,000.00 to P200,000.00.

In fact, to implement and ensure the speedy disposition of cases involving violations of intellectual property
rights under R.A. No. 8293, the Court issued A.M. No. 02-1-11-SC dated February 19, 2002 designating certain
Regional Trial Courts as Intellectual Property Courts. On June 17, 2003, the Court further issued a Resolution
consolidating jurisdiction to hear and decide Intellectual Property Code and Securities and Exchange
Commission cases in specific Regional Trial Courts designated as Special Commercial Courts.

The case of Mirpuri v. Court of Appeals,10 invoked by petitioner finds no application in the present case.
Nowhere in Mirpuri did we state that Section 27 of R.A. No. 166 was repealed by R.A. No. 8293. Neither did
we make a categorical ruling therein that jurisdiction over cases for violation of intellectual property rights is
lodged with the Municipal Trial Courts. The passing remark in Mirpuri on the repeal of R.A. No. 166 by R.A.
No. 8293 was merely a backgrounder to the enactment of the present Intellectual Property Code and cannot thus
be construed as a jurisdictional pronouncement in cases for violation of intellectual property rights.

Anent the second issue, petitioner failed to substantiate his claim that there was a prejudicial question. In his
petition, he prayed for the reversal of the March 26, 2003 order which sustained the denial of his motion to
suspend arraignment and other proceedings in Criminal Case Nos. Q-02-108043-44. For unknown reasons,
however, he made no discussion in support of said prayer in his petition and reply to comment. Neither did he
attach a copy of the complaint in Civil Case No. Q-00-41446 nor quote the pertinent portion thereof to prove the
existence of a prejudicial question.

At any rate, there is no prejudicial question if the civil and the criminal action can, according to law, proceed
independently of each other.11 Under Rule 111, Section 3 of the Revised Rules on Criminal Procedure, in the
cases provided in Articles 32, 33, 34 and 2176 of the Civil Code, the independent civil action may be brought
by the offended party. It shall proceed independently of the criminal action and shall require only a
preponderance of evidence.

In the case at bar, the common element in the acts constituting unfair competition under Section 168 of R.A.
No. 8293 is fraud.12 Pursuant to Article 33 of the Civil Code, in cases of defamation, fraud, and physical
injuries, a civil action for damages, entirely separate and distinct from the criminal action, may be brought by
the injured party. Hence, Civil Case No. Q-00-41446, which as admitted13 by private respondent also relate to
unfair competition, is an independent civil action under Article 33 of the Civil Code. As such, it will not operate
as a prejudicial question that will justify the suspension of the criminal cases at bar.

Section 11 (c), Rule 116 of the Revised Rules on Criminal Procedure provides –

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

xxxxxxxxx

(c) A petition for review of the resolution of the prosecutor is pending at either the Department of
Justice, or the Office of the President; Provided, that the period of suspension shall not exceed sixty (60)
days counted from the filing of the petition with the reviewing office.

While the pendency of a petition for review is a ground for suspension of the arraignment, the aforecited
provision limits the deferment of the arraignment to a period of 60 days reckoned from the filing of the petition
with the reviewing office. It follows, therefore, that after the expiration of said period, the trial court is bound to
arraign the accused or to deny the motion to defer arraignment.

In the instant case, petitioner failed to establish that respondent Judge abused his discretion in denying his
motion to suspend. His pleadings and annexes submitted before the Court do not show the date of filing of the
petition for review with the Secretary of Justice.14 Moreover, the Order dated August 9, 2002 denying his
motion to suspend was not appended to the petition. He thus failed to discharge the burden of proving that he
was entitled to a suspension of his arraignment and that the questioned orders are contrary to Section 11 (c),
Rule 116 of the Revised Rules on Criminal Procedure. Indeed, the age-old but familiar rule is that he who
alleges must prove his allegations.

In sum, the dismissal of the petition is proper considering that petitioner has not established that the trial court
committed grave abuse of discretion. So also, his failure to attach documents relevant to his allegations warrants
the dismissal of the petition, pursuant to Section 3, Rule 46 of the Rules of Civil Procedure, which states:

SEC. 3. Contents and filing of petition; effect of non-compliance with requirements. — The petition
shall contain the full names and actual addresses of all the petitioners and respondents, a concise
statement of the matters involved, the factual background of the case, and the grounds relied upon for
the relief prayed for.

It shall be filed in seven (7) clearly legible copies together with proof of service thereof on the
respondent with the original copy intended for the court indicated as such by the petitioner, and shall be
accompanied by a clearly legible duplicate original or certified true copy of the judgment, order,
resolution, or ruling subject thereof, such material portions of the record as are referred to
therein, and other documents relevant or pertinent thereto.

xxxxxxxxx

The failure of the petitioner to comply with any of the foregoing requirements shall be sufficient
ground for the dismissal of the petition. (Emphasis added)

WHEREFORE, in view of all the foregoing, the petition is dismissed.

SO ORDERED.
G.R. No. 114508 November 19, 1999

PRIBHDAS J. MIRPURI, petitioner,

vs.
COURT OF APPEALS, DIRECTOR OF PATENTS and the BARBIZON CORPORATION, respondents.

PUNO, J.:

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

On June 15, 1970, one Lolita Escobar, the predecessor-in-interest of petitioner Pribhdas J. Mirpuri, filed an
application with the Bureau of Patents for the registration of the trademark "Barbizon" for use in brassieres and
ladies undergarments. Escobar alleged that she had been manufacturing and selling these products under the
firm name "L & BM Commercial" since March 3, 1970.

Private respondent Barbizon Corporation, a corporation organized and doing business under the laws of New
York, U.S.A., opposed the application. It claimed that:

The mark BARBIZON of respondent-applicant is confusingly similar to the trademark

BARBIZON which opposer owns and has not abandoned.

That opposer will be damaged by the registration of the mark BARBIZON and its business
reputation and goodwill will suffer great and irreparable injury.

That the respondent-applicant's use of the said mark BARBIZON which resembles the trademark
used and owned by opposer, constitutes an unlawful appropriation of a mark previously used in
the Philippines and not abandoned and therefore a statutory violation of Section 4 (d) of
Republic Act No. 166, as amended. 1

This was docketed as Inter Partes Case No. 686 (IPC No. 686). After filing of the pleadings, the parties
submitted the case for decision.

On June 18, 1974, the Director of Patents rendered judgment dismissing the opposition and giving due course to
Escobar's application, thus:

WHEREFORE, the opposition should be, as it is hereby, DISMISSED. Accordingly, Application

Serial No. 19010 for the registration of the trademark BARBIZON, of respondent Lolita R.
Escobar, is given due course.

IT IS SO ORDERED. 2

This decision became final and on September 11, 1974, Lolita Escobar was issued a certificate of
registration for the trademark "Barbizon." The trademark was "for use in "brassieres and lady's
underwear garments like panties." 3
Escobar later assigned all her rights and interest over the trademark to petitioner Pribhdas J. Mirpuri who, under
his firm name then, the "Bonito Enterprises," was the sole and exclusive distributor of Escobar's "Barbizon"
products.

In 1979, however, Escobar failed to file with the Bureau of Patents the Affidavit of Use of the trademark
required under Section 12 of Republic Act (R.A.) No. 166, the Philippine Trademark Law. Due to this failure,
the Bureau of Patents cancelled Escobar's certificate of registration.

On May 27, 1981, Escobar reapplied for registration of the cancelled trademark. Mirpuri filed his own
application for registration of Escobar's trademark. Escobar later assigned her application to herein petitioner
and this application was opposed by private respondent. The case was docketed as Inter Partes Case No. 2049
(IPC No. 2049).

In its opposition, private respondent alleged that:

(a) The Opposer has adopted the trademark BARBIZON (word), sometime in June 1933 and has
then used it on various kinds of wearing apparel. On August 14, 1934, Opposer obtained from
the United States Patent Office a more recent registration of the said mark under Certificate of
Registration No. 316,161. On March 1, 1949, Opposer obtained from the United States Patent
Office a more recent registration for the said trademark under Certificate of Registration No.
507,214, a copy of which is herewith attached as Annex "A." Said Certificate of Registration
covers the following goods — wearing apparel: robes, pajamas, lingerie, nightgowns and slips;

(b) Sometime in March 1976, Opposer further adopted the trademark BARBIZON and Bee
design and used the said mark in various kinds of wearing apparel. On March 15, 1977, Opposer
secured from the United States Patent Office a registration of the said mark under Certificate of
Registration No. 1,061,277, a copy of which is herein enclosed as Annex "B." The said
Certificate of Registration covers the following goods: robes, pajamas, lingerie, nightgowns and
slips;

(c) Still further, sometime in 1961, Opposer adopted the trademark BARBIZON and a
Representation of a Woman and thereafter used the said trademark on various kinds of wearing
apparel. Opposer obtained from the United States Patent Office registration of the said mark on
April 5, 1983 under Certificate of Registration No. 1,233,666 for the following goods: wearing
apparel: robes, pajamas, nightgowns and lingerie. A copy of the said certificate of registration is
herewith enclosed as Annex "C."

(d) All the above registrations are subsisting and in force and Opposer has not abandoned the use
of the said trademarks. In fact, Opposer, through a wholly-owned Philippine subsidiary, the
Philippine Lingerie Corporation, has been manufacturing the goods covered by said registrations
and selling them to various countries, thereby earning valuable foreign exchange for the country.
As a result of respondent-applicant's misappropriation of Opposer's BARBIZON trademark,
Philippine Lingerie Corporation is prevented from selling its goods in the local market, to the
damage and prejudice of Opposer and its wholly-owned subsidiary.

(e) The Opposer's goods bearing the trademark BARBIZON have been used in many countries,
including the Philippines, for at least 40 years and has enjoyed international reputation and good
will for their quality. To protect its registrations in countries where the goods covered by the
registrations are being sold, Opposer has procured the registration of the trademark BARBIZON
in the following countries: Australia, Austria, Abu Dhabi, Argentina, Belgium, Bolivia, Bahrain,
Canada, Chile, Colombia, Denmark, Ecuador, France, West Germany, Greece, Guatemala,
Hongkong, Honduras, Italy, Japan, Jordan, Lebanon, Mexico, Morocco, Panama, New Zealand,
 Norway, Sweden, Switzerland, Syria, El Salvador, South Africa, Zambia, Egypt, and Iran,
among others;

(f) To enhance its international reputation for quality goods and to further promote goodwill over
its name, marks and products, Opposer has extensively advertised its products, trademarks and
name in various publications which are circulated in the United States and many countries
around the world, including the Philippines;

(g) The trademark BARBIZON was fraudulently registered in the Philippines by one Lolita R.
Escobar under Registration No. 21920, issued on September 11, 1974, in violation of Article 189
(3) of the Revised Penal Code and Section 4 (d) of the Trademark Law. Herein respondent
applicant acquired by assignment the "rights" to the said mark previously registered by Lolita
Escobar, hence respondent-applicant's title is vitiated by the same fraud and criminal act.
Besides, Certificate of Registration No. 21920 has been cancelled for failure of either Lolita
Escobar or herein respondent-applicant, to seasonably file the statutory affidavit of use. By
applying for a re-registration of the mark BARBIZON subject of this opposition, respondent-
applicant seeks to perpetuate the fraud and criminal act committed by Lolita Escobar.

(h) Opposer's BARBIZON as well as its BARBIZON and Bee Design and BARBIZON and
Representation of a Woman trademarks qualify as well-known trademarks entitled to protection
under Article 6bis of the Convention of Paris for the Protection of Industrial Property and further
amplified by the Memorandum of the Minister of Trade to the Honorable Director of Patents
dated October 25, 1983 [sic], 4 Executive Order No. 913 dated October 7, 1963 and the
Memorandum of the Minister of Trade and Industry to the Honorable Director of Patents dated
October 25, 1983.

(i) The trademark applied for by respondent applicant is identical to Opposer's BARBIZON
trademark and constitutes the dominant part of Opposer's two other marks namely, BARBIZON
and Bee design and BARBIZON and a Representation of a Woman. The continued use by
respondent-applicant of Opposer's trademark BARBIZON on goods belonging to Class 25
constitutes a clear case of commercial and criminal piracy and if allowed registration will violate
not only the Trademark Law but also Article 189 of the Revised Penal Code and the commitment
of the Philippines to an international treaty. 5

Replying to private respondent's opposition, petitioner raised the defense of res judicata.

On March 2, 1982, Escobar assigned to petitioner the use of the business name "Barbizon International."
Petitioner registered the name with the Department of Trade and Industry (DTI) for which a certificate of
registration was issued in 1987.

Forthwith, private respondent filed before the Office of Legal Affairs of the DTI a petition for cancellation of
petitioner's business name.

On November 26, 1991, the DTI, Office of Legal Affairs, cancelled petitioner's certificate of registration, and
declared private respondent the owner and prior user of the business name "Barbizon International." Thus:

WHEREFORE, the petition is hereby GRANTED and petitioner is declared the owner and prior
user of the business name "BARBIZON INTERNATIONAL" under Certificate of Registration
No. 87-09000 dated March 10, 1987 and issued in the name of respondent, is [sic] hereby
ordered revoked and cancelled. . . . . 6
Meanwhile, in IPC No. 2049, the evidence of both parties were received by the Director of Patents. On June 18,
1992, the Director rendered a decision declaring private respondent's opposition barred by res judicata and
giving due course to petitioner's application for registration, to wit:

WHEREFORE, the present Opposition in Inter Partes Case No. 2049 is hereby DECLARED
BARRED by res judicata and is hereby DISMISSED. Accordingly, Application Serial No.
45011 for trademark BARBIZON filed by Pribhdas J. Mirpuri is GIVEN DUE COURSE.

SO ORDERED. 7

Private respondent questioned this decision before the Court of Appeals in CA-G.R. SP No. 28415. On April
30, 1993, the Court of Appeals reversed the Director of Patents finding that IPC No. 686 was not barred by
judgment in IPC No. 2049 and ordered that the case be remanded to the Bureau of Patents for further
proceedings, viz:

WHEREFORE, the appealed Decision No. 92-13 dated June 18, 1992 of the Director of Patents
in Inter Partes Case No. 2049 is hereby SET ASIDE; and the case is hereby remanded to the
Bureau of Patents for further proceedings, in accordance with this pronouncement. No costs. 8

In a Resolution dated March 16, 1994, the Court of Appeals denied reconsideration of its decision. 9
Hence, this recourse.

Before us, petitioner raises the following issues:

1. WHETHER OR NOT THE DECISION OF THE DIRECTOR OF PATENTS IN INTER

PARTES CASE NO. 686 RENDERED ON JUNE 18, 1974, ANNEX C HEREOF,
CONSTITUTED RES JUDICATA IN SO FAR AS THE CASE BEFORE THE DIRECTOR OF
PATENTS IS CONCERNED;

2. WHETHER OR NOT THE DIRECTOR OF PATENTS CORRECTLY APPLIED THE

PRINCIPLE OF RES JUDICATA IN DISMISSING PRIVATE RESPONDENT BARBIZON'S
OPPOSITION TO PETITIONER'S APPLICATION FOR REGISTRATION FOR THE
TRADEMARK BARBIZON, WHICH HAS SINCE RIPENED TO CERTIFICATE OF
REGISTRATION NO. 53920 ON NOVEMBER 16, 1992;

3. WHETHER OR NOT THE REQUISITE THAT A "JUDGMENT ON THE MERITS"

REQUIRED A "HEARING WHERE BOTH PARTIES ARE SUPPOSED TO ADDUCE
EVIDENCE" AND WHETHER THE JOINT SUBMISSION OF THE PARTIES TO A CASE
ON THE BASIS OF THEIR RESPECTIVE PLEADINGS WITHOUT PRESENTING
TESTIMONIAL OR DOCUMENTARY EVIDENCE FALLS WITHIN THE MEANING OF
"JUDGMENT ON THE MERITS" AS ONE OF THE REQUISITES TO CONSTITUTE RES
JUDICATA;

4. WHETHER A DECISION OF THE DEPARTMENT OF TRADE AND INDUSTRY

CANCELLING PETITIONER'S FIRM NAME "BARBIZON INTERNATIONAL" AND
WHICH DECISION IS STILL PENDING RECONSIDERATION NEVER OFFERED IN
EVIDENCE BEFORE THE DIRECTOR OF PATENTS IN INTER PARTES CASE NO. 2049
HAS THE RIGHT TO DECIDE SUCH CANCELLATION NOT ON THE BASIS OF THE
BUSINESS NAME LAW (AS IMPLEMENTED BY THE BUREAU OF DOMESTIC TRADE)
BUT ON THE BASIS OF THE PARIS CONVENTION AND THE TRADEMARK LAW (R.A.
166) WHICH IS WITHIN THE ORIGINAL AND EXCLUSIVE JURISDICTION OF THE
DIRECTOR OF PATENTS. 10
Before ruling on the issues of the case, there is need for a brief background on the function and historical
development of trademarks and trademark law.

A "trademark" is defined under R.A. 166, the Trademark Law, as including "any word, name, symbol, emblem,
sign or device or any combination thereof adopted and used by a manufacturer or merchant to identify his goods
and distinguish them from those manufactured, sold or dealt in by others. 11 This definition has been simplified
in R.A. No. 8293, the Intellectual Property Code of the Philippines, which defines a "trademark" as "any visible
sign capable of distinguishing goods." 12 In Philippine jurisprudence, the function of a trademark is to point out
distinctly the origin or ownership of the goods to which it is affixed; to secure to him, who has been
instrumental in bringing into the market a superior article of merchandise, the fruit of his industry and skill; to
assure the public that they are procuring the genuine article; to prevent fraud and imposition; and to protect the
manufacturer against substitution and sale of an inferior and different article as his product. 13

Modern authorities on trademark law view trademarks as performing three distinct functions: (1) they indicate
origin or ownership of the articles to which they are attached; (2) they guarantee that those articles come up to a
certain standard of quality; and (3) they advertise the articles they symbolize. 14

Symbols have been used to identify the ownership or origin of articles for several centuries. 15 As early as
5,000 B.C., markings on pottery have been found by archaeologists. Cave drawings in southwestern Europe
show bison with symbols on their flanks. 16 Archaeological discoveries of ancient Greek and Roman
inscriptions on sculptural works, paintings, vases, precious stones, glassworks, bricks, etc. reveal some features
which are thought to be marks or symbols. These marks were affixed by the creator or maker of the article, or
by public authorities as indicators for the payment of tax, for disclosing state monopoly, or devices for the
settlement of accounts between an entrepreneur and his workmen. 17

In the Middle Ages, the use of many kinds of marks on a variety of goods was commonplace. Fifteenth century
England saw the compulsory use of identifying marks in certain trades. There were the baker's mark on bread,
bottlemaker's marks, smith's marks, tanner's marks, watermarks on paper, etc. 18 Every guild had its own mark
and every master belonging to it had a special mark of his own. The marks were not trademarks but police
marks compulsorily imposed by the sovereign to let the public know that the goods were not "foreign" goods
smuggled into an area where the guild had a monopoly, as well as to aid in tracing defective work or poor
craftsmanship to the artisan. 19 For a similar reason, merchants also used merchants' marks. Merchants dealt in
goods acquired from many sources and the marks enabled them to identify and reclaim their goods upon
recovery after shipwreck or piracy. 20

With constant use, the mark acquired popularity and became voluntarily adopted. It was not intended to create
or continue monopoly but to give the customer an index or guarantee of quality. 21 It was in the late 18th
century when the industrial revolution gave rise to mass production and distribution of consumer goods that the
mark became an important instrumentality of trade and commerce. 22 By this time, trademarks did not merely
identify the goods; they also indicated the goods to be of satisfactory quality, and thereby stimulated further
purchases by the consuming public. 23 Eventually, they came to symbolize the goodwill and business
reputation of the owner of the product and became a property right protected by law. 24 The common law
developed the doctrine of trademarks and tradenames "to prevent a person from palming off his goods as
another's, from getting another's business or injuring his reputation by unfair means, and, from defrauding the
public." 25 Subsequently, England and the United States enacted national legislation on trademarks as part of
the law regulating unfair trade. 26 It became the right of the trademark owner to exclude others from the use of
his mark, or of a confusingly similar mark where confusion resulted in diversion of trade or financial injury. At
the same time, the trademark served as a warning against the imitation or faking of products to prevent the
imposition of fraud upon the public. 27

Today, the trademark is not merely a symbol of origin and goodwill; it is often the most effective agent for the
actual creation and protection of goodwill. It imprints upon the public mind an anonymous and impersonal
guaranty of satisfaction, creating a desire for further satisfaction. In other words, the mark actually sells the
goods. 28 The mark has become the "silent salesman," the conduit through which direct contact between the
trademark owner and the consumer is assured. It has invaded popular culture in ways never anticipated that it
has become a more convincing selling point than even the quality of the article to which it refers. 29 In the last
half century, the unparalleled growth of industry and the rapid development of communications technology
have enabled trademarks, tradenames and other distinctive signs of a product to penetrate regions where the
owner does not actually manufacture or sell the product itself. Goodwill is no longer confined to the territory of
actual market penetration; it extends to zones where the marked article has been fixed in the public mind
through advertising. 30 Whether in the print, broadcast or electronic communications medium, particularly on
the Internet, 31 advertising has paved the way for growth and expansion of the product by creating and earning
a reputation that crosses over borders, virtually turning the whole world into one vast marketplace.

This is the mise-en-scene of the present controversy. Petitioner brings this action claiming that "Barbizon"
products have been sold in the Philippines since 1970. Petitioner developed this market by working long hours
and spending considerable sums of money on advertisements and promotion of the trademark and its products.
Now, almost thirty years later, private respondent, a foreign corporation, "swaggers into the country like a
conquering hero," usurps the trademark and invades petitioner's market. 32 Justice and fairness dictate that
private respondent be prevented from appropriating what is not its own. Legally, at the same time, private
respondent is barred from questioning petitioner's ownership of the trademark because of res judicata. 33

Literally, res judicata means a matter adjudged, a thing judicially acted upon or decided; a thing or matter
settled by judgment. 34 In res judicata, the judgment in the first action is considered conclusive as to every
matter offered and received therein, as to any other admissible matter which might have been offered for that
purpose, and all other matters that could have been adjudged therein. 35 Res judicata is an absolute bar to a
subsequent action for the same cause; and its requisites are: (a) the former judgment or order must be final; (b)
the judgment or order must be one on the merits; (c) it must have been rendered by a court having jurisdiction
over the subject matter and parties; (d) there must be between the first and second actions, identity of parties, of
subject matter and of causes of action. 36

The Solicitor General, on behalf of respondent Director of Patents, has joined cause with petitioner. Both claim
that all the four elements of res judicata have been complied with: that the judgment in IPC No. 686 was final
and was rendered by the Director of Patents who had jurisdiction over the subject matter and parties; that the
judgment in IPC No. 686 was on the merits; and that the lack of a hearing was immaterial because substantial
issues were raised by the parties and passed upon by the Director of Patents. 37

The decision in IPC No. 686 reads as follows:

xxx xxx xxx.

Neither party took testimony nor adduced documentary evidence. They submitted the case for
decision based on the pleadings which, together with the pertinent records, have all been
carefully considered.

Accordingly, the only issue for my disposition is whether or not the herein opposer would
probably be damaged by the registration of the trademark BARBIZON sought by the respondent-
applicant on the ground that it so resembles the trademark BARBIZON allegedly used and
owned by the former to be "likely to cause confusion, mistake or to deceive purchasers."

On record, there can be no doubt that respondent-applicant's sought-to-be-registered trademark

BARBIZON is similar, in fact obviously identical, to opposer's alleged trademark BARBIZON,
in spelling and pronunciation. The only appreciable but very negligible difference lies in their
respective appearances or manner of presentation. Respondent-applicant's trademark is in bold
 letters (set against a black background), while that of the opposer is offered in stylish script
letters.

It is opposer's assertion that its trademark BARBIZON has been used in trade or commerce in
the Philippines prior to the date of application for the registration of the identical mark
BARBIZON by the respondent-applicant. However, the allegation of facts in opposer's verified
notice of opposition is devoid of such material information. In fact, a reading of the text of said
verified opposition reveals an apparent, if not deliberate, omission of the date (or year) when
opposer's alleged trademark BARBIZON was first used in trade in the Philippines (see par. No.
1, p. 2, Verified Notice of Opposition, Rec.). Thus, it cannot here and now be ascertained
whether opposer's alleged use of the trademark BARBIZON could be prior to the use of the
identical mark by the herein respondent-applicant, since the opposer attempted neither to
substantiate its claim of use in local commerce with any proof or evidence. Instead, the opposer
submitted the case for decision based merely on the pleadings.

On the other hand, respondent-applicant asserted in her amended application for registration that
she first used the trademark BARBIZON for brassiere (or "brasseire") and ladies underwear
garments and panties as early as March 3, 1970. Be that as it may, there being no testimony
taken as to said date of first use, respondent-applicant will be limited to the filing date, June 15,
1970, of her application as the date of first use (Rule 173, Rules of Practice in Trademark Cases).

From the foregoing, I conclude that the opposer has not made out a case of probable damage by
the registration of the respondent-applicant's mark BARBIZON.

WHEREFORE, the opposition should be, as it is hereby, DISMISSED. Accordingly, Application

Serial No. 19010, for the registration of the trademark BARBIZON of respondent Lolita R.
Escobar, is given due course.38

The decision in IPC No. 686 was a judgment on the merits and it was error for the Court of Appeals to rule that
it was not. A judgment is on the merits when it determines the rights and liabilities of the parties based on the
disclosed facts, irrespective of formal, technical or dilatory objections. 39 It is not necessary that a trial should
have been conducted. If the court's judgment is general, and not based on any technical defect or objection, and
the parties had a full legal opportunity to be heard on their respective claims and contentions, it is on the merits
although there was no actual hearing or arguments on the facts of the case. 40 In the case at bar, the Director of
Patents did not dismiss private respondent's opposition on a sheer technicality. Although no hearing was
conducted, both parties filed their respective pleadings and were given opportunity to present evidence. They,
however, waived their right to do so and submitted the case for decision based on their pleadings. The lack of
evidence did not deter the Director of Patents from ruling on the case, particularly on the issue of prior use,
which goes into the very substance of the relief sought by the parties. Since private respondent failed to prove
prior use of its trademark, Escobar's claim of first use was upheld.

The judgment in IPC No. 686 being on the merits, petitioner and the Solicitor General allege that IPC No. 686
and IPC No. 2049 also comply with the fourth requisite of res judicata, i.e., they involve the same parties and
the same subject matter, and have identical causes of action.

Undisputedly, IPC No. 686 and IPC No. 2049 involve the same parties and the same subject matter. Petitioner
herein is the assignee of Escobar while private respondent is the same American corporation in the first case.
The subject matter of both cases is the trademark "Barbizon." Private respondent counter-argues, however, that
the two cases do not have identical causes of action. New causes of action were allegedly introduced in IPC No.
2049, such as the prior use and registration of the trademark in the United States and other countries worldwide,
prior use in the Philippines, and the fraudulent registration of the mark in violation of Article 189 of the Revised
Penal Code. Private respondent also cited protection of the trademark under the Convention of Paris for the
Protection of Industrial Property, specifically Article 6bis thereof, and the implementation of Article 6bis by
two Memoranda dated November 20, 1980 and October 25, 1983 of the Minister of Trade and Industry to the
Director of Patents, as well as Executive Order (E.O.) No. 913.

The Convention of Paris for the Protection of Industrial Property, otherwise known as the Paris Convention, is a
multilateral treaty that seeks to protect industrial property consisting of patents, utility models, industrial
designs, trademarks, service marks, trade names and indications of source or appellations of origin, and at the
same time aims to repress unfair competition. 41 The Convention is essentially a compact among various
countries which, as members of the Union, have pledged to accord to citizens of the other member countries
trademark and other rights comparable to those accorded their own citizens by their domestic laws for an
effective protection against unfair competition. 42 In short, foreign nationals are to be given the same treatment
in each of the member countries as that country makes available to its own citizens. 43 Nationals of the various
member nations are thus assured of a certain minimum of international protection of their industrial property. 44

The Convention was first signed by eleven countries in Paris on March 20, 1883. 45 It underwent several
revisions — at Brussels in 1900, at Washington in 1911, at The Hague in 1925, at London in 1934, at Lisbon in
1958, 46 and at Stockholm in 1967. Both the Philippines and the United States of America, herein private
respondent's country, are signatories to the Convention. The United States acceded on May 30, 1887 while the
Philippines, through its Senate, concurred on May 10, 1965. 47 The Philippines' adhesion became effective on
September 27, 1965, 48 and from this date, the country obligated itself to honor and enforce the provisions of
the Convention. 49

In the case at bar, private respondent anchors its cause of action on the first paragraph of Article 6bis of the
Paris Convention which reads as follows:

Article 6bis

(1) The countries of the Union undertake, either administratively if their legislation so permits, or
at the request of an interested party, to refuse or to cancel the registration and to prohibit the use,
of a trademark which constitutes a reproduction, an imitation, or a translation, liable to create
confusion, of a mark considered by the competent authority of the country of registration or use
to be well-known in that country as being already the mark of a person entitled to the benefits of
this Convention and used for identical or similar goods. These provisions shall also apply when
the essential part of the mark constitutes a reproduction of any such well-known mark or an
imitation liable to create confusion therewith.

(2) A period of at least five years from the date of registration shall be allowed for seeking the
cancellation of such a mark. The countries of the Union may provide for a period within which
the prohibition of use must be sought.

(3) No time limit shall be fixed for seeking the cancellation or the prohibition of the use of marks
registered or used in bad faith. 50

This Article governs protection of well-known trademarks. Under the first paragraph, each country of
the Union bound itself to undertake to refuse or cancel the registration, and prohibit the use of a
trademark which is a reproduction, imitation or translation, or any essential part of which trademark
constitutes a reproduction, liable to create confusion, of a mark considered by the competent authority of
the country where protection is sought, to be well-known in the country as being already the mark of a
person entitled to the benefits of the Convention, and used for identical or similar goods.

Art. 6bis was first introduced at The Hague in 1925 and amended in Lisbon in 1952. 51 It is a self-executing
provision and does not require legislative enactment to give it effect in the member country. 52 It may be
applied directly by the tribunals and officials of each member country by the mere publication or proclamation
of the Convention, after its ratification according to the public law of each state and the order for its execution.
53

The essential requirement under Article 6bis is that the trademark to be protected must be "well-known" in the
country where protection is sought. The power to determine whether a trademark is well-known lies in the
"competent authority of the country of registration or use." This competent authority would be either the
registering authority if it has the power to decide this, or the courts of the country in question if the issue comes
before a court. 54

Pursuant to Article 6bis, on November 20, 1980, then Minister Luis Villafuerte of the Ministry of Trade issued
a Memorandum to the Director of Patents. The Minister ordered the Director that:

Pursuant to the Paris Convention for the Protection of Industrial Property to which the
Philippines is a signatory, you are hereby directed to reject all pending applications for
Philippine registration of signature and other world-famous trademarks by applicants other than
its original owners or users.

The conflicting claims over internationally known trademarks involve such name brands as
Lacoste, Jordache, Vanderbilt, Sasson, Fila, Pierre Cardin, Gucci, Christian Dior, Oscar de la
Renta, Calvin Klein, Givenchy, Ralph Lauren, Geoffrey Beene, Lanvin and Ted Lapidus.

It is further directed that, in cases where warranted, Philippine registrants of such trademarks
should be asked to surrender their certificates of registration, if any, to avoid suits for damages
and other legal action by the trademarks' foreign or local owners or original users.

You are also required to submit to the undersigned a progress report on the matter.

For immediate compliance. 55

Three years later, on October 25, 1983, then Minister Roberto Ongpin issued another Memorandum to the
Director of Patents, viz:

Pursuant to Executive Order No. 913 dated 7 October 1983 which strengthens the rule-making
and adjudicatory powers of the Minister of Trade and Industry and provides inter alia, that "such
rule-making and adjudicatory powers should be revitalized in order that the Minister of Trade
and Industry can . . . apply more swift and effective solutions and remedies to old and new
problems . . . such as infringement of internationally-known tradenames and trademarks . . ." and
in view of the decision of the Intermediate Appellate Court in the case of LA CHEMISE
LACOSTE, S.A., versus RAM SADWHANI [AC-G.R. SP NO. 13359 (17) June 1983] 56 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 6bis 57 thereof, as follows:

1. Whether the trademark under consideration is well-known in the Philippines or

is a mark already belonging to a person entitled to the benefits of the
CONVENTION, this should be established, pursuant to Philippine Patent Office
procedures in inter partes and ex parte cases, according to any of the following
criteria or any combination thereof:
 (a) a declaration by the Minister of Trade and Industry that the
trademark being considered is already well-known in the
Philippines such that permission for its use by other than its
original owner will constitute a reproduction, imitation, translation
or other infringement;

(b) that the trademark is used in commerce internationally,

supported by proof that goods bearing the trademark are sold on an
international scale, advertisements, the establishment of factories,
sales offices, distributorships, and the like, in different countries,
including volume or other measure of international trade and
commerce;

(c) that the trademark is duly registered in the industrial property

office(s) of another country or countries, taking into consideration
the date of such registration;

(d) that the trademark has long been established and obtained
goodwill and international consumer recognition as belonging to
one owner or source;

(e) that the trademark actually belongs to a party claiming

ownership and has the right to registration under the provisions of
the aforestated PARIS CONVENTION.

2. The word trademark, as used in this MEMORANDUM, shall include

tradenames, service marks, logos, signs, emblems, insignia or other similar
devices used for identification and recognition by consumers.

3. The Philippine Patent Office shall refuse all applications for, or cancel the
registration of, trademarks which constitute a reproduction, translation or
imitation of a trademark owned by a person, natural or corporate, who is a citizen
of a country signatory to the PARIS CONVENTION FOR THE PROTECTION
OF INDUSTRIAL PROPERTY.

4. The Philippine Patent Office shall give due course to the Opposition in cases
already or hereafter filed against the registration of trademarks entitled to
protection of Section 6bis of said PARIS CONVENTION as outlined above, by
remanding applications filed by one not entitled to such protection for final
disallowance by the Examination Division.

5. All pending applications for Philippine registration of signature and other

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.

xxx xxx xxx. 58

In the Villafuerte Memorandum, the Minister of Trade instructed the Director of Patents to reject all pending
applications for Philippine registration of signature and other world-famous trademarks by applicants other than
their original owners or users. The Minister enumerated several internationally-known trademarks and ordered
the Director of Patents to require Philippine registrants of such marks to surrender their certificates of
registration.

In the Ongpin Memorandum, the Minister of Trade and Industry did not enumerate well-known trademarks but
laid down guidelines for the Director of Patents to observe in determining whether a trademark is entitled to
protection as a well-known mark in the Philippines under Article 6bis of the Paris Convention. This was to be
established through Philippine Patent Office procedures in inter partes and ex parte cases pursuant to the
criteria enumerated therein. The Philippine Patent Office was ordered to refuse applications for, or cancel the
registration of, trademarks which constitute a reproduction, translation or imitation of a trademark owned by a
person who is a citizen of a member of the Union. All pending applications for registration of world-famous
trademarks by persons other than their original owners were to be rejected forthwith. The Ongpin Memorandum
was issued pursuant to Executive Order No. 913 dated October 7, 1983 of then President Marcos which
strengthened the rule-making and adjudicatory powers of the Minister of Trade and Industry for the effective
protection of consumers and the application of swift solutions to problems in trade and industry. 59

Both the Villafuerte and Ongpin Memoranda were sustained by the Supreme Court in the 1984 landmark case
of La Chemise Lacoste, S.A. v. Fernandez. 60 This court ruled therein that under the provisions of Article 6bis
of the Paris Convention, the Minister of Trade and Industry was the "competent authority" to determine whether
a trademark is well-known in this country. 61

The Villafuerte Memorandum was issued in 1980, i.e., fifteen (15) years after the adoption of the Paris
Convention in 1965. In the case at bar, the first inter partes case, IPC No. 686, was filed in 1970, before the
Villafuerte Memorandum but five (5) years after the effectivity of the Paris Convention. Article 6bis was
already in effect five years before the first case was instituted. Private respondent, however, did not cite the
protection of Article 6bis, neither did it mention the Paris Convention at all. It was only in 1981 when IPC No.
2049 was instituted that the Paris Convention and the Villafuerte Memorandum, and, during the pendency of the
case, the 1983 Ongpin Memorandum were invoked by private respondent.

The Solicitor General argues that the issue of whether the protection of Article 6bis of the Convention and the
two Memoranda is barred by res judicata has already been answered in Wolverine Worldwide, Inc. v. Court of
Appeals. 62 In this case, petitioner Wolverine, a foreign corporation, filed with the Philippine Patent Office a
petition for cancellation of the registration certificate of private respondent, a Filipino citizen, for the trademark
"Hush Puppies" and "Dog Device." Petitioner alleged that it was the registrant of the internationally-known
trademark in the United States and other countries, and cited protection under the Paris Convention and the
Ongpin Memorandum. The petition was dismissed by the Patent Office on the ground of res judicata. It was
found that in 1973 petitioner's predecessor-in-interest filed two petitions for cancellation of the same trademark
against respondent's predecessor-in-interest. The Patent Office dismissed the petitions, ordered the cancellation
of registration of petitioner's trademark, and gave due course to respondent's application for registration. This
decision was sustained by the Court of Appeals, which decision was not elevated to us and became final and
executory. 63

Wolverine claimed that while its previous petitions were filed under R.A. No. 166, the Trademark Law, its
subsequent petition was based on a new cause of action, i.e., the Ongpin Memorandum and E.O. No. 913 issued
in 1983, after finality of the previous decision. We held that the said Memorandum and E.O. did not grant a new
cause of action because it did "not amend the Trademark Law," . . . "nor did it indicate a new policy with
respect to the registration in the Philippines of world-famous trademarks." 64 This conclusion was based on the
finding that Wolverine's two previous petitions and subsequent petition dealt with the same issue of ownership
of the trademark. 65 In other words, since the first and second cases involved the same issue of ownership, then
the first case was a bar to the second case.
In the instant case, the issue of ownership of the trademark "Barbizon" was not raised in IPC No. 686. Private
respondent's opposition therein was merely anchored on:

(a) "confusing similarity" of its trademark with that of Escobar's;

(b) that the registration of Escobar's similar trademark will cause damage to private respondent's
business reputation and goodwill; and

(c) that Escobar's use of the trademark amounts to an unlawful appropriation of a mark
previously used in the Philippines which act is penalized under Section 4 (d) of the Trademark
Law.

In IPC No. 2049, private respondent's opposition set forth several issues summarized as follows:

(a) as early as 1933, it adopted the word "BARBIZON" as trademark on its products such as
robes, pajamas, lingerie, nightgowns and slips;

(b) that the trademark "BARBIZON" was registered with the United States Patent Office in 1934
and 1949; and that variations of the same trademark, i.e., "BARBIZON" with Bee design and
"BARBIZON" with the representation of a woman were also registered with the U.S. Patent
Office in 1961 and 1976;

(c) that these marks have been in use in the Philippines and in many countries all over the world
for over forty years. "Barbizon" products have been advertised in international publications and
the marks registered in 36 countries worldwide;

(d) Escobar's registration of the similar trademark "BARBIZON" in 1974 was based on fraud;
and this fraudulent registration was cancelled in 1979, stripping Escobar of whatsoever right she
had to the said mark;

(e) Private respondent's trademark is entitled to protection as a well-known mark under Article
6bis of the Paris Convention, Executive Order No. 913, and the two Memoranda dated
November 20, 1980 and October 25, 1983 of the Minister of Trade and Industry to the Director
of Patents;

(f) Escobar's trademark is identical to private respondent's and its use on the same class of goods
as the latter's amounts to a violation of the Trademark Law and Article 189 of the Revised Penal
Code.

IPC No. 2049 raised the issue of ownership of the trademark, the first registration and use of the
trademark in the United States and other countries, and the international recognition and reputation of
the trademark established by extensive use and advertisement of private respondent's products for over
forty years here and abroad. These are different from the issues of confusing similarity and damage in
IPC No. 686. The issue of prior use may have been raised in IPC No. 686 but this claim was limited to
prior use in the Philippines only. Prior use in IPC No. 2049 stems from private respondent's claim as
originator of the word and symbol "Barbizon," 66 as the first and registered user of the mark attached to
its products which have been sold and advertised worldwide for a considerable number of years prior to
petitioner's first application for registration of her trademark in the Philippines. Indeed, these are
substantial allegations that raised new issues and necessarily gave private respondent a new cause of
action. Res judicata does not apply to rights, claims or demands, although growing out of the same
subject matter, which constitute separate or distinct causes of action and were not put in issue in the
former action. 67
Respondent corporation also introduced in the second case a fact that did not exist at the time the first case was
filed and terminated. The cancellation of petitioner's certificate of registration for failure to file the affidavit of
use arose only after IPC No. 686. It did not and could not have occurred in the first case, and this gave
respondent another cause to oppose the second application. Res judicata extends only to facts and conditions as
they existed at the time judgment was rendered and to the legal rights and relations of the parties fixed by the
facts so determined. 68 When new facts or conditions intervene before the second suit, furnishing a new basis
for the claims and defenses of the parties, the issues are no longer the same, and the former judgment cannot be
pleaded as a bar to the subsequent action. 69

It is also noted that the oppositions in the first and second cases are based on different laws. The opposition in
IPC No. 686 was based on specific provisions of the Trademark Law, i.e., Section 4 (d) 70 on confusing
similarity of trademarks and Section 8 71 on the requisite damage to file an opposition to a petition for
registration. The opposition in IPC No. 2049 invoked the Paris Convention, particularly Article 6bis thereof,
E.O. No. 913 and the two Memoranda of the Minister of Trade and Industry. This opposition also invoked
Article 189 of the Revised Penal Code which is a statute totally different from the Trademark Law. 72 Causes
of action which are distinct and independent from each other, although arising out of the same contract,
transaction, or state of facts, may be sued on separately, recovery on one being no bar to subsequent actions on
others. 73 The mere fact that the same relief is sought in the subsequent action will not render the judgment in
the prior action operative as res judicata, such as where the two actions are based on different statutes. 74 Res
judicata therefore does not apply to the instant case and respondent Court of Appeals did not err in so ruling.

Intellectual and industrial property rights cases are not simple property cases. Trademarks deal with the
psychological function of symbols and the effect of these symbols on the public at large. 75 Trademarks play a
significant role in communication, commerce and trade, and serve valuable and interrelated business functions,
both nationally and internationally. For this reason, all agreements concerning industrial property, like those on
trademarks and tradenames, are intimately connected with economic development. 76 Industrial property
encourages investments in new ideas and inventions and stimulates creative efforts for the satisfaction of human
needs. They speed up transfer of technology and industrialization, and thereby bring about social and economic
progress. 77 These advantages have been acknowledged by the Philippine government itself. The Intellectual
Property Code of the Philippines declares that "an effective intellectual and industrial property system is vital to
the development of domestic and creative activity, facilitates transfer of technology, it attracts foreign
investments, and ensures market access for our products." 78 The Intellectual Property Code took effect on
January 1, 1998 and by its express provision, 79 repealed the Trademark Law, 80 the Patent Law, 81 Articles
188 and 189 of the Revised Penal Code, the Decree on Intellectual Property, 82 and the Decree on Compulsory
Reprinting of Foreign Textbooks. 83 The Code was enacted to strengthen the intellectual and industrial property
system in the Philippines as mandated by the country's accession to the Agreement Establishing the World
Trade Organization (WTO). 84

The WTO is a common institutional framework for the conduct of trade relations among its members in matters
related to the multilateral and plurilateral trade agreements annexed to the WTO Agreement. 85 The WTO
framework ensures a "single undertaking approach" to the administration and operation of all agreements and
arrangements attached to the WTO Agreement. Among those annexed is the Agreement on Trade-Related
Aspects of Intellectual Property Rights or TRIPs. 86 Members to this Agreement "desire to reduce distortions
and impediments to international trade, taking into account the need to promote effective and adequate
protection of intellectual property rights, and to ensure that measures and procedures to enforce intellectual
property rights do not themselves become barriers to legitimate trade." To fulfill these objectives, the members
have agreed to adhere to minimum standards of protection set by several Conventions. 87 These Conventions
are: the Berne Convention for the Protection of Literary and Artistic Works (1971), the Rome Convention or the
International Convention for the Protection of Performers, Producers of Phonograms and Broadcasting
Organisations, the Treaty on Intellectual Property in Respect of Integrated Circuits, and the Paris Convention
(1967), as revised in Stockholm on July 14, 1967. 88
A major proportion of international trade depends on the protection of intellectual property rights. 89 Since the
late 1970's, the unauthorized counterfeiting of industrial property and trademarked products has had a
considerable adverse impact on domestic and international trade revenues. 90 The TRIPs Agreement seeks to
grant adequate protection of intellectual property rights by creating a favorable economic environment to
encourage the inflow of foreign investments, and strengthening the multi-lateral trading system to bring about
economic, cultural and technological independence. 91

The Philippines and the United States of America have acceded to the WTO Agreement. This Agreement has
revolutionized international business and economic relations among states, and has propelled the world towards
trade liberalization and economic globalization. 92 Protectionism and isolationism belong to the past. Trade is
no longer confined to a bilateral system. There is now "a new era of global economic cooperation, reflecting the
widespread desire to operate in a fairer and more open multilateral trading system." 93 Conformably, the State
must reaffirm its commitment to the global community and take part in evolving a new international economic
order at the dawn of the new millenium.

IN VIEW WHEREOF, the petition is denied and the Decision and Resolution of the Court of Appeals in CA-
G.R. SP No. 28415 are affirmed.

SO ORDERED.
G.R. No. 120961 October 17, 1996

DISTILLERIA WASHINGTON, INC. or WASHINGTON DISTILLERY, INC., petitioner,

vs.
THE HONORABLE COURT OF APPEALS and LA TONDEÑA DISTILLERS, INC., respondents.

VITUG, J.:p

The initiatory suit was instituted on 02 November 1987 with the trial court (docketed Civil Case No. 87-42639)
for manual delivery with damages instituted by La Tondeña Distillers, Inc. ("LTDI"), against Distilleria
Washington ("Washington"). LTDI, under a claim of ownership, sought to seize from Distilleria Washington
18,157 empty "350 c.c. white flint bottles" bearing the blown-in marks of "La Tondeña Inc." and "Ginebra San
Miguel." The court, on application of LTDI, issued an order of replevin on 05 November 1987 for the seizure of
the empty gin bottles from Washington. These bottles, it was averred, were being used by Washington for its
own "Gin Seven" products without the consent of LTDI.

LTDI asserted that, being the owner and registrant of the bottles, it was entitled to the protection so extended by
Republic Act ("R.A.") No. 623, as amended, notwithstanding its sale of the Ginebra San Miguel gin product
contained in said bottles.

Washington countered that R.A. No. 623, invoked by LTDI, should not apply to gin, an alcoholic beverage
which is unlike that of "soda water, mineral or aerated water, ciders, milks, cream, or other lawful beverages"
mentioned in the law, and that, in any case, ownership of the bottles should, considering the attendant facts and
circumstances, be held lawfully transferred to the buyers upon the sale of the gin and containers at a single
price.

After hearing the parties, the trial court rendered its decision, dated 03 December 1991, holding against LTDI;
viz:

WHEREFORE, premises considered, the complaint is hereby DISMISSED and plaintiff is

ordered:

1. To return to defendant the 18,157 empty bottles seized by virtue of the writ for the Seizure of
Personal Property issued by this Court on November 6, 1987;

2. In the event of failure to return said empty bottles, plaintiff is ordered to indemnify defendant
in the amount of P18,157.00 representing the value of the bottles.

3. Costs against plaintiff. 1

LTDI appealed the decision to the Court of Appeals (CA-G.R. CV No. 36971). The appellate court reversed the
court a quo and ruled against Washington; thus:

WHEREFORE, the appealed decision is hereby REVERSED and SET ASIDE. The appellant,
being the owner, is authorized to retain in its possession the 18,157 bottles registered in its name
delivered to it by the sheriff following their seizure from the appellee pursuant to the writ of
replevin issued by the trial court on November 6, 1987. Costs against the appellee. 2
Washington is now before this Court assailing the reversal of the trial court's decision. In its petition,
Washington points out that —

4.00.a. Under the undisputed facts, petitioner is the lawful owner of the personal properties
(18,157 empty bottles) involved in the petition. Respondent LTDI is precluded by law from
claiming the same;

4.00.b. The decision and resolution appealed from violate equity and applicable canons in the
interpretation and construction of statutes; and

4.00.c. Liquor products are not covered by Republic Act. No. 623. The holding of the Court in
Cagayan Valley Enterprises, Inc. vs. Honorable Court of Appeals, 179 SCRA 218 [1989] should
be reviewed and reconsidered in light of the Constitution and House Bill No. 20585. 3

It is a fact that R.A. No. 623 extends trademark protection in the use of containers duly registered with the
Philippine Patent Office. The pertinent provisions of R.A. 623, as amended, so reads:

Sec. 1. Persons engaged or licensed to engage in the manufacture, bottling, or selling of soda
water, mineral or aerated waters, cider, milk, cream or other lawful beverages in bottles, boxes,
casks, kegs, or barrels, and other similar containers, or in the manufacture, compressing or
selling of gases such as oxygen, acetylene, nitrogen, carbon dioxide, ammonia, hydrogen,
chloride, helium, sulphur dioxide, butane, propane, freon, methyl chloride or similar gases
contained in steel cylinders, tanks, flasks, accumulators or similar containers, with their names or
the names of their principals or products, or other marks of ownership stamped or marked
thereon, may register with the Philippine Patent Office a description of the names or marks, and
the purpose for which the containers so marked are used by them, under the same conditions,
rules, and regulations, made applicable by law or regulation to the issuance of trademarks.

Sec. 2. It shall be unlawful for any person, without the written consent of the manufacturer,
bottler, or seller, who has successfully registered the marks of ownership in accordance with the
provisions of the next preceding section, to fill such bottles, boxes, kegs, barrels, steel cylinders,
tanks, flasks, accumulators, or other similar containers so marked or stamped, for the purpose of
sale, or to sell, dispose of, buy or traffic in, or wantonly destroy the same, whether filled or not to
use the same for drinking vessels or glasses or drain pipes, foundation pipes, for any other
purpose than that registered by the manufacturer, bottler or seller. Any violation of this section
shall be punished by a fine of not more than one thousand pesos or imprisonment of not more
than one year or both.

Sec. 3. The use by any person other than the registered manufacturer, bottler or seller, without
written permission of the latter of any such bottle, cask, barrel, keg, box, steel cylinders, tanks,
flask, accumulators, or other similar containers, or the possession thereof without written
permission of the manufacturer, by any junk dealer or dealer in casks, barrels, kegs, boxes, steel
cylinders, tanks, flasks, accumulators or other similar containers, the same being duly marked or
stamped and registered as herein provided, shall give rise to a prima facie presumption that such
use or possession is unlawful. 4

As the outset, the Court must state that is sees no cogent reason for either departing from or changing the basic
rule it laid down in Cagayan Valley Enterprises, Inc., vs. Court of Appeals. 5 The Court has there held:

The above-quoted provisions grant protection to a qualified manufacturer who successfully

registered with the Philippine Patent Office its duly stamped or marked bottles, boxes, casks and
other similar containers. The mere use of registered bottles or containers without the written
 consent of the manufacturer is prohibited, the only exceptions being when they are used as
containers for "sisi," "bagoong," "patis" and similar native products.

It is an admitted fact that herein petitioner Cagayan buys form junk dealers and retailers bottles
which bear the marks or names "La Tondeña, Inc." and "Ginebra San Miguel" and uses them as
containers for its own liquor products. The contention of Cagayan that the aforementioned
bottles without the words "properly of" indicated thereon are not the registered bottles of LTI,
since they do not conform with the statement or description in the supporting affidavits attached
to the original registration certificate and renewal, is untenable.

Republic Act No. 623 which governs the registration of marked bottles and containers merely
requires that the bottles, in order to be eligible for registration, must be stamped or marked with
the names of the manufacturers or the names of their principals or products, or other marks of
ownership. No drawings or labels are required but, instead, two photographs of the container,
duly signed by the applicant, showing clearly and legibly the names and other marks of
ownership sought to be registered and a bottle showing the name or other mark or ownership,
irremovably stamped or marked, shall be submitted.

xxx xxx xxx

The claim of petitioner that hard liquor is not included under the term "other lawful beverages"
as provided in Section 1 of Republic Act No. 623, as amended by Republic Act No. 5700, is
without merit. The title of the law itself, which reads "An Act to Regulate the Use of Duly
Stamped or Marked Bottles, Boxes, Casks, Kegs, Barrels and Other Similar Containers" clearly
shows the legislative intent to give protection to all marked bottles and containers of all lawful
beverages regardless of the nature of their contents. The words "other lawful beverages" is used
in its general sense, referring to all beverages not prohibited by law. Beverage is defined as a
liquor or liquid for drinking. Hard liquor, although regulated, is not prohibited by law, hence it is
within the purview and coverage of Republic Act No. 623, as amended. 6

Given the nature of the action in Cagayan, as well as its factual milieu, the Court indeed hardly has had a choice
but to sustain the registrant's right to the injunctive writ against the unauthorized use of its containers. The case
before us, however, goes beyond just seeking to have such use stopped but it so takes on even the ownership
issue as well. Parenthetically, petitioner is not here being charged with a violation of Section 2 of R.A. No. 623
or of the Trademark Law. The instant suit is one for replevin (manual delivery) where the claimant must be able
to show convincingly that he is either the owner or clearly entitled to the possession of the object sought to be
recovered. Replevin is a possessory action the gist of which focuses on the right of possession that, in turn, is
dependent on a legal basis that, not infrequently, looks to the ownership of the object sought to be replevied.

It is to be pointed out that a trademark refers to a word, name, symbol, emblem, sign or device or any
combination thereof adopted and used by a merchant to identify, and distinguish from others, his goods of
commerce. It is basically an intellectual creation that is susceptible to ownership 7 and, consistently therewith,
gives rise to its own elements of jus posidendi, jus utendi, jus fruendi, jus disponendi, and jus abutendi, along
with the applicable jus lex, comprising that ownership. The incorporeal right, however, is distinct from the
property in the material object subject to it. Ownership in one does not necessarily vest ownership in the other.
Thus, the transfer or assignment of the intellectual property will not necessarily constitute a conveyance of the
thing it covers, nor would a conveyance of the latter imply the transfer or assignment of the intellectual right. 8

R.A. No. 623 evidently does not disallow the sale or transfer of ownership of the marked bottles or containers.
In fact, the contrary is implicit in the law; thus —
 Sec. 5. No action shall be brought under this Act against any person to whom the registered
manufacturer, bottler or seller, has transferred by way of sale, any of the containers herein
referred to, but the sale of the beverage contained in the said containers shall not include the sale
of the containers unless specifically so provided.

Sec. 6. The provisions of this Act shall not be interpreted as prohibiting the use of bottles as
containers for "sisi," "bagoong," "patis," and similar native products.

Scarcely disputed are certain and specific industry practices in the sale of gin: The manufacturer sells the
product in marked containers, through dealers, to the public in supermarkets, grocery shops, retail stores and
other sales outlets. The buyer takes the item; he is neither required to return the bottle nor required to make a
deposit to assure its return to the seller. He could return the bottle and get a refund. A number of bottles at times
find their way to commercial users. It cannot be gainsaid that ownership of the containers does pass on to the
consumer albeit subject to the statutory limitation on the use of the registered containers and to the trademark
right of the registrant. The statement in Section 5 of R.A. 623 to the effect that the "sale of beverage contained
in the said containers shall not include the sale of the containers unless specifically so provided" is not a rule of
proscription. It is a rule of construction that, in keeping with the spirit and intent of the law, establishes at best a
presumption (of non-conveyance of the container) and which by no means can be taken to be either interdictive
or conclusive in character. Upon the other hand, LTDI's sales invoice, stipulating that the "sale does not include
the bottles with the blown-in marks of ownership of La Tondeña Distillers," cannot affect those who are not
privies thereto.

While it may be unwarranted then for LTDI to simply seize the empty containers, this Court finds it to be
legally absurd, however, to still allow petitioner to recover the possession thereof. The fact of the matter is that
R.A. 623, as amended, in affording trademark protection to the registrant, has additionally expressed a prima
facie presumption of illegal use by a possessor whenever such use or possession is without the written
permission of the registered manufacturer, a provision that is neither arbitrary nor without appropriate rationale.
Indeed, the appellate court itself has made a finding of such unauthorized use by petitioner. The Court sees no
other logical purpose for petitioner's insistence to keep the bottles, except for such continued use. The practical
and feasible alternative is to merely require the payment of just compensation to petitioner for the bottles seized
from it by LTDI. Conventional wisdom, along with equity and justice to both parties, dictates it.

WHEREFORE, the decision of the appellate court is MODIFIED by ordering LTDI to pay petitioner just
compensation for the seized bottles. Instead, however, of remanding the case to the Court of Appeals to receive
evidence on, and thereafter resolve, the assessment thereof, this Court accepts and accordingly adopts the
quantification of P18,157.00 made by the trial court. No costs.

SO ORDERED.
G.R. No. L-48226         December 14, 1942

ANA L. ANG, petitioner,

vs.
TORIBIO TEODORO, respondent.

Cirilo Lim for petitioner.

Marcial P. Lichauco and Manuel M. Mejia for respondent.

OZAETA, J.:

Petitioner has appealed to this Court by certiorari to reverse the judgment of the Court of Appeals reversing that
of the Court of First Instance of Manila and directing the Director of Commerce to cancel the registration of the
trade-mark "Ang Tibay" in favor of said petitioner, and perpetually enjoining the latter from using said trade-
mark on goods manufactured and sold by her.

Respondent Toribio Teodoro, at first in partnership with Juan Katindig and later as sole proprietor, has
continuously used "Ang Tibay," both as a trade-mark and as a trade-name, in the manufacture and sale of
slippers, shoes, and indoor baseballs since 1910. He formally registered it as trade-mark on September 29, 1915,
and as trade-name on January 3, 1933. The growth of his business is a thrilling epic of Filipino industry and
business capacity. Starting in an obscure shop in 1910 with a modest capital of P210 but with tireless industry
and unlimited perseverance, Toribio Teodoro, then an unknown young man making slippers with his own hands
but now a prominent business magnate and manufacturer with a large factory operated with modern machinery
by a great number of employees, has steadily grown with his business to which he has dedicated the best years
of his life and which he has expanded to such proportions that his gross sales from 1918 to 1938 aggregated
P8,787,025.65. His sales in 1937 amounted to P1,299,343.10 and in 1938, P1,133,165.77. His expenses for
advertisement from 1919 to 1938 aggregated P210,641.56.

Petitioner (defendant below) registered the same trade-mark "Ang Tibay" for pants and shirts on April 11, 1932,
and established a factory for the manufacture of said articles in the year 1937. In the following year (1938) her
gross sales amounted to P422,682.09. Neither the decision of the trial court nor that of the Court of Appeals
shows how much petitioner has spent or advertisement. But respondent in his brief says that petitioner "was
unable to prove that she had spent a single centavo advertising "Ang Tibay" shirts and pants prior to 1938. In
that year she advertised the factory which she had just built and it was when this was brought to the attention of
the appellee that he consulted his attorneys and eventually brought the present suit."

The trial court (Judge Quirico Abeto) presiding absolved the defendant from the complaint, with costs against
the plaintiff, on the grounds that the two trademarks are dissimilar and are used on different and non-competing
goods; that there had been no exclusive use of the trade-mark by the plaintiff; and that there had been no fraud
in the use of the said trade-mark by the defendant because the goods on which it is used are essentially different
from those of the plaintiff. The second division of the Court of Appeals, composed of Justices Bengson, Padilla,
Lopez Vito, Tuason, and Alex Reyes, with Justice Padilla as ponente, reversed that judgment, holding that by
uninterrupted an exclusive use since 191 in the manufacture of slippers and shoes, respondent's trade-mark has
acquired a secondary meaning; that the goods or articles on which the two trade-marks are used are similar or
belong to the same class; and that the use by petitioner of said trade-mark constitutes a violation of sections 3
and 7 of Act No. 666. The defendant Director of Commerce did not appeal from the decision of the Court of
Appeals.
First. Counsel for the petitioner, in a well-written brief, makes a frontal sledge-hammer attack on the validity of
respondent's trade-mark "Ang Tibay." He contends that the phrase "Ang Tibay" as employed by the respondent
on the articles manufactured by him is a descriptive term because, "freely translate in English," it means
"strong, durable, lasting." He invokes section 2 of Act No. 666, which provides that words or devices which
related only to the name, quality, or description of the merchandise cannot be the subject of a trade-mark. He
cites among others the case of Baxter vs. Zuazua (5 Phil., 16), which involved the trade-mark "Agua de
Kananga" used on toilet water, and in which this Court held that the word "Kananga," which is the name of a
well-known Philippine tree or its flower, could not be appropriated as a trade-mark any more than could the
words "sugar," "tobacco," or "coffee." On the other hand, counsel for the respondent, in an equally well-
prepared and exhaustive brief, contend that the words "Ang Tibay" are not descriptive but merely suggestive
and may properly be regarded as fanciful or arbitrary in the legal sense. The cite several cases in which similar
words have been sustained as valid trade-marks, such as "Holeproof" for hosiery, 1 "ideal for tooth brushes, 2 and
"Fashionknit" for neckties and sweaters. 3

We find it necessary to go into the etymology and meaning of the Tagalog words "Ang Tibay" to determine
whether they are a descriptive term, i.e., whether they relate to the quality or description of the merchandise to
which respondent has applied them as a trade-mark. The word "ang" is a definite article meaning "the" in
English. It is also used as an adverb, a contraction of the word "anong" (what or how). For instance, instead of
saying, "Anong ganda!" ("How beautiful!"), we ordinarily say, "Ang ganda!" Tibay is a root word from which
are derived the verb magpatibay (to strenghten; the nouns pagkamatibay (strength, durability), katibayan (proof,
support, strength), katibay-tibayan (superior strength); and the adjectives matibay (strong, durable, lasting),
napakatibay (very strong), kasintibay or magkasintibay (as strong as, or of equal strength). The phrase "Ang
Tibay" is an exclamation denoting administration of strength or durability. For instance, one who tries hard but
fails to break an object exclaims, "Ang tibay!" (How strong!") It may also be used in a sentence thus, " Ang
tibay ng sapatos mo!" (How durable your shoes are!") The phrase "ang tibay" is never used adjectively to
define or describe an object. One does not say, "ang tibay sapatos" or "sapatos ang tibay" is never used
adjectively to define or describe an object. One does not say, "ang tibay sapatos" or "sapatos ang tibay" to
mean "durable shoes," but "matibay na sapatos" or "sapatos na matibay."

From all of this we deduce that "Ang Tibay" is not a descriptive term within the meaning of the Trade-Mark
Law but rather a fanciful or coined phrase which may properly and legally be appropriated as a trade-mark or
trade-name. In this connection we do not fail to note that when the petitioner herself took the trouble and
expense of securing the registration of these same words as a trademark of her products she or her attorney as
well as the Director of Commerce was undoubtedly convinced that said words (Ang Tibay) were not a
descriptive term and hence could be legally used and validly registered as a trade-mark. It seems stultifying and
puerile for her now to contend otherwise, suggestive of the story of sour grapes. Counsel for the petitioner says
that the function of a trade-mark is to point distinctively, either by its own meaning or by association, to the
origin or ownership of the wares to which it is applied. That is correct, and we find that "Ang Tibay," as used by
the respondent to designate his wares, had exactly performed that function for twenty-two years before the
petitioner adopted it as a trade-mark in her own business. Ang Tibay shoes and slippers are, by association,
known throughout the Philippines as products of the Ang Tibay factory owned and operated by the respondent
Toribio Teodoro.

Second. In her second assignment of error petitioner contends that the Court of Appeals erred in holding that the
words "Ang Tibay" had acquired a secondary meaning. In view of the conclusion we have reached upon the
first assignment of error, it is unnecessary to apply here the doctrine of "secondary meaning" in trade-mark
parlance. This doctrine is to the effect that a word or phrase originally incapable of exclusive appropriation with
reference to an article of the market, because geographically or otherwise descriptive, might nevertheless have
been used so long and so exclusively by one producer with reference to his article that, in that trade and to that
branch of the purchasing public, the word or phrase has come to mean that the article was his product. (G. & C.
Merriam Co. vs. Salfield, 198 F., 369, 373.) We have said that the phrase "Ang Tibay," being neither
geographic nor descriptive, was originally capable of exclusive appropriation as a trade-mark. But were it not
so, the application of the doctrine of secondary meaning made by the Court of Appeals could nevertheless be
fully sustained because, in any event, by respondent's long and exclusive use of said phrase with reference to his
products and his business, it has acquired a proprietary connotation. (Landers, Frary, and Clark vs. Universal
Cooler Corporation, 85 F. [2d], 46.)

Third. Petitioner's third assignment of error is, that the Court of Appeals erred in holding that pants and shirts
are goods similar to shoes and slippers within the meaning of sections 3 and 7 of Act No. 666. She also
contends under her fourth assignment of error (which we deem convenient to pass upon together with the third)
that there can neither be infringement of trade-mark under section 3 nor unfair competition under section 7
through her use of the words "Ang Tibay" in connection with pants and shirts, because those articles do not
belong to the same class of merchandise as shoes and slippers.

The question raised by petitioner involve the scope and application of sections 3,7, 11, 13, and 20 of the Trade-
Mark Law (Act No. 666.) Section 3 provides that "any person entitled to the exclusive use of a trade-mark to
designate the origin or ownership of goods he has made or deals in, may recover damages in a civil actions from
any person who has sold goods of a similar kind, bearing such trade-mark . . . The complaining party . . . may
have a preliminary injunction, . . . and such injunction upon final hearing, if the complainant's property in the
trade-mark and the defendant's violation thereof shall be fully established, shall be made perpetual, and this
injunction shall be part of the judgment for damages to be rendered in the same cause." Section 7 provides that
any person who, in selling his goods, shall give them the general appearance of the goods of another either in
the wrapping of the packages, or in the devices or words thereon, or in any other feature of their appearance,
which would be likely to influence purchasers to believe that the goods offered are those of the complainant,
shall be guilty of unfair competition, and shall be liable to an action for damages and to an injunction, as in the
cases of trade-mark infringement under section 3. Section 11 requires the applicant for registration of a trade-
mark to state, among others, "the general class of merchandise to which the trade-mark claimed has been
appropriated." Section 13 provides that no alleged trade-mark or trade name shall be registered which is
identical with a registered or known trade-mark owned by another and appropriate to the same class of
merchandise, or which to nearly resembles another person's lawful trade-mark or trade-name as to be likely to
cause confusion or mistake in the mind of the public, or to deceive purchasers. And section 2 authorizes the
Director of Commerce to establish classes of merchandise for the purpose of the registration of trade-marks and
to determine the particular description of articles included in each class; it also provides that "an application for
registration of a trade-mark shall be registered only for one class of articles and only for the particular
description of articles mentioned in said application."

We have underlined the key words used in the statute: "goods of a similar kin," "general class of merchandise,"
"same class of merchandise," "classes of merchandise," and "class of articles," because it is upon their
implications that the result of the case hinges. These phrases, which refer to the same thing, have the same
meaning as the phrase "merchandise of the same descriptive properties" used in the statutes and jurisprudence
of other jurisdictions.

The burden of petitioner's argument is that under sections 11 and 20 the registration by respondent of the trade-
mark "Ang Tibay" for shoes and slippers is no safe-guard against its being used by petitioner for pants and
shirts because the latter do not belong to the same class of merchandise or articles as the former; that she cannot
be held guilty of infringement of trade-mark under section 3 because respondent's mark is not a valid trade-
mark, nor has it acquired a secondary meaning; that pants and shirts do not possess the same descriptive
properties as shoes and slippers; that neither can she be held guilty of unfair competition under section 7
because the use by her of the trade-mark "Ang Tibay" upon pants and shirts is not likely to mislead the general
public as to their origin or ownership; and that there is now showing that she in unfairly or fraudulently using
that mark "Ang Tibay" against the respondent. If we were interpreting the statute for the first time and in the
first decade of the twentieth century, when it was enacted, and were to construe it strictly and literally, we might
uphold petitioner's contentions. But law and jurisprudence must keep abreast with the progress of mankind, and
the courts must breathe life into the statutes if they are to serve their purpose. Our Trade-mark Law, enacted
nearly forty years ago, has grown in its implications and practical application, like a constitution, in virtue of the
life continually breathed into it. It is not of merely local application; it has its counterpart in other jurisdictions
of the civilized world from whose jurisprudence it has also received vitalizing nourishment. We have to apply
this law as it has grown and not as it was born. Its growth or development abreast with that of sister statutes and
jurisprudence in other jurisdictions is reflected in the following observation of a well-known author:

This fundamental change in attitude first manifested itself in the year 1915-1917. Until about then, the
courts had proceeded on the theory that the same trade-mark, used on un-like goods, could not cause
confusion in trade and that, therefore, there could be no objection to the use and registration of a well-
known mark by a third party for a different class of goods. Since 1916 however, a growing sentiment
began to arise that in the selection of a famous mark by a third party, there was generally the hidden
intention to "have a free ride" on the trade-mark owner's reputation and good will. (Derenberg, Trade-
Mark Protection & Unfair Trading, 1936 edition, p. 409.)

In the present state of development of the law on Trade-Marks, Unfair Competition, and Unfair Trading, the test
employed by the courts to determine whether noncompeting goods are or are not of the same class is confusion
as to the origin of the goods of the second user. Although two noncompeting articles may be classified under
two different classes by the Patent Office because they are deemed not to possess the same descriptive
properties, they would, nevertheless, be held by the courts to belong to the same class if the simultaneous use on
them of identical or closely similar trade-marks would be likely to cause confusion as to the origin, or personal
source, of the second user's goods. They would be considered as not falling under the same class only if they are
so dissimilar or so foreign to each other as to make it unlikely that the purchaser would think the first user made
the second user's goods.

Such construction of the law is induced by cogent reasons of equity and fair dealing. The courts have come to
realize that there can be unfair competition or unfair trading even if the goods are non-competing, and that such
unfair trading can cause injury or damage to the first user of a given trade-mark, first, by prevention of the
natural expansion of his business and, second, by having his business reputation confused with and put at the
mercy of the second user. Then noncompetitive products are sold under the same mark, the gradual whittling
away or dispersion of the identity and hold upon the public mind of the mark created by its first user, inevitably
results. The original owner is entitled to the preservation of the valuable link between him and the public that
has been created by his ingenuity and the merit of his wares or services. Experience has demonstrated that when
a well-known trade-mark is adopted by another even for a totally different class of goods, it is done to get the
benefit of the reputation and advertisements of the originator of said mark, to convey to the public a false
impression of some supposed connection between the manufacturer of the article sold under the original mark
and the new articles being tendered to the public under the same or similar mark. As trade has developed and
commercial changes have come about, the law of unfair competition has expanded to keep pace with the times
and the element of strict competition in itself has ceased to be the determining factor. The owner of a trade-
mark or trade-name has a property right in which he is entitled to protection, since there is damage to him from
confusion of reputation or goodwill in the mind of the public as well as from confusion of goods. The modern
trend is to give emphasis to the unfairness of the acts and to classify and treat the issue as a fraud.

A few of the numerous cases in which the foregoing doctrines have been laid down in one form or another will
now be cited: (1) In Teodoro Kalaw Ng Khe vs. Level Brothers Company (G.R. No. 46817), decided by this
Court on April 18, 1941, the respondent company (plaintiff below) was granted injunctive relief against the use
by the petitioner of the trade-mark "Lux" and "Lifebuoy" for hair pomade, they having been originally used by
the respondent for soap; The Court held in effect that although said articles are noncompetitive, they are similar
or belong to the same class. (2) In Lincoln Motor Co. vs. Lincoln Automobile Co. (44 F. [2d], 812), the
manufacturer of the well-known Lincoln automobile was granted injunctive relief against the use of the word
"Lincoln" by another company as part of its firm name. (3) The case of Aunt Jemima Mills Co. vs. Rigney &
Co. (247 F., 407), involved the trade-mark "Aunt Jemima," originally used on flour, which the defendant
attempted to use on syrup, and there the court held that the goods, though different, are so related as to fall
within the mischief which equity should prevent. (4) In Tiffany & Co., vs. Tiffany Productions, Inc. (264
N.Y.S., 459; 23 Trade-mark Reporter, 183), the plaintiff, a jewelry concern, was granted injunctive relief
against the defendant, a manufacturer of motion pictures, from using the name "Tiffany." Other famous cases
cited on the margin, wherein the courts granted injunctive relief, involved the following trade-marks or trade-
names: "Kodak," for cameras and photographic supplies, against its use for bicycles. 4 "Penslar," for medicines
and toilet articles, against its use for cigars; 5 "Rolls-Royce," for automobiles. against its use for radio tubes; 6
"Vogue," as the name of a magazine, against its use for hats; 7 "Kotex," for sanitary napkins, against the use of
"Rotex" for vaginal syringes; 8 "Sun-Maid," for raisins, against its use for flour; 9 "Yale," for locks and keys,
against its use for electric flashlights; 10 and "Waterman," for fountain pens, against its use for razor blades.
11
lawphil.net

Against this array of famous cases, the industry of counsel for the petitioner has enabled him to cite on this
point only the following cases: (1) Mohawk Milk Products vs. General Distilleries Corporation (95 F. [2d],
334), wherein the court held that gin and canned milk and cream do not belong to the same class; (2) Fawcett
Publications, Inc. vs. Popular Mechanics Co. (80 F. [2d], 194), wherein the court held that the words "Popular
Mechanics" used as the title of a magazine and duly registered as a trade-mark were not infringed by
defendant's use of the words "Modern Mechanics and Inventions" on a competitive magazine, because the word
"mechanics" is merely a descriptive name; and (3) Oxford Book Co. vs. College Entrance Book Co. (98 F. [2d],
688), wherein the plaintiff unsuccessfully attempted to enjoin the defendant from using the word "Visualized"
in connection with history books, the court holding that said word is merely descriptive. These cases cites and
relied upon by petitioner are obviously of no decisive application to the case at bar.

We think reasonable men may not disagree that shoes and shirts are not as unrelated as fountain pens and razor
blades, for instance. The mere relation or association of the articles is not controlling. As may readily be noted
from what we have heretofore said, the proprietary connotation that a trade-mark or trade-name has acquired is
of more paramount consideration. The Court of Appeals found in this case that by uninterrupted and exclusive
use since 1910 of respondent's registered trade-mark on slippers and shoes manufactured by him, it has come to
indicate the origin and ownership of said goods. It is certainly not farfetched to surmise that the selection by
petitioner of the same trade-mark for pants and shirts was motivated by a desire to get a free ride on the
reputation and selling power it has acquired at the hands of the respondent. As observed in another case, 12 the
field from which a person may select a trade-mark is practically unlimited, and hence there is no excuse for
impinging upon or even closely approaching the mark of a business rival. In the unlimited field of choice, what
could have been petitioner's purpose in selecting "Ang Tibay" if not for its fame?

Lastly, in her fifth assignment of error petitioner seems to make a frantic effort to retain the use of the mark
"Ang Tibay." Her counsel suggests that instead of enjoining her from using it, she may be required to state in
her labels affixed to her products the inscription: "Not manufactured by Toribio Teodoro." We think such
practice would be unethical and unworthy of a reputable businessman. To the suggestion of petitioner,
respondent may say, not without justice though with a tinge of bitterness: "Why offer a perpetual apology or
explanation as to the origin of your products in order to use my trade-mark instead of creating one of your
own?" On our part may we add, without meaning to be harsh, that a self-respecting person does not remain in
the shelter of another but builds one of his own.

The judgment of the Court of Appeals is affirmed, with costs against the petitioner in the three instances. So
ordered.
G.R. No. L-20635             March 31, 1966

ETEPHA, A.G., petitioner,

vs.
DIRECTOR OF PATENTS and WESTMONT PHARMACEUTICALS, INC., respondents.

McClure, Salas and Gonzalez, for petitioner.

Sycip, Salazar, Manalo, Luna and Associates, for respondent.

SANCHEZ, J.:

To the question: May trademark ATUSSIN be registered, given the fact that PERTUSSIN, another trademark,
had been previously registered in the Patent Office? — the Director of Patents answered affirmatively. Hence
this appeal.

On April 23, 1959, respondent Westmont Pharmaceuticals, Inc., a New York corporation, sought registration of
trademark "Atussin" placed on its "medicinal preparation of expectorant antihistaminic, bronchodilator sedative,
ascorbic acid (Vitamin C) used in the treatment of cough". The trademark is used exclusively in the Philippines
since January 21, 1959.1

Petitioner, Etepha, A. G., a Liechtenstin (principality) corporation, objected. Petitioner claims that it will be
damaged because Atussin is so confusedly similar to its Pertussin (Registration No. 6089, issued on September
25, 1957) used on a preparation for the treatment of coughs, that the buying public will be misled into believing
that Westmont's product is that of petitioner's which allegedly enjoys goodwill.

1. The objects of a trademark are "to point out distinctly the origin or ownership of the articles to which
it is affixed, to secure to him who has been instrumental in bringing into market a superior article or
merchandise the fruit of his industry and skill, and to prevent fraud and imposition." 2 Our over-all task
then is to ascertain whether or not Atussin so resembles Pertussin "as to be likely, when applied to or
used in connection with the goods ... of the applicant, to cause confusion or mistake or to deceive
purchasers".3 And, we are to be guided by the rule that the validity of a cause for infringement is
predicated upon colorable imitation. The phrase "colorable imitation" denotes such a "close or ingenious
imitation as to be calculated to deceive ordinary persons, or such a resemblance to the original as to
deceive an ordinary purchaser, giving such attention as a purchaser usually gives, and to cause him to
purchase the one supposing it to be the other."4

2. That the word "tussin" figures as a component of both trademarks is nothing to wonder at. The
Director of Patents aptly observes that it is "the common practice in the drug and pharmaceutical
industries to 'fabricate' marks by using syllables or words suggestive of the ailments for which they are
intended and adding thereto distinctive prefixes or suffixes". 5 And appropriately to be considered now is
the fact that, concededly, the "tussin" (in Pertussin and Atussin) was derived from the Latin root-word
"tussis" meaning cough.6

"Tussin" is merely descriptive; it is generic; it furnishes to the buyer no indication of the origin of the
goods; it is open for appropriation by anyone. It is accordingly barred from registration as trademark.
With jurisprudence holding the line, we feel safe in making the statement that any other conclusion
would result in "appellant having practically a monopoly"7 of the word "tussin" in a trademark.8

While "tussin" by itself cannot thus be used exclusively to identify one's goods, it may properly become
the subject of a trademark "by combination with another word or phrase". 9 And this union of words is
reflected in petitioner's Pertussin and respondent's Atussin, the first with prefix "Per" and the second
with Prefix "A".1äwphï1.ñët

3. A practical approach to the problem of similarity or dissimilarity is to go into the whole of the two
trademarks pictured in their manner of display. Inspection should be undertaken from the viewpoint of a
prospective buyer. The trademark complained of should be compared and contrasted with the
purchaser's memory (not in juxtaposition) of the trademark said to be infringed. 10 Some such factors as
"sound; appearance; form, style, shape, size or format; color; ideas connoted by marks; the meaning,
spelling, and pronunciation, of words used; and the setting in which the words appear" may be
considered. 11 For, indeed, trademark infringement is a form of unfair competition. 12

We take a casual look at the two labels — without spelling out the details — bearing in mind the easy-
to-remember earmarks thereof. Respondent's label underscores the trademark Atussin in bold, block
letters horizontally written. In petitioner's, on the other hand, Pertussin is printed diagonally upwards
and across in semiscript style with flourishes and with only the first letter "P" capitalized. Each label
plainly shows the source of the medicine: petitioner's at the foot bears "Etepha Ltd. Schaan Fl", and on
top, "Apothecary E. Taeschner's"; respondent's projects "Westmont Pharmaceuticals, Inc. New York,
USA" at the bottoms, and on the lower left side the word "Westmont" upon a white diamond shaped
enclosure and in red ink — a color different from that of the words above and below it. Printed
prominently along the left, bottom and right edges of petitioner's label are indications of the use: "for
bronchial catarrh — whopping-cough — coughs and asthma". Respondent's for its part briefly
represents what its produce actually is - a "cough syrup". The two labels are entirely different in colors,
contents, arrangement of words thereon, sizes, shapes and general appearance. The contrasts in pictorial
effects and appeals to the eye is so pronounced that the label of one cannot be mistaken for that of the
other, not even by persons unfamiliar with the two trademarks. 13

On this point the following culled from a recent decision of the United States Court of Customs and
Patent Appeals (June 15, 1956) is persuasive: 14

Confusion is likely between trademarks, however, only if their over-all presentations in any of
the particulars of sound, appearance, or meaning are such as would lead the purchasing public
into believing that the products to which the marks are applied emanated from the same source.
In testing this issue, fixed legal rules exist — if not in harmony, certainly in abundance — but, in
the final analysis, the application of these rules in any given situation necessarily reflects a
matter of individual judgment largely predicated on opinion. There is, however, and can be no
disagreement with the rule that the purchaser is confused, if at all, by the marks as a whole.

4. We now consider exclusively the two words — Pertussin and Atussin — as they appear on the
respective labels. As previously adverted to, these words are presented to the public in different styles of
writing and methods of design. The horizontal plain, block letters of Atussin and the diagonally and
artistically upward writing of Pertussin leave distinct visual impressions. One look is enough to denude
the mind of that illuminating similarity so essential for a trademark infringement case to prosper.

5. As we take up Pertussin and Atussin once again, we cannot escape notice of the fact that the two
words do not sound alike — when pronounced. There is not much phonetic similarity between the two.
The Solicitor General well-observed that in Pertussin the pronunciation of the prefix "Per", whether
correct or incorrect, includes a combination of three letters P, e and r; whereas, in Atussin the whole
starts with the single letter A added to suffix "tussin". Appeals to the ear are disimilar. And this, because
in a word combination, the part that comes first is the most pronounced. An expositor of the applicable
rule here is the decision in the Syrocol-Cheracol controversy. 15 There, the ruling is that trademark
Syrocol (a cough medicine preparation) is not confusedly similar to trademark Cheracol (also a cough
medicine preparation). Reason: the two words "do not look or sound enough alike to justify a holding of
 trademark infringement", and the "only similarity is in the last syllable, and that is not uncommon in
names given drug compounds".

6. In the solution of a trademark infringement problem, regard too should be given to the class of
persons who buy the particular product and the circumstances ordinarily attendant to its acquisition. 16
The medicinal preparation clothed with the trademarks in question, are unlike articles of everyday use
such as candies, ice cream, milk, soft drinks and the like which may be freely obtained by anyone,
anytime, anywhere. Petitioner's and respondent's products are to be dispensed upon medical prescription.
The respective labels say so. An intending buyer must have to go first to a licensed doctor of medicine;
he receives instructions as to what to purchase; he reads the doctor's prescription; he knows what he is to
buy. He is not of the incautious, unwary, unobservant or unsuspecting type; he examines the product
sold to him; he checks to find out whether it conforms to the medical prescription. The common trade
channel is the pharmacy or the drugstore. Similarly, the pharmacist or druggist verifies the medicine
sold. The margin of error in the acquisition of one for the other is quite remote.

We concede the possibility that buyers might be able to obtain Pertussin or Attusin without prescription. When
this happens, then the buyer must be one throughly familiar with what he intends to get, else he would not have
the temerity to ask for a medicine — specifically needed to cure a given ailment. In which case, the more
improbable it will be to palm off one for the other. For a person who purchases with open eyes is hardly the
man to be deceived.

For the reasons given, the appealed decision of the respondent Director of Patents — giving due course to the
application for the registration of trademark ATTUSIN is hereby affirmed. Costa against petitioner. So ordered.