G.R. No.

222366, December 04, 2017

W LAND HOLDINGS, INC., Petitioner, v. STARWOOD HOTELS AND RESORTS

WORLDWIDE, INC., Respondent.

DECISION

PERLAS-BERNABE, J.:

Assailed in this petition for review on certiorari1 are the Decision2 dated June 22, 2015
and the Resolution3 dated January 7, 2016 of the Court of Appeals (CA) in CA-G.R. SP
No. 133825 affirming the Decision4 dated January 10, 2014 of the Intellectual Property
Office (IPO) - Director General (IPO DG), which, in turn, reversed the Decision5 dated
May 11, 2012 of the IPO Bureau of Legal Affairs (BLA) in Inter Partes Case No. 14-
2009-00143, and accordingly, dismissed petitioner W Land Holdings, Inc.'s (W Land)
petition for cancellation of the trademark "W" registered in the name of respondent
Starwood Hotels and Resorts, Worldwide, Inc. (Starwood).

The Facts

On December 2, 2005, Starwood filed before the IPO an application for registration of
the trademark "W" for Classes 436 and 447 of the International Classification of Goods
and Services for the Purposes of the Registration of Marks8 (Nice Classification).9 On
February 26, 2007, Starwood's application was granted and thus, the "W" mark was
registered in its name.10 However, on April 20, 2006, W Land applied11 for the
registration of its own "W" mark for Class 36,12 which thereby prompted Starwood to
oppose the same.13 In a Decision14 dated April 23, 2008, the BLA found merit in
Starwood's opposition, and ruled that W Land's "W" mark is confusingly similar with
Starwood's mark,15 which had an earlier filing date. W Land filed a motion for
reconsideration16 on June 11, 2008, which was denied by the BLA in a
Resolution17 dated July 23, 2010.

On May 29, 2009, W Land filed a Petition for Cancellation18 of Starwood's mark for non-
use under Section 151.119 of Republic Act No. 8293 or the "Intellectual Property Code of
the Philippines" (IP Code),20 claiming that Starwood has failed to use its mark in the
Philippines because it has no hotel or establishment in the Philippines rendering the
services covered by its registration; and that Starwood's "W" mark application and
registration barred its own "'W" mark application and registration for use on real
estate.21

In its defense,22 Starwood denied having abandoned the subject mark on the ground of
non-use, asserting that it filed with the Director of Trademarks a notarized Declaration
of Actual Use23 (DAU)24 with evidence of use on December 2, 2008,25 which was not
rejected. In this relation, Starwood argued that it conducts hotel and leisure business
both directly and indirectly through subsidiaries and franchisees, and operates
interactive websites for its W Hotels in order to accommodate its potential clients
worldwide.26 According to Starwood, apart from viewing agents, discounts, promotions,
and other marketing fields being offered by it, these interactive websites allow
Philippine residents to make reservations and bookings, which presuppose clear and
convincing use of the "W'' mark in the Philippines.27
 The BLA Ruling

In a Decision28 dated May 11, 2012, the BLA ruled in W Land's favor, and accordingly
ordered the cancellation of Starwood's registration for the "W" mark. The BLA found
that the DAU and the attachments thereto submitted by Starwood did not prove actual
use of the "W" mark in the Philippines, considering that the "evidences of use" attached
to the DAU refer to hotel or establishments that are located abroad.29 In this regard, the
BLA opined that "the use of a trademark as a business tool and as contemplated under
[Section 151.1 (c) of RA 8293] refers to the actual attachment thereof to goods and
services that are sold or availed of and located in the Philippines."30

Dissatisfied, Starwood appealed31 to the IPO DG.

The IPO DG Ruling

In a Decision32 dated January 10, 2014, the IPO DG granted Starwood's

appeal,33 thereby dismissing W Land's Petition for Cancellation. Contrary to the BLA's
findings, the IPO DG found that Starwood's submission of its DAU and attachments,
coupled by the acceptance thereof by the IPO Bureau of Trademarks, shows that the
"W" mark still bears a "registered" status. Therefore, there is a presumption that
Starwood sufficiently complied with the registration requirements for its mark.34 The
IPO DG likewise held that the absence of any hotel or establishment owned by
Starwood in the Philippines bearing the "W" mark should not be equated to the absence
of its use in the country, opining that Starwood's pieces of evidence, particularly its
interactive website, indicate actual use in the Philippines,35 citing Rule 20536 of the
Trademark Regulations, as amended by IPO Office Order No. 056-13.37 Finally, the IPO
DG stressed that since Starwood is the undisputed owner of the "W" mark for use in
hotel and hotel-related services, any perceived damage on the part of W Land in this
case should be subordinated to the essence of protecting Starwood's intellectual
property rights. To rule otherwise is to undermine the intellectual property system.38

Aggrieved, W Land filed a petition for review39 under Rule 43 of the Rules of Court
before the CA.

The CA Ruling

In a Decision40 dated June 22, 2015, the CA affirmed the IPO DG ruling. At the onset,
the CA observed that the hotel business is peculiar in nature in that the offer, as well as
the acceptance of room reservations or bookings wherever in the world is an
indispensable element. As such, the actual existence or presence of a hotel in one place
is not necessary before it can be considered as doing business therein.41 In this regard,
the CA recognized that the internet has become a powerful tool in allowing businesses
to reach out to consumers in a given market without being physically present thereat;
thus, the IPO DG correctly held that Starwood's interactive websites already indicate its
actual use in the Philippines of the "W" mark.42 Finally, the CA echoed the IPO DG's
finding that since Starwood is the true owner of the "W" mark - as shown by the fact
that Starwood had already applied for the registration of this mark even before W Land
was incorporated - its registration over the same should remain valid, absent any
showing that it has abandoned the use thereof.43
Unperturbed, W Land moved for reconsideration,44 but was denied in a
Resolution45 dated January 7, 2016; hence, this petition.

The Issue Before the Court

The essential issue for the Court's resolution is whether or not the CA correctly affirmed
the IPO DG's dismissal of W Land's Petition for Cancellation of Starwood's "W'' mark.

The Court's Ruling

The petition is without merit.

The IP Code defines a "mark" as "any visible sign capable of distinguishing the goods
(trademark) or services (service mark) of an enterprise."46 Case law explains that
"[t]rademarks deal with the psychological function of symbols and the effect of these
symbols on the public at large."47 It is a merchandising short-cut, and, "[w]hatever the
means employed, the aim is the same to convey through the mark, in the minds of
potential customers, the desirability of the commodity upon which it appears."48 Thus,
the protection of trademarks as intellectual property is intended not only to preserve
the goodwill and reputation of the business established on the goods or services
bearing the mark through actual use over a period of time, but also to safeguard the
public as consumers against confusion on these goods or services.49 As viewed by
modern authorities on trademark law, trademarks perform three (3) 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.50

In Berris Agricultural Co., Inc. v. Abyadang,51 this Court explained that "[t]he ownership
of a trademark is acquired by its registration and its actual use by the manufacturer or
distributor of the goods made available to the purchasing public. x x x. A certificate of
registration of a mark, once issued, constitutes prima facie evidence of the validity of
the registration, of the registrant's ownership of the mark, and of the registrant's
exclusive right to use the same in connection with the goods or services and those that
are related thereto specified in the certificate."52 However, "the prima facie presumption
brought about by the registration of a mark may be challenged and overcome, in an
appropriate action, by proof of[, among others,] non-use of the mark, except
when excused."53

The actual use of the mark representing the goods or services introduced and
transacted in commerce over a period of time creates that goodwill which the law seeks
to protect. For this reason, the IP Code, under Section 124.2,54 requires the registrant
or owner of a registered mark to declare "actual use of the mark" (DAU) and present
evidence of such use within the prescribed period. Failing in which, the IPO DG may
cause the motu propio removal from the register of the mark's registration.55 Also, any
person, believing that "he or she will be damaged by the registration of a mark," which
has not been used within the Philippines, may file a petition for cancellation.56 Following
the basic rule that he who alleges must prove his case,57 the burden lies on the
petitioner to show damage and non-use.
The IP Code and the Trademark Regulations have not specifically defined "use."
However, it is understood that the "use" which the law requires to maintain the
registration of a mark must be genuine, and not merely token. Based on foreign
authorities,58 genuine use may be characterized as a bona fide use which results or
tends to result, in one way or another, into a commercial interaction or
transaction "in the ordinary course of trade."59

What specific act or acts would constitute use of the mark sufficient to keep its
registration in force may be gleaned from the Trademark Regulations, Rule 205 of
which reads:

RULE 205. Contents of the Declaration and Evidence of Actual Use. — The declaration

shall be under oath, must refer to only one application or registration, must contain
the name and address of the applicant or registrant declaring that the mark is in
actual use in the Philippines, list of goods where the mark is attached; list the
name or names and the exact location or locations of the outlet or
outlets where the products are being sold or where the services are being
rendered, recite sufficient facts to show that the mark described in the
application or registration is being actually used in the Philippines and,
specifying the nature of such use. The declarant shall attach five labels as actually
used on the goods or the picture of the stamped or marked container visibly and legibly
showing the mark as well as proof of payment of the prescribed fee. [As amended by
Office Order No. 08 (2000)] (Emphases supplied)

The Trademark Regulations was amended by Office Order No. 056-13. Particularly, Rule
205 now mentions certain items which "shall be accepted as proof of actual use of the
mark:"

RULE 205. Contents of the Declaration and Evidence of Actual Use.—

(a) The declaration shall be under oath and filed by the applicant or registrant (or the
authorized officer in case of a juridical entity) or the attorney or authorized
representative of the applicant or registrant. The declaration must refer to only one
application or registration, shall contain the name and address of the applicant or
registrant declaring that the mark is in actual use in the Philippines, the list of goods or
services where the mark is used, the name/s of the establishment and address where
the products are being sold or where the services are being rendered. If the goods or
services are available only by online purchase, the website must be indicated on the
form in lieu of name or address of the establishment or outlet. The applicant or
registrant may include other facts to show that the mark described in the application or
registration is actually being used in the Philippines. The date of first use shall not be
required.

(b) Actual use for some of the goods and services in the same class shall constitute use
for the entire class of goods and services. Actual use for one class shall be considered
use for related classes. In the event that some classes are not covered in the
declaration, a subsequent declaration of actual use may be filed for the other classes of
goods or services not included in the first declaration, provided that the subsequent
declaration is filed within the three year period or the extension period, in case an
extension of time to file the declaration was timely made. In the event that no
subsequent declaration of actual use for the other classes of goods and services is filed
within the prescribed period, the classes shall be automatically dropped from the
application or registration without need of notice to the applicant or registrant.

(c) The following shall be accepted as proof of actual use of the mark: (1) labels
of the mark as these are used; (2) downloaded pages from the website of the
applicant or registrant clearly showing that the goods are being sold or the
services are being rendered in the Philippines; (3) photographs (including digital
photographs printed on ordinary paper) of goods bearing the marks as these are
actually used or of the stamped or marked container of goods and of the
establishment/s where the services are being rendered; (4) brochures or advertising
materials showing the actual use of the mark on the goods being sold or services being
rendered in the Philippines; (5) for online sale, receipts of sale of the goods or
services rendered or other similar evidence of use, showing that the goods are
placed on the market or the services are available in the Philippines or that the
transaction took place in the Philippines; (6) copies of contracts for services
showing the use of the mark. Computer printouts of the drawing or reproduction of
marks will not be accepted as evidence of use.

(d) The Director may, from time to time, issue a list of acceptable evidence of
use and those that will not be accepted by the Office. (Emphases and
underscoring supplied)

Office Order No. 056-13 was issued by the IPO DG on April 5, 2013, pursuant to his
delegated rule-making authority under Section 7 of the IP Code.60 The rationale for this
issuance, per its whereas clauses, is to further "the policy of the [IPO] to streamline
administrative procedures in registering trademarks" and in so doing, address the need
"to clarify what will be accepted as proof of use." In this regard, the parameters and list
of evidence introduced under the amended Trademark Regulations are thus mere
administrative guidelines which are only meant to flesh out the types of acceptable
evidence necessary to prove what the law already provides, i.e., the requirement of
actual use. As such, contrary to W Land's postulation,61 the same does not diminish or
modify any substantive right and hence, may be properly applied to "all pending and
registered marks,"62 as in Starwood's "W" mark for hotel / hotel reservation services
being rendered or, at the very least, made available in the Philippines.

Based on the amended Trademark Regulations, it is apparent that the IPO has now
given due regard to the advent of commerce on the internet. Specifically, it now
recognizes, among others, "downloaded pages from the website of the applicant or
registrant clearly showing that the goods are being sold or the services are being
rendered in the Philippines," as well as "for online sale, receipts of sale of the goods or
services rendered or other similar evidence of use, showing that the goods are placed
on the market or the services are available in the Philippines or that the transaction
took place in the Philippines,"63 as acceptable proof of actual use. Truly, the Court
discerns that these amendments are but an inevitable reflection of the realities of the
times. In Mirpuri v. CA,64 this Court noted that "[a]dvertising on the Net and
cybershopping are turning the Internet into a commercial marketplace:"65

The Internet is a decentralized computer network linked together through routers and
communications protocols that enable anyone connected to it to communicate with
others likewise connected, regardless of physical location. Users of the Internet have a
wide variety of communication methods available to them and a tremendous wealth of
information that they may access. The growing popularity of the Net has been driven in
large part by the World Wide Web,  i.e., a system that facilitates use of the Net by
sorting through the great mass of information available on it. Advertising on the Net
and cybershopping are turning the Internet into a commercial
marketplace.66 (Emphasis and underscoring supplied)

Thus, as modes of advertising and acquisition have now permeated into virtual zones
over cyberspace, the concept of commercial goodwill has indeed evolved:

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. Whether in the
print, broadcast or electronic communications medium, particularly on the
Internet, 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.67 (Emphasis and
underscoring supplied)

Cognizant of this current state of affairs, the Court therefore agrees with the IPO DG,
as affirmed by the CA, that the use of a registered mark representing the owner's
goods or services by means of an interactive website may constitute proof of actual use
that is sufficient to maintain the registration of the same. Since the internet has turned
the world into one vast marketplace, the owner of a registered mark is clearly entitled
to generate and further strengthen his commercial goodwill by actively marketing and
commercially transacting his wares or services throughout multiple platforms on the
internet. The facilities and avenues present in the internet are, in fact, more prominent
nowadays as they conveniently cater to the modern-day consumer who desires to
procure goods or services at any place and at any time, through the simple click of a
mouse, or the tap of a screen. Multitudinous commercial transactions are accessed,
brokered, and consummated everyday over websites. These websites carry the mark
which represents the goods or services sought to be transacted. For the owner, he
intentionally exhibits his mark to attract the customers' interest in his goods or
services. The mark displayed over the website no less serves its functions of indicating
the goods or services' origin and symbolizing the owner's goodwill than a mark
displayed in the physical market. Therefore, there is no less premium to recognize
actual use of marks through websites than their actual use through traditional means.
Indeed, as our world evolves, so too should our appreciation of the law. Legal
interpretation - as it largely affects the lives of people in the here and now - never
happens in a vacuum. As such, it should not be stagnant but dynamic; it should not be
ensnared in the obsolete but rather, sensitive to surrounding social realities.

It must be emphasized, however, that the mere exhibition of goods or services over the
internet, without more, is not enough to constitute actual use. To reiterate, the "use"
contemplated by law is genuine use - that is, a bona fide kind of use tending towards a
commercial transaction in the ordinary course of trade. Since the internet creates a
borderless marketplace, it must be shown that the owner has actually
transacted, or at the very least, intentionally targeted customers of a
particular jurisdiction in order to be considered as having used the trade mark
in the ordinary course of his trade in that country. A showing of an actual
commercial link to the country is therefore imperative. Otherwise, an
unscrupulous registrant would be able to maintain his mark by the mere expedient of
setting up a website, or by posting his goods or services on another's site, although no
commercial activity is intended to be pursued in the Philippines. This type of token use
renders inutile the commercial purpose of the mark, and hence, negates the reason to
keep its registration active. As the IP Code expressly requires, the use of the
mark must be "within the Philippines." This is embedded in Section 151 of the IP
Code on cancellation, which reads:

SECTION 151.  Cancellation. — 151.1. A petition to cancel a registration of a mark

under this Act may be filed with the Bureau of Legal Affairs by any person who believes
that he is or will be damaged by the registration of a mark under this Act as follows:

(a) Within five (5) years from the date of the registration of the mark under this Act.
(b) At any time, if the registered mark becomes the generic name for the goods or services, or a
portion thereof, for which it is registered, or has been abandoned, or its registration was
obtained fraudulently or contrary to the provisions of this Act, or if the registered mark is
being used by, or with the permission of, the registrant so as to misrepresent the source of the
goods or services on or in connection with which the mark is used. If the registered mark
becomes the generic name for less than all of the goods or services for which it is registered,
a petition to cancel the registration for only those goods or services may be filed. A
registered mark shall not be deemed to be the generic name of goods or services solely
because such mark is also used as a name of or to identify a unique product or service. The
primary significance of the registered mark to the relevant public rather than purchaser
motivation shall be the test for determining whether the registered mark has become the
generic name of goods or services on or in connection with which it has been used.
(c) At any time, if the registered owner of the mark without legitimate reason fails to use
the mark within the Philippines, or to cause it to be used in the Philippines by virtue of
a license during an uninterrupted period of three (3) years or longer. (Emphasis and
underscoring supplied)

The hotel industry is no stranger to the developments and advances in technology. Like
most businesses nowadays, hotels are utilizing the internet to drive almost every
aspect of their operations, most especially the offering and accepting of room
reservations or bookings, regardless of the client or customer base. The CA explained
this booking process in that the "business transactions commence with the placing of
room reservations, usually by or through a travel agent who acts for or in behalf of his
principal, the hotel establishment. [The] reservation is first communicated to the
reservations and booking assistant tasked to handle the transaction. After the
reservation is made, the specific room reserved for the guest will be blocked and will
not be offered to another guest. As such, on the specified date of arrival, the room
reserved will be available to the guest."68
In this accord, a hotel's website has now become an integral element of a hotel
business. Especially with the uptrend of international travel and tourism, the hotel's
website is now recognized as an efficient and necessary tool in advertising and
promoting its brand in almost every part of the world. More so, interactive websites
that allow customers or clients to instantaneously book and pay for, in advance,
accommodations and other services of a hotel anywhere in the world, regardless of the
hotel's actual location, dispense with the need for travel agents or hotel employees to
transact the reservations for them. In effect, the hotel's website acts as a bridge or
portal through which the hotel reaches out and provides its services to the
client/customer anywhere in the world, with the booking transaction completed at the
client/customer's own convenience. It is in this sense that the CA noted that the "actual
existence or presence of a hotel in one place is not necessary before it can be
considered as doing business therein."69

As earlier intimated, mere use of a mark on a website which can be accessed anywhere
in the world will not automatically mean that the mark has been used in the ordinary
course of trade of a particular country. Thus, the use of mark on the internet must be
shown to result into a within-State sale, or at the very least, discernibly intended to
target customers that reside in that country. This being so, the use of the mark on
an interactive website, for instance, may be said to target local customers
when they contain specific details regarding or pertaining to the target State,
sufficiently showing an intent towards realizing a within-State commercial
activity or interaction. These details may constitute a local contact phone number,
specific reference being available to local customers, a specific local webpage, whether
domestic language and currency is used on the website, and/or whether domestic
payment methods are accepted.70 Notably, this paradigm of ascertaining local details to
evince within-state commercial intent is subscribed to by a number of jurisdictions,
namely, the European Union, Hong Kong, Singapore, Malaysia, Japan, Australia,
Germany, France, Russia, and the United Kingdom.71 As for the U.S. - where most of
our intellectual property laws have been patterned72 - there have been no decisions to
date coming from its Trademark Trial and Appeal Board involving cases challenging the
validity of mark registrations through a cancellation action based on the mark's internet
use. However, in  International Bancorp LLC v. Societe des Bains de Mer et du Cercle
des Etrangers a Monaco,73 it was ruled that mere advertising in the U.S. combined with
rendering of services to American customers in a foreign country constituted "use" for
the purpose of establishing trademark rights in the U.S.

In this case, Starwood has proven that it owns Philippine registered domain
names,74 i.e., www.whotels.ph, www.wreservations.ph, www.whotel.ph, www.wreservat
ion.ph, for its website that showcase its mark. The website is readily accessible to
Philippine citizens and residents, where they can avail and book amenities and other
services in any of Starwood's W Hotels worldwide. Its website also readily provides a
phone number75 for Philippine consumers to call for information or other concerns. The
website further uses the English language76 - considered as an official language in this
country77 - which the relevant market in the Philippines understands and often uses in
the daily conduct of affairs. In addition, the prices for its hotel accommodations and/or
services can be converted into the local currency or the Philippine Peso.78 Amidst all of
these features, Starwood's "W" mark is prominently displayed in the website through
which consumers in the Philippines can instantaneously book and pay for their
accommodations, with immediate confirmation, in any of its W Hotels. Furthermore, it
has presented data showing a considerably growing number of internet users in the
Philippines visiting its website since 2003, which is enough to conclude that Starwood
has established commercially-motivated relationships with Philippine consumers.79

Taken together, these facts and circumstances show that Starwood's use of its "W"
mark through its interactive website is intended to produce a discernable commercial
effect or activity within the Philippines, or at the very least, seeks to establish
commercial interaction with local consumers. Accordingly, Starwood's use of the "W"
mark in its reservation services through its website constitutes use of the mark
sufficient to keep its registration in force.

To be sure, Starwood's "W" mark is registered for Classes 43,  i.e., for hotel, motel,
resort and motor inn services, hotel reservation services, restaurant, bar and
catering services, food and beverage preparation services, cafe and cafeteria services,
provision of conference, meeting and social function facilities, under the Nice
Classification.80 Under Section 152.3 of the IP Code, "[t]he use of a mark in connection
with one or more of the goods or services belonging to the class in respect of which the
mark is registered shall prevent its cancellation or removal in respect of all other goods
or services of the same class." Thus, Starwood's use of the "W" mark for reservation
services through its website constitutes use of the mark which is already sufficient to
protect its registration under the entire subject classification from non-use cancellation.
This, notwithstanding the absence of a Starwood hotel or establishment in the
Philippines.

Finally, it deserves pointing out that Starwood submitted in 2008 its DAU with evidence
of use which the IPO, through its Director of Trademarks and later by the IPO DG in the
January 10, 2014 Decision, had accepted and recognized as valid. The Court finds no
reason to disturb this recognition. According to jurisprudence, administrative agencies,
such as the IPO, by means of their special knowledge and expertise over matters falling
within their jurisdiction are in a better position to pass judgment on this issue.81 Thus,
their findings are generally accorded respect and finality, as long as they are supported
by substantial evidence. In this case, there is no compelling basis to reverse the IPO
DG's findings - to keep Starwood's registration for the "W" mark in force - as they are
well supported by the facts and the law and thus, deserve respect from this Court.

WHEREFORE, the petition is DENIED. The Decision dated June 22, 2015 and the
Resolution dated January 7, 2016 of the Court of Appeals in CA-G.R. SP No. 133825 are
hereby AFFIRMED.

SO ORDERED.

G.R. No. L-19439            October 31, 1964

MAURO MALANG SANTOS, plaintiff-appellant,
vs.
MCCULLOUGH PRINTING COMPANY, defendant-appellee.

Tañada Teehankee & Carreon for plaintiff-appellant.

Esposo & Usison for defendant-appellee.

PAREDES, J.:

This is an action for damages based on the provisions of Articles 721 and 722 of the Civil Code of
the Philippines, allegedly on the unauthorized use, adoption and appropriation by the defendant
company of plaintiff's intellectual creation or artistic design for a Christmas Card. The design depicts
"a Philippine rural Christmas time scene consisting of a woman and a child in a nipa hut adorned
with a star-shaped lantern and a man astride a carabao, beside a tree, underneath which appears
the plaintiff's pen name, Malang."

The complaint alleges that plaintiff Mauro Malang Santos designed for former Ambassador Felino
Neri, for his personal Christmas Card greetings for the year 1959, the artistic motif in question. The
following year the defendant McCullough Printing Company, without the knowledge and authority of
plaintiff, displayed the very design in its album of Christmas cards and offered it for sale, for a price.
For such unauthorized act of defendant, plaintiff suffered moral damages to the tune of P16,000.00,
because it has placed plaintiff's professional integrity and ethics under serious question and caused
him grave embarrassment before Ambassador Neri. He further prayed for the additional sum of
P3,000.00 by way of attorney's fee.

Defendant in answer to the complaint, after some denials and admissions, moved for a dismissal of
the action claiming that —

(1) The design claimed does not contain a clear notice that it belonged to him and that he
prohibited its use by others;

(2) The design in question has been published but does not contain a notice of copyright, as
in fact it had never been copyrighted by the plaintiff, for which reason this action is barred by
the Copyright Law;

(3) The complaint does not state a cause of action.

The documentary evidence submitted were the Christmas cards, as originally designed by plaintiff,
the design as printed for Ambassador Neri, and the subsequent reprints ordered by other parties.
The case was submitted an a "Stipulation of Fact" the pertinent portions of which are hereunder
reproduced:

1. That the plaintiff was the artist who created the design shown in Exhibit A, ...

2. That the design carries the pen name of plaintiff, MALANG, on its face ... and indicated in
Exhibit A, ...

3. That said design was created by plaintiff in the latter part of 1959 for the personal use of
former Ambassador Felino Neri; ...
 4. That former Ambassador Neri had 800 such cards ... printed by the defendant company in
1959, ... which he distributed to his friends in December, 1959;

5. That defendant company utilized plaintiff's design in the year 1960 in its album of
Christmas card samples displayed to its customers ... .

6. That the Sampaguita Pictures, Inc., placed an order with defendant company for 700 of
said cards ... while Raul Urra & Co. ordered 200 ..., which cards were sent out by them to
their respective correspondent, clients and friends during the Christmas season of 1960;

7. That defendant company's use of plaintiff's design was without knowledge, authority or
consent of plaintiff;

8. That said design has not been copyrighted;

9. That plaintiff is an artist of established name, good-will and reputation. ... .

Upon the basis of the facts stipulated, the lower court rendered judgment on December 1, 1961, the
pertinent portions of which are recited below:

As a general proposition, there can be no dispute that the artist acquires ownership of the
product of his art. At the time of its creation, he has the absolute dominion over it. To help
the author protect his rights the copyright law was enacted.

In intellectual creations, a distinction must be made between two classes of property rights;
the fact of authorship and the right to publish and/or distribute copies of the creation. With
regard to the first, i.e. the fact of authorship, the artist cannot be divested of the same. In
other words, he may sell the right to print hundred of his work yet the purchaser of said right
can never be the author of the creation.

It is the second right, i.e., the right to publish, republish, multiply and/or distribute copies of
the intellectual creation which the state, through the enactment of the copyright law, seeks to
protect. The author or his assigns or heirs may have the work copyrighted and once this is
legally accomplished any infringement of the copyright will render the infringer liable to the
owner of the copyright.

xxx           xxx           xxx

The plaintiff in this case did not choose to protect his intellectual creation by a copyright. The
fact that the design was used in the Christmas card of Ambassador Neri who distributed
eight hundred copies thereof among his friends during the Christmas season of 1959, shows
that the, same was published.

Unless satisfactorily explained a delay in applying for a copyright, of more than thirty days
from the date of its publication, converts the property to one of public domain.

Since the name of the author appears in each of the alleged infringing copies of the
intellectual creation, the defendant may not be said to have pirated the work nor guilty of
plagiarism Consequently, the complaint does not state a cause of action against the
defendant.
 xxx           xxx           ;xxx

WHEREFORE, the Court dismisses the complaint without pronouncement as to costs.

In his appeal to this Court, plaintiff-appellant pointed five (5) errors allegedly committed by the trial
court, all of which bring to the fore, the following propositions: (1) whether plaintiff is entitled to
protection, notwithstanding the, fact that he has not copyrighted his design; (2) whether the
publication is limited, so as to prohibit its use by others, or it is general publication, and (3) whether
the provisions of the Civil Code or the Copyright Law should apply in the case. We will undertake a
collective discussion of these propositions.

Under the established facts, We find that plaintiff is not entitled to a protection, the provision of the
Civil Code, notwithstanding. Paragraph 33 of Patent Office Administrative Order No. 3 (as amended
dated September 18, 1947) entitled "Rules of Practice in the Philippines Patent Office relating to the
Registration of Copyright Claims" promulgated pursuant to Republic Act 165, provides, among
others, that an intellectual creation should be copyrighted thirty (30) days after its publication, if
made in Manila, or within sixty (60) day's if made elsewhere, failure of which renders such creation
public property. In the case at bar, even as of this moment, there is no copyright for the design in
question. We are not also prepared to accept the contention of appellant that the publication of the
design was a limited one, or that there was an understanding that only Ambassador Neri should,
have absolute right to use the same. In the first place, if such were the condition then Ambassador
Neri would be the aggrieved party, and not the appellant. In the second place, if there was such a
limited publication or prohibition, the same was not shown on the face of the design. When the
purpose is a limited publication, but the effect is general publication, irrevocable rights thereupon
become vested in the public, in consequence of which enforcement of the restriction becomes
impossible (Nutt vs. National Institute, 31 F [2d] 236). It has been held that the effect of offering for
sale a dress, for example manufactured in accordance with an original design which is not protected
by either a copyright or a patent, is to divest the owner of his common law rights therein by virtue of
the publication of a 'copy' and thereafter anyone is free to copy the design or the dress (Fashion
Originators Guild of America v. Federal Trade Commission, 114 F [2d] 80). When Ambassador Neri
distributed 800 copies of the design in controversy, the plaintiff lost control of his design and the
necessary implication was that there had been a general publication, there having been no showing
of a clear indication that a limited publication was intended. The author of a literary composition has
a light to the first publication thereof. He has a right to determine whether it shall be published at all,
and if published, when, where, by whom, and in what form. This exclusive right is confined to the first
publication. When once published, it is dedicated to the public, and the author loses the exclusive
right to control subsequent publication by others, unless the work is placed under the protection of
the copyright law. (See II Tolentino's Comments on the Civil Code, p. 433, citing Wright v. Eisle 83
N.Y. Supp. 887.)

CONFORMABLY WITH ALL THE FOREGOING, We find that the errors assigned have not been
committed by the lower court. The decision appealed from, therefore, should be, as it is hereby
affirmed. Costs taxed against plaintiff-appellant.
G.R. No. 195956               March 11, 2015

ABS-CBN CORPORATION, Petitioner,
vs.
FELIPE GOZON, GILBERTO R. DUAVIT, JR., MARISSA L. FLORES, JESSICA A. SORO,
GRACE DELA PENA-REYES, JOHN OLIVER T. MANALASTAS, JOHN DOES AND JANE
DOES, Respondents.

DECISION

LEONEN, J.:

The main issue in this case is whether there is probable cause to charge respondents with
infringement under Republic Act No. 8293, otherwise known as the Intellectual Property Code. The
resolution of this issue requires clarification of the concept of "copyrightable material" in relation to
material that is rebroadcast live as a news story. We are also asked to rule on whether criminal
prosecution for infringement of copyrightable material, such as live rebroadcast, can be negated by
good faith.

ABS-CBN Corporation (ABS-CBN) filed the Petition for Review on Certiorari  to assail the November
1

9, 2010 Decision  and the March 3, 2011 Resolution  of the Court of Appeals. The Court of Appeals
2 3

reinstated the Department of Justice Resolution dated August 1, 2005 that ordered the withdrawal of
the Information finding probable cause for respondents’ violation of Sections 177  and 211  of the
4 5

Intellectual Property Code.  Respondents are officers and employees of GMA Network, Inc. (GMA-
6

7). They are: Felipe Gozon (Gozon), GMA-7 President; Gilberto R. Duavit, Jr. (Duavit, Jr.), Executive
Vice-President; Marissa L. Flores (Flores), Vice-President for New and Public Affairs; Jessica A.
Soho (Soho), Director for News; Grace Dela Peña-Reyes (Dela Peña-Reyes), Head of News and
Public Affairs; John Oliver Manalastas (Manalastas), Program Manager; and others.

The controversy arose from GMA-7’s news coverage on the homecoming of Filipino overseas
worker and hostage victim Angelo dela Cruz on July 22, 2004. As summarized by the Court of
Appeals:

Overseas Filipino worker Angelo dela Cruz was kidnapped by Iraqi militants and as a condition for
his release, a demand was made for the withdrawal of Filipino troops in Iraq. After negotiations, he
was released by his captors and was scheduled to return to the country in the afternoon of 22 July
2004. Occasioned by said homecoming and the public interest it generated, both . . . GMA Network,
Inc. . . . and [petitioner] made their respective broadcasts and coverage of the live event. 7

ABS-CBN "conducted live audio-video coverage of and broadcasted the arrival of Angelo dela Cruz
at the Ninoy Aquino International Airport (NAIA) and the subsequent press conference."  ABS-CBN
8

allowed Reuters Television Service (Reuters) to air the footages it had taken earlier under a special
embargo agreement. 9

ABS-CBN alleged that under the special embargo agreement, any of the footages it took would be
for the "use of Reuter’s international subscribers only, and shall be considered and treated by
Reuters under ‘embargo’ against use by other subscribers in the Philippines. . . . [N]o other
Philippine subscriber of Reuters would be allowed to use ABS-CBN footage without the latter’s
consent."10
GMA-7, to which Gozon, Duavit, Jr., Flores, Soho, Dela Peña-Reyes, and Manalastas are
connected, "assigned and stationed news reporters and technical men at the NAIA for its live
broadcast and non-live news coverage of the arrival of dela Cruz."  GMA-7 subscribes to both
11

Reuters and Cable News Network (CNN). It received a live video feed of the coverage of Angelo
dela Cruz’s arrival from Reuters. 12

GMA-7 immediately carried the live news feed in its program "Flash Report," together with its live
broadcast.  Allegedly, GMA-7 did not receive any notice or was not aware that Reuters was airing
13

footages of ABS-CBN.  GMA-7’s news control room staff saw neither the "No Access Philippines"
14

notice nor a notice that the video feed was under embargo in favor of ABS-CBN. 15

On August 13, 2004, ABS-CBN filed the Complaint for copyright infringement under Sections
177  and 211  of the Intellectual Property Code.
16 17 18

On December 3, 2004, Assistant City Prosecutor Dindo Venturanza issued the Resolution  finding
19

probable cause to indict Dela Peña-Reyes and Manalastas.  Consequently, the Information  for
20 21

violation of the Intellectual Property Code was filed on December 17, 2004. It reads:

That on or about the 22nd of July 2004, in Quezon City, Philippines, the above-named accused,
conspiring together, confederating with and mutually helping each other, being the Head of News
Operations and the Program Manager, respectively, for the News and Public Affairs Department of
GMA Network, Inc., did then and there, willfully, unlawfully and feloniously use and broadcast the
footage of the arrival of Angelo [d]ela Cruz at the Ninoy Aquino International Airport of which ABS-
CBN holds the exclusive ownership and copyright by then and there using, airing, and broadcasting
the said footage in its news program "FLASH REPORT" without first obtaining the consent or
authority of said copyright owner, to their damage and prejudice.

Contrary to law. 22

On January 4, 2005, respondents filed the Petition for Review before the Department of Justice.  In 23

the Resolution (Gonzalez Resolution) dated August 1, 2005, Department of Justice Secretary Raul
M. Gonzalez (Secretary Gonzalez) ruled in favor of respondents and held that good faith may be
raised as a defense in the case.  The dispositive portion of the Resolution reads:
24

WHEREFORE, THE PETITION FOR REVIEW FILED BY GMA-7 in I.S. No. 04-10458 is considered
meritorious and is hereby GRANTED. This case is hereby Dismissed, the resolution of the City
Prosecutor of Quezon City is hereby reversed and the same is ordered to withdraw the information if
any and report action taken to this office within ten (10) days.  (Emphasis in the original)
25

Both parties moved for reconsideration of the Gonzalez Resolution. 26

Meanwhile, on January 19, 2005, the trial court granted the Motion to Suspend Proceedings filed
earlier by Dela Peña-Reyes and Manalastas.  The trial court Order reads:
27

Perusing the motion, the court finds that a petition for review was filed with the Department of Justice
on January 5, 2005 as confirmed by the public prosecutor. Under Section 11 (c), Rule 116 of the
Rules of Criminal Procedure, once a petition for review is filed with the Department of Justice, a
suspension of the criminal proceedings may be allowed by the court.

Accordingly, to allow the Department of Justice the opportunity to act on said petition for review, let
the proceedings on this case be suspended for a period of sixty (60) days counted from January 5,
2005, the date the petition was filed with the Department of Justice. The arraignment of the accused
on February 1, 2005 is accordingly cancelled. Let the arraignment be rescheduled to March 8, 2005
at 8:30 a.m. The accused through counsel are notified in open court.

SO ORDERED. 28

On June 29, 2010, Department of Justice Acting Secretary Alberto C. Agra (Secretary Agra) issued
the Resolution (Agra Resolution) that reversed the Gonzalez Resolution and found probable cause
to charge Dela Peña-Reyes and Manalastas for violation of the Intellectual Property
Code.  Secretary Agra also found probable cause to indict Gozon, Duavit, Jr., Flores, and Soho for
29

the same violation.  He ruled that:

30

[w]hile good faith may be a defense in copyright infringement, the same is a disputable presumption
that must be proven in a full-blown trial. Disputable presumptions may be contradicted and
overcome by other evidence. Thus, a full-blown trial is the proper venue where facts, issues and
laws are evaluated and considered. The very purpose of trial is to allow a party to present evidence
to overcome the disputable presumptions involved. 31

The dispositive portion of the Agra Resolution provides:

WHEREFORE, premises considered:

(a) The Motion for Reconsideration filed by appellees ABS-CBN Broadcasting Corporation
(ABS-CBN) of our Resolution promulgated on August 1, 2005 (Resolution No. 364, Series of
2005) and the Petition for Review filed by complainant-appellant ABS-CBN in I.S. No. 04-
10458 on April10, 2006, are GRANTED and the City Prosecutor of Quezon City is hereby
ordered to file the necessary Information for violation of Section 177 and 211 of Republic Act
No. 8293 against GMA-7. Felipe L. Gozon, Gilberto R. Duavit, Jr., Marissa L.Flores, Jessica
A. Soho, Grace Dela Pena-Reyes, John Oliver T. Manalastas[.]

....

SO ORDERED.  (Emphasis in the original)

32

Respondents assailed the Agra Resolution through the Petition for Certiorari with prayer for issuance
of a temporary restraining order and/or Writ of Preliminary Injunction on September 2, 2010 before
the Court of Appeals. In the Resolution dated September 13, 2010, the Court of Appeals granted the
temporary restraining order preventing the Department of Justice from enforcing the Agra
Resolution. 33

On November 9, 2010, the Court of Appeals rendered the Decision granting the Petition and
reversing and setting aside the Agra Resolution.  The Court of Appeals held that Secretary Agra
34

committed errors of jurisdiction in issuing the assailed Resolution. Resolving the issue of copyright
infringement, the Court of Appeals said:

Surely, private respondent has a copyright of its news coverage. Seemingly, for airing said video
feed, petitioner GMA is liable under the provisions of the Intellectual Property Code, which was
enacted purposely to protect copyright owners from infringement. However, it is an admitted fact that
petitioner GMA had only aired a five (5) second footage of the disputed live video feed that it had
received from Reuters and CNN as a subscriber. Indeed, petitioners had no notice of the right of
ownership of private respondent over the same. Without notice of the "No Access Philippines"
restriction of the live video feed, petitioner cannot be faulted for airing a live video feed from Reuters
and CNN.

Verily, as aptly opined by Secretary Gonzalez in his earlier Resolution, the act of petitioners in airing
the five (5) second footage was undeniably attended by good faith and it thus serves to exculpate
them from criminal liability under the Code. While the Intellectual Property Code is a special law, and
thus generally categorized as malum prohibitum, it bears to stress that the provisions of the Code
itself do not ipso facto penalize a person or entity for copyright infringement by the mere fact that
one had used a copyrighted work or material.

Certainly so, in the exercise of one’s moral and economic or copyrights, the very provisions of Part
IV of the Intellectual Property Code provide for the scope and limitations on copyright protection
under Section 184 and in fact permit fair use of copyrighted work under Section 185. With the
aforesaid statutory limitations on one’s economic and copyrights and the allowable instances where
the other persons can legally use a copyrighted work, criminal culpability clearly attaches only when
the infringement had been knowingly and intentionally committed.  (Emphasis supplied)
35

The dispositive portion of the Decision reads:

WHEREFORE, the foregoing considered, the instant petition is hereby GRANTED and the assailed
Resolution dated 29 June 2010 REVERSED and SET ASIDE. Accordingly, the earlier Resolution
dated 1 August 2005, which ordered the withdrawal of the Information filed, if any, against the
petitioners for violation of Sections 177 and 211 of the Intellectual Property Code, is hereby
REINSTATED. No costs.

SO ORDERED.  (Emphasis in the original)

36

ABS-CBN’s Motion for Reconsideration was denied.  It then filed its Petition for Review before this
37

court assailing the Decision and Resolution of the Court of Appeals. 38

The issues for this court’s consideration are:

First, whether Secretary Agra committed errors of jurisdiction in the Resolution dated June 29, 2010
and, therefore, whether a petition for certiorari was the proper remedy in assailing that Resolution;

Second, whether news footage is copyrightable under the law;

Third, whether there was fair use of the broadcast material;

Fourth, whether lack of knowledge that a material is copyrighted is a defense against copyright
infringement;

Fifth, whether good faith is a defense in a criminal prosecution for violation of the Intellectual
Property Code; and

Lastly, whether the Court of Appeals was correct in overturning Secretary Agra’s finding of probable
cause.

I
The trial court granted respondents’ Motion to Suspend Proceedings and deferred respondents Dela
Peña-Reyes and Manalastas’ arraignment for 60 days in view of the Petition for Review filed before
the Department of Justice.

Rule 116, Section 11 (c) of the Rules of Criminal Procedure allows

the suspension of the accused’s arraignment in certain circumstances only:

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

(a) The accused appears to be suffering from an unsound mental condition which effectively
renders him unable to fully understand the charge against him and to plead intelligently
thereto. In such case, the court shall order his mental examination and, if necessary, his
confinement for such purpose;

(b) There exists a prejudicial question; and

(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. (12a) (Emphasis supplied)

In Samson v. Daway,  this court acknowledged the applicability of Rule 116, Section (c) in a criminal
39

prosecution for infringement under the Intellectual Property Code. However, this court emphasized
the limits of the order of deferment under the Rule:

While the pendency of a petition for review is a ground for suspension of the arraignment, the . . .
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. 40

We clarify that the suspension of the arraignment should always be within the limits allowed by law.
In Crespo v. Judge Mogul,  this court outlined the effects of filing an information before the trial
41

court, which includes initiating a criminal action and giving this court "authority to hear and determine
the case":42

The preliminary investigation conducted by the fiscal for the purpose of determining whether a prima
facie case exists warranting the prosecution of the accused is terminated upon the filing of the
information in the proper court. In turn, as above stated, the filing of said information sets in motion
the criminal action against the accused in Court. Should the fiscal find it proper to conduct a
reinvestigation of the case, at such stage, the permission of the Court must be secured. After such
reinvestigation the finding and recommendations of the fiscal should be submitted to the Court for
appropriate action. While it is true that the fiscal has the quasi judicial discretion to determine
whether or not a criminal case should be filed in court or not, once the case had already been
brought to Court whatever disposition the fiscal may feel should be proper in the case thereafter
should be addressed for the consideration of the Court, the only qualification is that the action of the
Court must not impair the substantial rights of the accused or the right of the People to due process
of law.
Whether the accused had been arraigned or not and whether it was due to a reinvestigation by the
fiscal or a review by the Secretary of Justice whereby a motion to dismiss was submitted to the
Court, the Court in the exercise of its discretion may grant the motion or deny it and require that the
trial on the merits proceed for the proper determination of the case.

However, one may ask, if the trial court refuses to grant the motion to dismiss filed by the fiscal upon
the directive of the Secretary of Justice will there not be a vacuum in the prosecution? A state
prosecutor to handle the case cannot possibly be designated by the Secretary of Justice who does
not believe that there is a basis for prosecution nor can the fiscal be expected to handle the
prosecution of the case thereby defying the superior order of the Secretary of Justice. The answer is
simple. The role of the fiscal or prosecutor as We all know is to see that justice is done and not
necessarily to secure the conviction of the person accused before the Courts. Thus, in spite of his
opinion to the contrary, it is the duty of the fiscal to proceed with the presentation of evidence of the
prosecution to the Court to enable the Court to arrive at its own independent judgment as to whether
the accused should be convicted or acquitted. The fiscal should not shirk from the responsibility of
appearing for the People of the Philippines even under such circumstances much less should he
abandon the prosecution of the case leaving it to the hands of a private prosecutor for then the entire
proceedings will be null and void. The least that the fiscal should do is to continue to appear for the
prosecution although he may turn over the presentation of the evidence to the private prosecutor but
still under his direction and control.

The rule therefore in this jurisdiction is that once a complaint or information is filed in Court any
disposition of the case as to its dismissal or the conviction or acquittal of the accused rests in the
sound discretion of the Court. Although the fiscal retains the direction and control of the prosecution
of criminal cases even while the case is already in Court he cannot impose his opinion on the trial
court. The Court is the best and sole judge on what to do with the case before it. The determination
of the case is within its exclusive jurisdiction and competence. A motion to dismiss the case filed by
the fiscal should be addressed to the Court who has the option to grant or deny the same. It does
not matter if this is done before or after the arraignment of the accused or that the motion was filed
after a reinvestigation or upon instructions of the Secretary of Justice who reviewed the records of
the investigation.  (Emphasis supplied, citations omitted)
43

The doctrine in Crespo was reiterated in Mayor Balindong v. Court of Appeals,  where this court
44

reminded the Department of Justice Secretary to refrain from entertaining petitions for review when
the case is already pending with this court:

[I]n order to avoid a situation where the opinion of the Secretary of Justice who reviewed the action
of the fiscal may be disregarded by the trial court, the Secretary of Justice should, as far as
practicable, refrain from entertaining a petition for review or appeal from the action of the fiscal,
when the complaint or information has already been filed in the Court. The matter should be left
entirely for the determination of the Court.
45

The trial court should have proceeded with respondents Dela Peña-Reyes and Manalastas’
arraignment after the 60-day period from the filing of the Petition for Review before the Department
of Justice on March 8, 2005. It was only on September 13, 2010 that the temporary restraining order
was issued by the Court of Appeals. The trial court erred when it did not act on the criminal case
during the interim period. It had full control and direction of the case. As Judge Mogul reasoned in
denying the motion to dismiss in Crespo, failure to proceed with the arraignment "disregards the
requirements of due process [and] erodes the Court’s independence and integrity." 46

II
According to ABS-CBN, the Court of Appeals erred in finding that: a motion for reconsideration was
not necessary before a petition for certiorari could be filed; the Department of Justice Secretary
committed errors of jurisdiction since the Agra Resolution was issued within its authority and in
accordance with settled laws and jurisprudence; and respondents were not liable for copyright
infringement.

In its assailed Decision, the Court of Appeals found that respondents committed a procedural error
when they failed to file a motion for reconsideration before filing the Petition for Certiorari. However,
the Court of Appeals held that a motion for reconsideration was unnecessary since the Agra
Resolution was a patent nullity and it would have been useless under the circumstances: Given that
a reading of the assailed Resolution and the instant records readily reveals errors of jurisdiction on
the part of respondent Secretary, direct judicial recourse is warranted under the circumstances.
Aside from the fact that said Resolution is a patent nullity having been issued in grave abuse of
discretion amounting to lack or excess of jurisdiction, the filing of a motion for reconsideration is
evidently useless on account of the fact that the issues and arguments before this Court have
already been duly raised and accordingly delved into by respondent Secretary in his disposition of
the petition a quo.  (Emphasis in the original)
47

In Elma v. Jacobi,  this court ruled that a petition for certiorari under Rule 65 of the Rules of Court is
48

proper when assailing adverse resolutions of the Department of Justice stemming from the
determination of probable cause.  However, grave abuse of discretion must be alleged.
49 50

In Sanrio Company Limited v. Lim,  this court stressed the prosecutor’s role in determining probable
51

cause. Judicial review will only lie when it is shown that the prosecutor acted with grave abuse of
discretion amounting to lack or excess of jurisdiction:

A prosecutor alone determines the sufficiency of evidence that will establish probable cause
justifying the filing of a criminal information against the respondent. By way of exception, however,
judicial review is allowed where respondent has clearly established that the prosecutor committed
grave abuse of discretion. Otherwise stated, such review is appropriate only when the prosecutor
has exercised his discretion in an arbitrary, capricious, whimsical or despotic manner by reason of
passion or personal hostility, patent and gross enough to amount to an evasion of a positive duty or
virtual refusal to perform a duty enjoined by law.  (Citations omitted)
52

Grave abuse of discretion refers to:

such capricious and whimsical exercise of judgment as is equivalent to lack of jurisdiction. The
abuse of discretion must be grave as where the power is exercised in an arbitrary or despotic
manner by reason of passion or personal hostility and must be so patent and gross as to amount to
an evasion of positive duty or to a virtual refusal to perform the duty enjoined by or to act at all in
contemplation of law. 53

Resorting to certiorari requires that there be there be "no appeal, or any plain, speedy, and adequate
remedy in the ordinary course of law[,]"  such as a motion for reconsideration. Generally, "a motion
54

for reconsideration is a condition sine qua non before a petition for certiorari may lie, its purpose
being to grant an opportunity for the [tribunal or officer] to correct any error attributed to it by a re-
examination of the legal and factual circumstances of the case."  However, exceptions to the rule
55

exist:

(a) where the order is a patent nullity, as where the Court a quo had no jurisdiction; (b) where the
questions raised in the certiorari proceeding have been duly raised and passed upon by the lower
court, or are the same as those raised and passed upon in the lower court; (c) where there is an
urgent necessity for the resolution of the question and any further delay would prejudice the interests
of the Government or of the petitioner or the subject matter of the action is perishable; (d) where,
under the circumstances, a motion for reconsideration would be useless; (e) where petitioner was
deprived of due process and there is extreme urgency for relief; (f) where, in a criminal case, relief
from an order of arrest is urgent and the granting of such relief by the trial Court is improbable; (g)
where the proceedings in the lower court are a nullity for lack of due process; (h) where the
proceedings was ex parte or in which the petitioner had no opportunity to object; and (i) where the
issue raised is one purely of law or where public interest is involved.  (Emphasis in the original,
56

citations omitted)

As argued by respondents, "[a] second motion for reconsideration would have been useless and
futile since the D[epartment] [of] J[ustice] had already passed upon the same issues twice."  Equally
57

pressing under the circumstances was the need to resolve the matter, as the Information’s filing
would lead to respondents’ imminent arrest. 58

Moreover, Department of Justice Department Circular No. 70 dated July 3, 2000, or the 2000 NPS
Rules on Appeal, provides that no second motion for reconsideration of the Department of Justice
Secretary’s resolution shall be entertained:

SECTION 13. Motion for reconsideration. The aggrieved party may file a motion for reconsideration
within a non-extendible period of ten (10) days from receipt of the resolution on appeal, furnishing
the adverse party and the Prosecution Office concerned with copies thereof and submitting proof of
such service. No second or further motion for reconsideration shall be entertained.

The Agra Resolution was the result of respondents’ Motion for Reconsideration assailing the
Gonzalez Resolution. To file a motion for reconsideration of the Agra Resolution would be
superfluous. Respondents were, therefore, correct in filing the Petition for Certiorari of the Agra
Resolution before the Court of Appeals.

III

The Court of Appeals ruled that Secretary Agra committed errors of jurisdiction, which then required
the grant of the writ of certiorari:

So viewed, by ordering the filing of information without proof that probable cause exists to charge
petitioners with a crime, respondent Secretary clearly committed an error of jurisdiction thus
warranting the issuance of the writ of certiorari. Surely, probable cause cannot be had when the very
provisions of the statute exculpates criminal liability in cases classified as fair use of copyrighted
materials. The fact that they admittedly used the Reuters live video feed is not, as a matter of
course, tantamount to copyright infringement that would justify the filing of an information against the
petitioners.
59

Error of jurisdiction must be distinguished from error of judgment:

A line must be drawn between errors of judgment and errors of jurisdiction. An error of judgment is
one which the court may commit in the exercise of its jurisdiction. An error of jurisdiction renders an
order or judgment void or voidable. Errors of jurisdiction are reviewable on certiorari; errors of
judgment, only by appeal. 60

In People v. Hon. Sandiganbayan : 61

An error of judgment is one which the court may commit in the exercise of its jurisdiction. An error of
jurisdictionis one where the act complained of was issued by the court without or in excess of
jurisdiction, or with grave abuse of discretion, which is tantamount to lack or in excess of jurisdiction
and which error is correctible only by the extraordinary writ of certiorari. Certiorari will not be issued
to cure errors of the trial court in its appreciation of the evidence of the parties, or its conclusions
anchored on the said findings and its conclusions of law.  (Emphasis supplied)
62

This court has adopted a deferential attitude towards review of the executive’s finding of probable
cause.  This is based "not only upon the respect for the investigatory and [prosecutorial] powers
63

granted by the Constitution to the executive department but upon practicality as well."  Review of the
64

Department of Justice Secretary’s decision or resolution will be allowed only when grave abuse of
discretion is alleged:

The full discretionary authority to determine probable cause in a preliminary investigation to

ascertain sufficient ground for the filing of information rests with the executive branch. Hence, judicial
review of the resolution of the Secretary of Justice is limited to a determination whether there has
been a grave abuse of discretion amounting to lack or excess of jurisdiction. Courts cannot
substitute the executive branch’s judgment.

....

It is only where the decision of the Justice Secretary is tainted with grave abuse of discretion
amounting to lack or excess of jurisdiction that the Court of Appeals may take cognizance of the
case in a petition for certiorari under Rule 65 of the Revised Rules of Civil Procedure. The Court of
Appeals decision may then be appealed to this Court by way of a petition for review on
certiorari.  (Emphasis supplied, citations omitted)
65

In this case, it must be shown that Secretary Agra exceeded his authority when he reversed the
findings of Secretary Gonzalez. This court must determine whether there is probable cause to file an
information for copyright infringement under the Intellectual Property Code.

IV

Probable cause pertains to "such facts as are sufficient to engender a well-founded belief that a
crime has been committed and that respondent is probably guilty thereof."  Preliminary investigation
66

is the inquiry or proceeding to determine whether there is probable cause. 67

In Webb v. De Leon,  this court ruled that determination of probable cause during preliminary
68

investigation does not require trial-like evaluation of evidence since existence of probable cause
does not equate to guilt:

It ought to be emphasized that in determining probable cause, the average man weighs facts and
circumstances without resorting to the calibrations of our technical rules of evidence of which his
knowledge is nil. Rather, he relies on the calculus of common sense of which all reasonable men
have an abundance.

....

. . . A finding of probable cause merely binds over the suspect to stand trial. It is not a
pronouncement of guilt. 69
In Reyes v. Pearlbank Securities, Inc.,  finding probable cause is not equivalent to finding with moral
70

certainty that the accused committed the crime:

A finding of probable cause needs only to rest on evidence showing that more likely than not a crime
has been committed by the suspects. It need not be based on clear and convincing evidence of guilt,
not on evidence establishing guilt beyond reasonable doubt, and definitely not on evidence
establishing absolute certainty of guilt. In determining probable cause, the average man weighs facts
and circumstances without resorting to the calibrations of the rules of evidence of which he has no
technical knowledge. He relies on common sense. 71

During preliminary investigation, a public prosecutor does not adjudicate on the parties’ rights,
obligations, or liabilities.
72

In the recent case of Estrada v. Office of the Ombudsman, et al.,  we reiterated Webb on the
73

determination of probable cause during preliminary investigation and traced the history of probable
cause as borrowed from American jurisprudence:

The purpose in determining probable cause is to make sure that the courts are not clogged with
weak cases that will only be dismissed, as well as to spare a person from the travails of a needless
prosecution.

....

. . . In the United States, from where we borrowed the concept of probable cause, the prevailing
definition of probable cause is this:

In dealing with probable cause, however, as the very name implies, we deal with probabilities. These
are not technical; they are the factual and practical considerations of everyday life on which
reasonable and prudent men, not legal technicians, act. The standard of proof is accordingly
correlative to what must be proved.

"The substance of all the definitions" of probable cause "is a reasonable ground for belief of guilt."
McCarthy v. De Armit, 99 Pa. St. 63, 69, quoted with approval in the Carroll opinion. 267 U. S. at
161. And this "means less than evidence which would justify condemnation" or conviction, as
Marshall, C. J., said for the Court more than a century ago in Locke v. United States, 7 Cranch 339,
348. Since Marshall’s time, at any rate, it has come to mean more than bare suspicion: Probable
cause exists where "the facts and circumstances within their [the officers’] knowledge and of which
they had reasonably trustworthy information [are] sufficient in themselves to warrant a man of
reasonable caution in the belief that" an offense has been or is being committed. Carroll v. United
States, 267 U. S. 132, 162.

These long-prevailing standards seek to safeguard citizens from rash and unreasonable
interferences with privacy and from unfounded charges of crime. They also seek to give fair leeway
for enforcing the law in the community’s protection. Because many situations which confront officers
in the course of executing their duties are more or less ambiguous, room must be allowed for some
mistakes on their part. But the mistakes must be those of reasonable men, acting on facts leading
sensibly to their conclusions of probability. The rule of probable cause is a practical, non technical
conception affording the best compromise that has been found for accommodating these often
opposing interests. Requiring more would unduly hamper law enforcement. To allow less would be
to leave law-abiding citizens at the mercy of the officers’ whim or caprice.
In the Philippines, there are four instances in the Revised Rules of Criminal Procedure where
probable cause is needed to be established:

(1) In Sections 1 and 3 of Rule 112: By the investigating officer, to determine whether there
is sufficient ground to engender a well-founded belief that a crime has been committed and
the respondent is probably guilty thereof, and should be held for trial. A preliminary
investigation is required before the filing of a complaint or information for an offense where
the penalty prescribed by law is at least four years, two months and one day without regard
to the fine;

(2) In Sections 6 and 9 of Rule 112: By the judge, to determine whether a warrant of arrest or
a commitment order, if the accused has already been arrested, shall be issued and that
there is a necessity of placing the respondent under immediate custody in order not to
frustrate the ends of justice;

(3) In Section 5(b) of Rule 113:By a peace officer or a private person making a warrantless
arrest when an offense has just been committed, and he has probable cause to believe
based on personal knowledge of facts or circumstances that the person to be arrested has
committed it; and

(4) In Section 4 of Rule 126: By the judge, to determine whether a search warrant shall be
issued, and only upon probable cause in connection with one specific offense to be
determined personally by the judge after examination under oath or affirmation of the
complainant and the witnesses he may produce, and particularly describing the place to be
searched and the things to be seized which may be anywhere in the Philippines.

In all these instances, the evidence necessary to establish probable cause is based only on the
likelihood, or probability, of guilt.
74

Estrada also highlighted that a "[p]reliminary investigation is not part of the criminal action. It is
merely preparatory and may even be disposed of in certain situations." 75

To determine whether there is probable cause that respondents committed copyright infringement, a
review of the elements of the crime, including the existing facts, is required.

ABS-CBN claims that news footage is subject to copyright and prohibited use of copyrighted material
is punishable under the Intellectual Property Code. It argues that the new footage is not a
"newsworthy event" but "merely an account of the arrival of Angelo dela Cruz in the Philippines —
the latter being the newsworthy event": 76

To be clear, it is the event itself or the arrival of Angelo dela Cruz which is not copyrightable because
that is the newsworthy event. However, any footage created from the event itself, in this case the
arrival of Angelo dela Cruz, are intellectual creations which are copyrightable. Thus, the footage
created by ABS-CBN during the arrival of Angelo dela Cruz, which includes the statements of Dindo
Amparo, are copyrightable and protected by the laws on copyright. 77

On the other hand, respondents argue that ABS-CBN’s news footage of Angelo dela Cruz’s arrival is
not copyrightable or subject to protection:
Certainly, the arrival of Angelo [d]ela Cruz, which aroused public attention and the consciousness of
the Filipino people with regard to their countrymen, OFWs working in foreign countries and how the
Philippine government responds to the issues concerning them, is "news". There is no ingenuity or
inventiveness added in the said news footage. The video footage of this "news" is not copyrightable
by any legal standard as facts of everyday life depicted in the news and items of press information is
part of the public domain.  (Emphasis in the original)
78

The news footage is copyrightable.

The Intellectual Property Code is clear about the rights afforded to authors of various kinds of work.
Under the Code, "works are protected by the sole fact of their creation, irrespective of their mode or
form of expression, as well as of their content, quality and purpose."  These include "[a]udiovisual
79

works and cinematographic works and works produced by a process analogous to cinematography
or any process for making audiovisual recordings." 80

Contrary to the old copyright law,  the Intellectual Property Code does not require registration of the
81

work to fully recover in an infringement suit. Nevertheless, both copyright laws provide that copyright
for a work is acquired by an intellectual creator from the moment of creation. 82

It is true that under Section 175 of the Intellectual Property Code, "news of the day and other
miscellaneous facts having the character of mere items of press information" are considered
unprotected subject matter.  However, the Code does not state that expression of the news of the
83

day, particularly when it underwent a creative process, is not entitled to protection.

An idea or event must be distinguished from the expression of that idea or event. An idea has been
likened to a ghost in that it "must be spoken to a little before it will explain itself."  It is a concept that
84

has eluded exact legal definition.  To get a better grasp of the idea/expression dichotomy, the
85

etymology of the term "idea" is traced:

The word "idea" is derived from a Greek term, meaning "a form, the look or appearance of a thing as
opposed to its reality, from idein, to see." In the Timaeus, Plato saw ideas as eternal paradigms,
independent objects to which the divine demiurge looks as patterns in forming the world. This was
later modified to the religious conception of ideas as the thoughts of God. "It is not a very long step
to extend the term ‘idea’ to cover patterns, blueprints, or plans in anyone's mind, not only in God’s."
The word entered the French and English vernacular in the 1600s and possessed two meanings.
The first was the Platonic meaning of a perfect exemplar or paradigm. The second, which probably
has its origin with Descartes, is of a mental concept or image or, more broadly, any object of the
mind when it is active. Objects of thought may exist independently. The sun exists (probably) before
and after you think of it. But it is also possible to think of things that have never existed, such as a
unicorn or Pegasus. John Locke defined ideas very comprehensively, to include: all objects of the
mind. Language was a way of translating the invisible, hidden ideas that make up a person’s
thoughts into the external, perceptible world of articulate sounds and visible written symbols that
others can understand.  (Citations omitted) There is no one legal definition of "idea" in this
86

jurisdiction. The term "idea" is mentioned only once in the Intellectual Property Code.  In Joaquin, Jr.
87

v. Drilon,  a television format (i.e., a dating show format) is not copyrightable under Section 2 of
88

Presidential Decree No. 49;  it is a mere concept:

89

P.D. No. 49, §2, in enumerating what are subject to copyright, refers to finished works and not to
concepts. The copyright does not extend to an idea, procedure, process, system, method of
operation, concept, principle, or discovery, regardless of the form in which it is described, explained,
illustrated, or embodied in such work. Thus, the new INTELLECTUAL PROPERTY CODE OF THE
PHILIPPINES provides:
SEC. 175. Unprotected Subject Matter.—Notwithstanding the provisions of Sections 172 and 173,
no protection shall extend, under this law, to any idea, procedure, system, method or operation,
concept, principle, discovery or mere data as such, even if they are expressed, explained, illustrated
or embodied in a work; news of the day and other miscellaneous facts having the character of mere
items of press information; or any official text of a legislative, administrative or legal nature, as well
as any official translation thereof.

What then is the subject matter of petitioners’ copyright? This Court is of the opinion that petitioner
BJPI’s copyright covers audio-visual recordings of each episode of Rhoda and Me, as falling within
the class of works mentioned in P.D. 49, §2(M),to wit:

Cinematographic works and works produced by a process analogous to cinematography or any

process for making audio-visual recordings;

The copyright does not extend to the general concept or format of its dating game show.
Accordingly, by the very nature of the subject of petitioner BJPI’s copyright, the investigating
prosecutor should have the opportunity to compare the videotapes of the two shows.

Mere description by words of the general format of the two dating game shows is insufficient; the
presentation of the master videotape in evidence was indispensable to the determination of the
existence of probable cause. As aptly observed by respondent Secretary of Justice:

A television show includes more than mere words can describe because it involves a whole
spectrum of visuals and effects, video and audio, such that no similarity or dissimilarity may be found
by merely describing the general copyright/format of both dating game shows.  (Emphasis supplied,
90

citations omitted)

Ideas can be either abstract or concrete.  It is the concrete ideas that are generally referred to as
91

expression:

The words "abstract" and "concrete" arise in many cases dealing with the idea/expression
distinction. The Nichols court, for example, found that the defendant’s film did not infringe the
plaintiff’s play because it was "too generalized an abstraction from what plaintiff wrote . . . only a part
of her ideas." In Eichel v. Marcin, the court said that authors may exploit facts, experiences, field of
thought, and general ideas found in another’s work, "provided they do not substantially copy a
concrete form, in which the circumstances and ideas have been developed, arranged, and put into
shape." Judge Hand, in National Comics Publications, Inc. v. Fawcett Publications, Inc. said that "no
one infringes, unless he descends so far into what is concrete as to invade. . . ‘expression.’"

These cases seem to be distinguishing "abstract" ideas from "concrete" tangible embodiments of
these abstractions that may be termed expression. However, if the concrete form of a work means
more than the literal expression contained within it, it is difficult to determine what is meant by
"concrete." Webster's New Twentieth Century Dictionary of the English Language provides several
meanings for the word concrete. These include: "having a material, perceptible existence; of,
belonging to, or characterized by things or events that can be perceived by the senses; real; actual;"
and "referring to a particular; specific, not general or abstract."
92

In Pearl & Dean (Phil.), Incorporated v. Shoemart, Incorporated,  this court, citing the American case
93

of Baker v. Selden, distinguished copyright from patents and illustrated how an idea or concept is
different from the expression of that idea:
In the oft-cited case of Baker vs. Selden, the United States Supreme Court held that only the
expression of an idea is protected by copyright, not the idea itself. In that case, the plaintiff held the
copyright of a book which expounded on a new accounting system he had developed. The
publication illustrated blank forms of ledgers utilized in such a system. The defendant reproduced
forms similar to those illustrated in the plaintiff’s copyrighted book. The US Supreme Court ruled
that:

"There is no doubt that a work on the subject of book-keeping, though only explanatory of well
known systems, may be the subject of a copyright; but, then, it is claimed only as a book. x x x But
there is a clear distinction between the books, as such, and the art, which it is, intended to illustrate.
The mere statement of the proposition is so evident that it requires hardly any argument to support it.
The same distinction may be predicated of every other art as well as that of bookkeeping.

A treatise on the composition and use of medicines, be they old or new; on the construction and use
of ploughs or watches or churns; or on the mixture and application of colors for painting or dyeing; or
on the mode of drawing lines to produce the effect of perspective, would be the subject of copyright;
but no one would contend that the copyright of the treatise would give the exclusive right to the art or
manufacture described therein. The copyright of the book, if not pirated from other works, would be
valid without regard to the novelty or want of novelty of its subject matter. The novelty of the art or
thing described or explained has nothing to do with the validity of the copyright. To give to the author
of the book an exclusive property in the art described therein, when no examination of its novelty has
ever been officially made, would be a surprise and a fraud upon the public. That is the province of
letters patent, not of copyright. The claim to an invention of discovery of an art or manufacture must
be subjected to the examination of the Patent Office before an exclusive right therein can be
obtained; and a patent from the government can only secure it.

The difference between the two things, letters patent and copyright, may be illustrated by reference
to the subjects just enumerated. Take the case of medicines. Certain mixtures are found to be of
great value in the healing art. If the discoverer writes and publishes a book on the subject (as regular
physicians generally do), he gains no exclusive right to the manufacture and sale of the medicine; he
gives that to the public. If he desires to acquire such exclusive right, he must obtain a patent for the
mixture as a new art, manufacture or composition of matter. He may copyright his book, if he
pleases; but that only secures to him the exclusive right of printing and publishing his book. So of all
other inventions or discoveries.

The copyright of a book on perspective, no matter how many drawings and illustrations it may
contain, gives no exclusive right to the modes of drawing described, though they may never have
been known or used before. By publishing the book without getting a patent for the art, the latter is
given to the public.

....

Now, whilst no one has a right to print or publish his book, or any material part thereof, as a book
intended to convey instruction in the art, any person may practice and use the art itself which he has
described and illustrated therein. The use of the art is a totally different thing from a publication of
the book explaining it. The copyright of a book on bookkeeping cannot secure the exclusive right to
make, sell and use account books prepared upon the plan set forth in such book. Whether the art
might or might not have been patented, is a question, which is not before us. It was not patented,
and is open and free to the use of the public. And, of course, in using the art, the ruled lines and
headings of accounts must necessarily be used as incident to it.
The plausibility of the claim put forward by the complainant in this case arises from a confusion of
ideas produced by the peculiar nature of the art described in the books, which have been made the
subject of copyright. In describing the art, the illustrations and diagrams employed happened to
correspond more closely than usual with the actual work performed by the operator who uses the
art. x x x The description of the art in a book, though entitled to the benefit of copyright, lays no
foundation for an exclusive claim to the art itself. The object of the one is explanation; the object of
the other is use. The former may be secured by copyright. The latter can only be secured, if it can be
secured at all, by letters patent."  (Emphasis supplied)
94

News or the event itself is not copyrightable. However, an event can be captured and presented in a
specific medium. As recognized by this court in Joaquin, television "involves a whole spectrum of
visuals and effects, video and audio."  News coverage in television involves framing shots, using
95

images, graphics, and sound effects.  It involves creative process and originality. Television news
96

footage is an expression of the news.

In the United States, a line of cases dwelt on the possibility of television newscasts to be
copyrighted.  Most of these cases focused on private individuals’ sale or resale of tapes of news
97

broadcasts. Conflicting decisions were rendered by its courts. Noteworthy, however, is the District
Court’s pronouncement in Pacific & Southern Co. v. Duncan,  which involves a News Monitoring
98

Service’s videotaping and sale of WXIA-TV’s news broadcasts:

It is axiomatic that copyright protection does not extend to news "events" or the facts or ideas which
are the subject of news reports. Miller v. Universal City Studios, Inc., 650 F.2d 1365, 1368 (5th Cir.
1981); Wainwright Securities, Inc. v. Wall Street Transcript Corp., 558 F.2d 91, 95 (2d Cir. 1977),
cert. denied, 434 U.S. 1014, 98 S.Ct. 730, 54 L.Ed.2d 759 (1978). But it is equally well-settled that
copyright protection does extend to the reports themselves, as distinguished from the substance of
the information contained in the reports. Wainwright, 558 F.2d at 95; International News Service v.
Associated Press, 248 U.S. 215, 39 S.Ct. 68, 63 L.Ed. 211 (1918); see Chicago Record-Herald Co.
v. Tribune Assn., 275 F. 797 (7th Cir.1921); 1 Nimmer on Copyright § 2.11[B] (1983). Copyright
protects the manner of expression of news reports, "the particular form or collocation of words in
which the writer has communicated it." International News Service, 248 U.S. at 234, 39 S.Ct. at 70.
Such protection extends to electronic news reports as well as written reports. See17 U.S.C. § 102(a)
(5), (6), and (7); see also Iowa State University Research Foundations, Inc. v. American
Broadcasting Cos., 621 F.2d 57, 61 (2d Cir. 1980).  (Emphasis supplied)
99

The idea/expression dichotomy has long been subject to debate in the field of copyright law.
Abolishing the dichotomy has been proposed, in that non-protectibility of ideas should be re-
examined, if not stricken, from decisions and the law:

If the underlying purpose of the copyright law is the dual one expressed by Lord Mansfield, the only
excuse for the continuance of the idea-expression test as a judicial standard for determining
protectibility would be that it was or could be a truly useful method of determining the proper balance
between the creator’s right to profit from his work and the public's right that the "progress of the arts
not be retarded."

. . . [A]s used in the present-day context[,] the dichotomy has little or no relationship to the policy
which it should effectuate. Indeed, all too often the sweeping language of the courts regarding the
non-protectibility of ideas gives the impression that this is of itself a policy of the law, instead of
merely a clumsy and outdated tool to achieve a much more basic end. 100

The idea/expression dichotomy is a complex matter if one is trying to determine whether a certain
material is a copy of another.  This dichotomy would be more relevant in determining, for instance,
101
whether a stage play was an infringement of an author’s book involving the same characters and
setting. In this case, however, respondents admitted that the material under review — which is the
subject of the controversy — is an exact copy of the original. Respondents did not subject ABS-
CBN’s footage to any editing of their own. The news footage did not undergo any transformation
where there is a need to track elements of the original.

Having established the protectible nature of news footage, we now discuss the concomitant rights
accorded to authors. The authors of a work are granted several rights in relation to it, including
copyright or economic rights:

SECTION 177. Copyright or Economic Rights. — Subject to the provisions of Chapter VIII, copyright
or economic rights shall consist of the exclusive right to carry out, authorize or prevent the following
acts:

177.1. Reproduction of the work or substantial portion of the work;

177.2. Dramatization, translation, adaptation, abridgment, arrangement or other

transformation of the work;

177.3. The first public distribution of the original and each copy of the work by sale or other
forms of transfer of ownership;

177.4. Rental of the original or a copy of an audiovisual or cinematographic work, a work

embodied in a sound recording, a computer program, a compilation of data and other
materials or a musical work in graphic form, irrespective of the ownership of the original or
the copy which is the subject of the rental; (n)

177.5. Public display of the original or a copy of the work;

177.6. Public performance of the work; and

177.7. Other communication to the public of the work.(Sec. 5, P. D. No. 49a) (Emphasis
supplied)

Under Section 211 of the Intellectual Property Code, broadcasting organizations are granted a more
specific set of rights called related or neighboring rights:

SECTION 211. Scope of Right. — Subject to the provisions of Section 212, broadcasting
organizations shall enjoy the exclusive right to carry out, authorize or prevent any of the following
acts:

211.1. The rebroadcasting of their broadcasts;

211.2. The recording in any manner, including the making of films or the use of video tape, of
their broadcasts for the purpose of communication to the public of television broadcasts of
the same; and

211.3. The use of such records for fresh transmissions or for fresh recording. (Sec. 52, P.D.
No. 49) (Emphasis supplied)

Section 212 of the Code provides:

 CHAPTER XV
LIMITATIONS ON PROTECTION

Section 212. Limitations on Rights. - Sections 203, 208 and 209 shall not apply where the acts
referred to in those Sections are related to:

212.1. The use by a natural person exclusively for his own personal purposes;

212.2. Using short excerpts for reporting current events;

212.3. Use solely for the purpose of teaching or for scientific research; and

212.4. Fair use of the broadcast subject to the conditions under Section 185. (Sec. 44, P.D.
No. 49a)

The Code defines what broadcasting is and who broadcasting organizations include:

202.7. "Broadcasting" means the transmission by wireless means for the public reception of
sounds or of images or of representations thereof; such transmission by satellite is also
"broadcasting" where the means for decrypting are provided to the public by the
broadcasting organization or with its consent;

202.8. "Broadcasting organization" shall include a natural person or a juridical entity duly
authorized to engage in broadcasting[.]

Developments in technology, including the process of preserving once ephemeral works and
disseminating them, resulted in the need to provide a new kind of protection as distinguished from
copyright.  The designation "neighboring rights" was abbreviated from the phrase "rights
102

neighboring to copyright."  Neighboring or related rights are of equal importance with copyright as
103

established in the different conventions covering both kinds of rights. 104

Several treaties deal with neighboring or related rights of copyright.  The most prominent of these is
105

the "International Convention for the Protection of Performers, Producers of Phonograms and
Broadcasting Organizations" (Rome Convention). 106

The Rome Convention protects the rights of broadcasting organizations in relation to their
broadcasts. Article XIII of the Rome Convention enumerates the minimum rights accorded to
broadcasting organizations:

Article 13

Minimum Rights for Broadcasting Organizations

Broadcasting organisations shall enjoy the right to authorize or prohibit:

(a) the rebroadcasting of their broadcasts;

(b) the fixation of their broadcasts;

(c) the reproduction:

 (i) of fixations, made without their consent, of their broadcasts;

(ii) of fixations, made in accordance with the provisions of Article 15, of their
broadcasts, if the reproduction is made for purposes different from those referred to
in those provisions;

(d) the communication to the public of their television broadcasts if such communication is
made in places accessible to the public against payment of an entrance fee; it shall be a
matter for the domestic law of the State where protection of this right is claimed to determine
the conditions under which it may be exercised.

With regard to the neighboring rights of a broadcasting organization in this jurisdiction, this court has
discussed the difference between broadcasting and rebroadcasting:

Section 202.7 of the IP Code defines broadcasting as "the transmission by wireless means for the
public reception of sounds or of images or of representations thereof; such transmission by satellite
is also ‘broadcasting’ where the means for decrypting are provided to the public by the broadcasting
organization or with its consent."

On the other hand, rebroadcasting as defined in Article 3(g) of the International Convention for the
Protection of Performers, Producers of Phonograms and Broadcasting Organizations, otherwise
known as the 1961 Rome Convention, of which the Republic of the Philippines is a signatory, is "the
simultaneous broadcasting by one broadcasting organization of the broadcast of another
broadcasting organization."

....

Under the Rome Convention, rebroadcasting is "the simultaneous broadcasting by one broadcasting
organization of the broadcast of another broadcasting organization." The Working Paper prepared by
the Secretariat of the Standing Committee on Copyright and Related Rights defines broadcasting
organizations as "entities that take the financial and editorial responsibility for the selection and
arrangement of, and investment in, the transmitted content."  (Emphasis in the original, citations
107

omitted)

Broadcasting organizations are entitled to several rights and to the protection of these rights under
the Intellectual Property Code. Respondents’ argument that the subject news footage is not
copyrightable is erroneous. The Court of Appeals, in its assailed Decision, correctly recognized the
existence of ABS-CBN’s copyright over the news footage:

Surely, private respondent has a copyright of its news coverage. Seemingly, for airing said video
feed, petitioner GMA is liable under the provisions of the Intellectual Property Code, which was
enacted purposely to protect copyright owners from infringement. 108

News as expressed in a video footage is entitled to copyright protection. Broadcasting organizations

have not only copyright on but also neighboring rights over their broadcasts. Copyrightability of a
work is different from fair use of a work for purposes of news reporting.

VI

ABS-CBN assails the Court of Appeals’ ruling that the footage shown by GMA-7 falls under the
scope of Section 212.2 and 212.4 of the Intellectual Property Code:
The evidence on record, as well as the discussions above, show that the footage used
by[respondents] could hardlybe characterized as a short excerpt, as it was aired over one and a half
minutes.

Furthermore, the footage used does not fall under the contemplation of Section 212.2 of the
Intellectual Property Code. A plain reading of the provision would reveal that copyrighted material
referred to in Section 212 are short portions of an artist’s performance under Section 203, or a
producer’s sound recordings under Sections 208 and 209. Section 212 does not refer to actual use
of video footage of another as its own.

The Angelo dela Cruz footage does not fall under the rule on Section 212.4 of the Intellectual
Property Code on fair use of the broadcast.

....

In determining fair use, several factors are considered, including the nature of the copyrighted work,
and the amount and substantiality of the person used in relation to the copyrighted work as a whole.

In the business of television news reporting, the nature of the copyrighted work or the video
footages, are such that, footage created, must be a novelty to be a good report. Thus, when the . . .
Angelo dela Cruz footage was used by [respondents], the novelty of the footage was clearly
affected.

Moreover, given that a substantial portion of the Angelo dela Cruz footage was utilized by GMA-7 for
its own, its use can hardly be classified as fair use.

Hence, [respondents] could not be considered as having used the Angelo dela Cruz [footage]
following the provisions on fair use.

It is also worthy to note that the Honorable Court of Appeals seem to contradict itself when it relied
on the provisions of fair use in its assailed rulings considering that it found that the Angelo dela Cruz
footage is not copyrightable, given that the fair use presupposes an existing copyright. Thus, it is
apparent that the findings of the Honorable Court of Appeals are erroneous and based on wrong
assumptions.  (Underscoring in the original)
109

On the other hand, respondents counter that GMA-7’s use of ABS-CBN’s news footage falls under
fair use as defined in the Intellectual Property Code. Respondents, citing the Court of Appeals
Decision, argue that a strong statutory defense negates any finding of probable cause under the
same statute.  The Intellectual Property Code provides that fair use negates infringement.
110

Respondents point out that upon seeing ABS-CBN’s reporter Dindo Amparo on the footage, GMA-7
immediately shut off the broadcast. Only five (5) seconds passed before the footage was cut. They
argue that this shows that GMA-7 had no prior knowledge of ABS-CBN’s ownership of the footage or
was notified of it. They claim that the Angelo dela Cruz footage is considered a short excerpt of an
event’s "news" footage and is covered by fair use. 111

Copyright protection is not absolute.  The Intellectual Property Code provides the limitations on
112

copyright:

CHAPTER VIII
LIMITATIONS ON COPYRIGHT
Section 184. Limitations on Copyright. - 184.1. Notwithstanding the provisions of Chapter V, the
following acts shall not constitute infringement of copyright:

....

184.2. The provisions of this section shall be interpreted in such a way as to allow the work to be
used in a manner which does not conflict with the normal exploitation of the work and does not
unreasonably prejudice the right holder's legitimate interests.

....

CHAPTER XV
LIMITATIONS ON PROTECTION

Section 212. Limitations on Rights. - Sections 203, 208 and 209 shall not apply where the acts
referred to in those Sections are related to:

....

212.2. Using short excerpts for reporting current events;

....

212.4. Fair use of the broadcast subject to the conditions under Section 185.(Sec. 44, P.D. No. 49a)
(Emphasis supplied)

The determination of what constitutes fair use depends on several factors. Section 185 of the
Intellectual Property Code states:

SECTION 185. Fair Use of a Copyrighted Work. —

185.1. The fair use of a copyrighted work for criticism, comment, news reporting, teaching including
multiple copies for classroom use, scholarship, research, and similar purposes is not an infringement
of copyright. . . . In determining whether the use made of a work in any particular case is fair use, the
factors to be considered shall include:

a. The purpose and character of the use, including whether such use is of a commercial
nature or is for non-profit educational purposes;

b. The nature of the copyrighted work;

c. The amount and substantiality of the portion used in relation to the copyrighted work as a
whole; and

d. The effect of the use upon the potential market for or value of the copyrighted work.
Respondents allege that the news footage was only five (5) seconds long, thus falling under
fair use. ABS-CBN belies this contention and argues that the footage aired for two (2)
minutes and 40 seconds.  According to the Court of Appeals, the parties admitted that only
113

five (5) seconds of the news footage was broadcasted by GMA-7. 114
This court defined fair use as "aprivilege to use the copyrighted material in a reasonable manner
without the consent of the copyright owner or as copying the theme or ideas rather than their
expression."  Fair use is an exception to the copyright owner’s monopoly of the use of the work to
115

avoid stifling "the very creativity which that law is designed to foster."
116

Determining fair use requires application of the four-factor test. Section 185 of the Intellectual
Property Code lists four (4) factors to determine if there was fair use of a copyrighted work:

a. The purpose and character of the use, including whether such use is of a commercial
nature or is for non-profit educational purposes;

b. The nature of the copyrighted work;

c. The amount and substantiality of the portion used in relation to the copyrighted work as a
whole; and

d. The effect of the use upon the potential market for or value of the copyrighted work.

First, the purpose and character of the use of the copyrighted material must fall under those listed in
Section 185, thus: "criticism, comment, news reporting, teaching including multiple copies for
classroom use, scholarship, research, and similar purposes."  The purpose and character
117

requirement is important in view of copyright’s goal to promote creativity and encourage creation of
works. Hence, commercial use of the copyrighted work can be weighed against fair use.

The "transformative test" is generally used in reviewing the purpose and character of the usage of
the copyrighted work.  This court must look into whether the copy of the work adds "new
118

expression, meaning or message" to transform it into something else.  "Meta-use" can also occur
119

without necessarily transforming the copyrighted work used. 120

Second, the nature of the copyrighted work is significant in deciding whether its use was fair. If the
nature of the work is more factual than creative, then fair use will be weighed in favor of the user.

Third, the amount and substantiality of the portion used is important to determine whether usage
falls under fair use. An exact reproduction of a copyrighted work, compared to a small portion of it,
can result in the conclusion that its use is not fair. There may also be cases where, though the
entirety of the copyrighted work is used without consent, its purpose determines that the usage is
still fair.  For example, a parody using a substantial amount of copyrighted work may be permissible
121

as fair use as opposed to a copy of a work produced purely for economic gain. Lastly, the effect of
the use on the copyrighted work’s market is also weighed for or against the user. If this court finds
that the use had or will have a negative impact on the copyrighted work’s market, then the use is
deemed unfair.

The structure and nature of broadcasting as a business requires assigned values for each second of
broadcast or airtime. In most cases, broadcasting organizations generate revenue through sale of
time or timeslots to advertisers, which, in turn, is based on market share:  Once a news broadcast
122

has been transmitted, the broadcast becomes relatively worthless to the station. In the case of the
aerial broadcasters, advertising sales generate most of the profits derived from news reports.
Advertising rates are, in turn, governed by market share. Market share is determined by the number
of people watching a show at any particular time, relative to total viewers at that time. News is by
nature time-limited, and so re-broadcasts are generally of little worth because they draw few
viewers. Newscasts compete for market share by presenting their news in an appealing format that
will capture a loyal audience. Hence, the primary reason for copyrighting newscasts by broadcasters
would seem to be to prevent competing stations from rebroadcasting current news from the station
with the best coverage of a particular news item, thus misappropriating a portion of the market
share.

Of course, in the real world there are exceptions to this perfect economic view. However, there are
also many caveats with these exceptions. A common exception is that some stations rebroadcast
the news of others. The caveat is that generally, the two stations are not competing for market
share. CNN, for example, often makes news stories available to local broadcasters. First, the local
broadcaster is often not affiliated with a network (hence its need for more comprehensive
programming), confining any possible competition to a small geographical area. Second, the local
broadcaster is not in competition with CNN. Individuals who do not have cable TV (or a satellite dish
with decoder) cannot receive CNN; therefore there is no competition. . . . Third, CNN sells the right
of rebroadcast to the local stations. Ted Turner, owner of CNN, does not have First Amendment
freedom of access argument foremost on his mind. (Else he would give everyone free cable TV so
everyone could get CNN.) He is in the business for a profit. Giving away resources does not a profit
make.  (Emphasis supplied)
123

The high value afforded to limited time periods is also seen in other media. In social media site
Instagram, users are allowed to post up to only 15 seconds of video.  In short-video sharing website
124

Vine,  users are allowed a shorter period of six (6) seconds per post. The mobile application 1
125

Second Everyday takes it further by capturing and stitching one (1) second of video footage taken
daily over a span of a certain period. 126

Whether the alleged five-second footage may be considered fair use is a matter of defense. We
emphasize that the case involves determination of probable cause at the preliminary investigation
stage. Raising the defense of fair use does not automatically mean that no infringement was
committed. The investigating prosecutor has full discretion to evaluate the facts, allegations, and
evidence during preliminary investigation. Defenses raised during preliminary investigation are
subject to further proof and evaluation before the trial court. Given the insufficiency of available
evidence, determination of whether the Angelo dela Cruz footage is subject to fair use is better left to
the trial court where the proceedings are currently pending. GMA-7’s rebroadcast of ABS-CBN’s
news footage without the latter’s consent is not an issue. The mere act of rebroadcasting without
authority from the owner of the broadcast gives rise to the probability that a crime was committed
under the Intellectual Property Code.

VII

Respondents cannot invoke the defense of good faith to argue that no probable cause exists.

Respondents argue that copyright infringement is malum in se, in that "[c]opying alone is not what is
being prohibited, but its injurious effect which consists in the lifting from the copyright owners’ film or
materials, that were the result of the latter’s creativity, work and productions and without authority,
reproduced, sold and circulated for commercial use to the detriment of the latter." 127

Infringement under the Intellectual Property Code is malum prohibitum. The Intellectual Property
Code is a special law. Copyright is a statutory creation:

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 the statute. 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. 128
The general rule is that acts punished under a special law are malum prohibitum.  "An act which is
129

declared malum prohibitum, malice or criminal intent is completely immaterial." 130

In contrast, crimes mala in seconcern inherently immoral acts:

Not every criminal act, however, involves moral turpitude. It is for this reason that "as to what crime
involves moral turpitude, is for the Supreme Court to determine". In resolving the foregoing question,
the Court is guided by one of the general rules that crimes mala in se involve moral turpitude, while
crimes mala prohibita do not, the rationale of which was set forth in "Zari v. Flores," to wit:

It (moral turpitude) implies something immoral in itself, regardless of the fact that it is punishable by
law or not. It must not be merely mala prohibita, but the act itself must be inherently immoral. The
doing of the act itself, and not its prohibition by statute fixes the moral turpitude. Moral turpitude does
not, however, include such acts as are not of themselves immoral but whose illegality lies in their
being positively prohibited. (Emphasis supplied)

[These] guidelines nonetheless proved short of providing a clear cut solution, for in International Rice
Research Institute v. NLRC, the Court admitted that it cannot always be ascertained whether moral
turpitude does or does not exist by merely classifying a crime as malum in se or as malum
prohibitum. There are crimes which are mala in se and yet but rarely involve moral turpitude and
there are crimes which involve moral turpitude and are mala prohibita only. In the final analysis,
whether or not a crime involves moral turpitude is ultimately a question of fact and frequently
depends on all the circumstances surrounding the violation of the statue.  (Emphasis in the original)
131

"Implicit in the concept of mala in se is that of mens rea."  Mens reais defined as "the nonphysical
132

element which, combined with the act of the accused, makes up the crime charged. Most frequently
it is the criminal intent, or the guilty mind[.]"
133

Crimes mala in sepre suppose that the person who did the felonious act had criminal intent to do so,
while crimes mala prohibita do not require knowledge or criminal intent:

In the case of mala in se it is necessary, to constitute a punishable offense, for the person doing the
act to have knowledge of the nature of his act and to have a criminal intent; in the case of mala
prohibita, unless such words as "knowingly" and "willfully" are contained in the statute, neither
knowledge nor criminal intent is necessary. In other words, a person morally quite innocent and with
every intention of being a law abiding citizen becomes a criminal, and liable to criminal penaltes, if
he does an act prohibited by these statutes.  (Emphasis supplied) Hence, "[i]ntent to commit the
134

crime and intent to perpetrate the act must be distinguished. A person may not have consciously
intended to commit a crime; but he did intend to commit an act, and that act is, by the very nature of
things, the crime itself[.]"  When an act is prohibited by a special law, it is considered injurious to
135

public welfare, and the performance of the prohibited act is the crime itself. 136

Volition, or intent to commit the act, is different from criminal intent. Volition or voluntariness refers to
knowledge of the act being done. On the other hand, criminal intent — which is different from motive,
or the moving power for the commission of the crime  — refers to the state of mind beyond
137

voluntariness. It is this intent that is being punished by crimes mala in se.

Unlike other jurisdictions that require intent for a criminal prosecution of copyright infringement, the
Philippines does not statutorily support good faith as a defense. Other jurisdictions provide in their
intellectual property codes or relevant laws that mens rea, whether express or implied, is an element
of criminal copyright infringement. 138
In Canada, criminal offenses are categorized under three (3) kinds: "the full mens rea offence,
meaning the accused’s actual or subjective state of mind has to be proved; strict liability offences
where no mens rea has to be proved but the accused can avoid liability if he can prove he took all
reasonable steps to avoid the particular event; [and] absolute liability offences where Parliament has
made it clear that guilt follows proof of the prescribed act only."  Because of the use of the word
139

"knowingly" in Canada’s Copyright Act, it has been held that copyright infringement is a full mens rea
offense.140

In the United States, willful intent is required for criminal copyright infringement.  Before the
141

passage of the No Electronic Theft Act, "civil copyright infringements were violations of criminal
copyright laws only if a defendant willfully infringed a copyright ‘for purposes of commercial
advantage or private financial gain.’"  However, the No Electronic Theft Act now allows criminal
142

copyright infringement without the requirement of commercial gain. The infringing act may or may
not be for profit.
143

There is a difference, however, between the required liability in civil copyright infringement and that
in criminal copyright infringement in the United States. Civil copyright infringement does not require
culpability and employs a strict liability regime  where "lack of intention to infringe is not a defense to
144

an action for infringement."145

In the Philippines, the Intellectual Property Code, as amended, provides for the prosecution of
criminal actions for the following violations of intellectual property rights: Repetition of Infringement of
Patent (Section 84); Utility Model (Section 108); Industrial Design (Section 119); Trademark
Infringement (Section 155 in relation to Section 170); Unfair Competition (Section 168 in relation to
Section 170); False Designations of Origin, False Description or Representation (Section 169.1 in
relation to Section 170); infringement of copyright, moral rights, performers’ rights, producers’ rights,
and broadcasting rights (Section 177, 193, 203, 208 and 211 in relation to Section 217); and other
violations of intellectual property rights as may be defined by law.

The Intellectual Property Code requires strict liability for copyright infringement whether for a civil
action or a criminal prosecution; it does not require mens rea or culpa: 146

SECTION 216. Remedies for Infringement. —

216.1. Any person infringing a right protected under this law shall be liable:

a. To an injunction restraining such infringement. The court may also order the
defendant to desist from an infringement, among others, to prevent the entry into the
channels of commerce of imported goods that involve an infringement, immediately
after customs clearance of such goods.

b. Pay to the copyright proprietor or his assigns or heirs such actual damages,
including legal costs and other expenses, as he may have incurred due to the
infringement as well as the profits the infringer may have made due to such
infringement, and in proving profits the plaintiff shall be required to prove sales only
and the defendant shall be required to prove every element of cost which he claims,
or, in lieu of actual damages and profits, such damages which to the court shall
appear to be just and shall not be regarded as penalty.

c. Deliver under oath, for impounding during the pendency of the action, upon such
terms and conditions as the court may prescribe, sales invoices and other
 documents evidencing sales, all articles and their packaging alleged to infringe a
copyright and implements for making them.

d. Deliver under oath for destruction without any compensation all infringing copies or
devices, as well as all plates, molds, or other means for making such infringing
copies as the court may order.

e. Such other terms and conditions, including the payment of moral and exemplary
damages, which the court may deem proper, wise and equitable and the destruction
of infringing copies of the work even in the event of acquittal in a criminal case.

216.2. In an infringement action, the court shall also have the power to order the seizure and
impounding of any article which may serve as evidence in the court proceedings. (Sec. 28,
P.D. No. 49a)

SECTION 217. Criminal Penalties. — 217.1. Any person infringing any right secured by provisions of
Part IV of this Actor aiding or abetting such infringement shall be guilty of a crime punishable by:

a. Imprisonment of one (1) year to three (3) years plus a fine ranging from Fifty
thousand pesos (₱50,000) to One hundred fifty thousand pesos (₱150,000) for the
first offense.

b. Imprisonment of three (3) years and one (1) day to six (6) years plus a fine ranging
from One hundred fifty thousand pesos (₱150,000) to Five hundred thousand pesos
(₱500,000) for the second offense.

c. Imprisonment of six (6) years and one (1) day to nine (9) years plus a fine ranging
from Five hundred thousand pesos (₱500,000) to One million five hundred thousand
pesos (₱1,500,000) for the third and subsequent offenses.

d. In all cases, subsidiary imprisonment in cases of insolvency.

217.2. In determining the number of years of imprisonment and the amount of fine, the court
shall consider the value of the infringing materials that the defendant has produced or
manufactured and the damage that the copyright owner has suffered by reason of the
infringement.

217.3. Any person who at the time when copyright subsists in a work has in his possession
an article which he knows, or ought to know, to be an infringing copy of the work for the
purpose of: a. Selling, letting for hire, or by way of trade offering or exposing for sale, or hire,
the article;

b. Distributing the article for purpose of trade, or for any other purpose to an extent
that will prejudice the rights of the copyright owner in the work; or

c. Trade exhibit of the article in public, shall be guilty of an offense and shall be liable
on conviction to imprisonment and fine as above mentioned. (Sec. 29, P.D. No. 49a)
(Emphasis supplied)

The law is clear. Inasmuch as there is wisdom in prioritizing the flow and exchange of ideas as
opposed to rewarding the creator, it is the plain reading of the law in conjunction with the actions of
the legislature to which we defer. We have continuously "recognized the power of the legislature . . .
to forbid certain acts in a limited class of cases and to make their commission criminal without regard
to the intent of the doer. Such legislative enactments are based on the experience that repressive
measures which depend for their efficiency upon proof of the dealer’s knowledge or of his intent are
of little use and rarely accomplish their purposes."
147

Respondents argue that live broadcast of news requires a different treatment in terms of good faith,
intent, and knowledge to commit infringement. To argue this point, they rely on the differences of the
media used in Habana et al. v. Robles, Columbia Pictures v. Court of Appeals, and this case:

Petitioner ABS-CBN argues that lack of notice that the Angelo dela Cruz was under embargo is not a
defense in copyright infringement and cites the case of Columbia Pictures vs. Court of Appeals and
Habana et al. vs. Robles(310 SCRA 511). However, these cases refer to film and literary work where
obviously there is "copying" from an existing material so that the copier knew that he is copying from
an existing material not owned by him. But, how could respondents know that what they are "copying
was not [theirs]" when they were not copying but merely receiving live video feed from Reuters and
CNN which they aired? What they knew and what they aired was the Reuters live video feed and the
CNN feed which GMA-7 is authorized to carry in its news broadcast, it being a subscriber of these
companies[.]

It is apt to stress that the subject of the alleged copyright infringement is not a film or literary work
but live broadcast of news footage. In a film or literary work, the infringer is confronted face to face
with the material he is allegedly copying and therefore knows, or is presumed to know, that what he
is copying is owned by another. Upon the other hand, in live broadcast, the alleged infringer is not
confronted with the fact that the material he airs or re-broadcasts is owned by another, and
therefore, he cannot be charged of knowledge of ownership of the material by another. This specially
obtains in the Angelo dela Cruz news footage which GMA-7 received from Reuters and CNN.
Reuters and CNN were beaming live videos from the coverage which GMA-7 received as a
subscriber and, in the exercise of its rights as a subscriber, GMA-7 picked up the live video and
simultaneously re-broadcast it. In simultaneously broadcasting the live video footage of Reuters,
GMA-7 did not copy the video footage of petitioner ABS-CBN[.]  (Emphasis in the original)
148

Respondents’ arguments must fail.

Respondents are involved and experienced in the broadcasting business. They knew that there
would be consequences in carrying ABS-CBN’s footage in their broadcast. That is why GMA-7
allegedly cut the feed from Reuters upon seeing ABS-CBN’s ogo and reporter. To admit a different
treatment for broadcasts would mean abandonment of a broadcasting organization’s minimum
rights, including copyright on the broadcast material and the right against unauthorized rebroadcast
of copyrighted material. The nature of broadcast technology is precisely why related or neighboring
rights were created and developed. Carving out an exception for live broadcasts would go against
our commitments under relevant international treaties and agreements, which provide for the same
minimum rights. 149

Contrary to respondents’ assertion, this court in Habana,  reiterating the ruling in Columbia
150

Pictures,  ruled that lack of knowledge of infringement is not a valid defense. Habana and Columbia
151

Pictures may have different factual scenarios from this case, but their rulings on copyright
infringement are analogous. In Habana, petitioners were the authors and copyright owners of
English textbooks and workbooks. The case was anchored on the protection of literary and artistic
creations such as books. In Columbia Pictures, video tapes of copyrighted films were the subject of
the copyright infringement suit.
In Habana, knowledge of the infringement is presumed when the infringer commits the prohibited
act:

The essence of intellectual piracy should be essayed in conceptual terms in order to underscore its
gravity by an appropriate understanding thereof. Infringement of a copyright is a trespass on a
private domain owned and occupied by the owner of the copyright, and, therefore, protected by law,
and infringement of copyright, or piracy, which is a synonymous term in this connection, consists in
the doing by any person, without the consent of the owner of the copyright, of anything the sole right
to do which is conferred by statute on the owner of the copyright.

....

A copy of a piracy is an infringement of the original, and it is no defense that the pirate, in such
cases, did not know whether or not he was infringing any copyright; he at least knew that what he
was copying was not his, and he copied at his peril.

....

In cases of infringement, copying alone is not what is prohibited. The copying must produce an
"injurious effect". Here, the injury consists in that respondent Robles lifted from petitioners’ book
materials that were the result of the latter’s research work and compilation and misrepresented them
as her own. She circulated the book DEP for commercial use and did not acknowledge petitioners as
her source.  (Emphasis supplied)
152

Habana and Columbia Pictures did not require knowledge of the infringement to constitute a
violation of the copyright. One does not need to know that he or she is copying a work without
consent to violate copyright law. Notice of fact of the embargo from Reuters or CNN is not material
to find probable cause that respondents committed infringement. Knowledge of infringement is only
material when the person is charged of aiding and abetting a copyright infringement under Section
217 of the Intellectual Property Code.153

We look at the purpose of copyright in relation to criminal prosecutions requiring willfulness: Most
importantly, in defining the contours of what it means to willfully infringe copyright for purposes of
criminal liability, the courts should remember the ultimate aim of copyright. Copyright is not primarily
about providing the strongest possible protection for copyright owners so that they have the highest
possible incentive to create more works. The control given to copyright owners is only a means to an
end: the promotion of knowledge and learning. Achieving that underlying goal of copyright law also
requires access to copyrighted works and it requires permitting certain kinds of uses of copyrighted
works without the permission of the copyright owner. While a particular defendant may appear to be
deserving of criminal sanctions, the standard for determining willfulness should be set with reference
to the larger goals of copyright embodied in the Constitution and the history of copyright in this
country.154

In addition, "[t]he essence of intellectual piracy should be essayed in conceptual terms in order to
underscore its gravity by an appropriate understanding thereof. Infringement of a copyright is a
trespass on a private domain owned and occupied by the owner of the copyright, and, therefore,
protected by law, and infringement of copyright, or piracy, which is a synonymous term in this
connection, consists in the doing by any person, without the consent of the owner of the copyright, of
anything the sole right to do which is conferred by statute on the owner of the copyright."155

Intellectual property rights, such as copyright and the neighboring right against rebroadcasting,
establish an artificial and limited monopoly to reward creativity. Without these legally enforceable
rights, creators will have extreme difficulty recovering their costs and capturing the surplus or profit
of their works as reflected in their markets. This, in turn, is based on the theory that the possibility of
gain due to creative work creates an incentive which may improve efficiency or simply enhance
consumer welfare or utility. More creativity redounds to the public good.

These, however, depend on the certainty of enforcement. Creativity, by its very nature, is vulnerable
to the free rider problem. It is easily replicated despite the costs to and efforts of the original creator.
The more useful the creation is in the market, the greater the propensity that it will be copied. The
most creative and inventive individuals are usually those who are unable to recover on their
creations.

Arguments against strict liability presuppose that the Philippines has a social, historical, and
economic climate similar to those of Western jurisdictions. As it stands, there is a current need to
strengthen intellectual property protection.

Thus, unless clearly provided in the law, offenses involving infringement of copyright protections
should be considered malum prohibitum. It is the act of infringement, not the intent, which causes
the damage. To require or assume the need to prove intent defeats the purpose of intellectual
property protection.

Nevertheless, proof beyond reasonable doubt is still the standard for criminal prosecutions under the
Intellectual Property Code.

VIII

Respondents argue that GMA-7’s officers and employees cannot be held liable for infringement
under the Intellectual Property Code since it does not expressly provide direct liability of the
corporate officers. They explain that "(i) a corporation may be charged and prosecuted for a crime
where the penalty is fine or both imprisonment and fine, and if found guilty, may be fined; or (ii) a
corporation may commit a crime but if the statute prescribes the penalty therefore to be suffered by
the corporate officers, directors or employees or other persons, the latter shall be responsible for the
offense."156

Section 217 of the Intellectual Property Code states that "any person" may be found guilty of
infringement. It also imposes the penalty of both imprisonment and fine:

Section 217. Criminal Penalties. - 217.1. Any person infringing any right secured by provisions of
Part IV of this Act or aiding or abetting such infringement shall be guilty of a crime punishable by:

(a) Imprisonment of one (1) year to three (3) years plus a fine ranging from Fifty thousand
pesos (₱50,000) to One hundred fifty thousand pesos (₱150,000) for the first offense.

(b) Imprisonment of three (3) years and one (1) day to six (6) years plus a fine ranging from
One hundred fifty thousand pesos (₱150,000) to Five hundred thousand pesos (₱500,000)
for the second offense.

(c) Imprisonment of six (6) years and one (1) day to nine (9) years plus a fine ranging from
five hundred thousand pesos (₱500,000) to One million five hundred thousand pesos
(₱1,500,000) for the third and subsequent offenses.
 (d) In all cases, subsidiary imprisonment in cases of insolvency. (Emphasis supplied)
Corporations have separate and distinct personalities from their officers or directors.  This
157

court has ruled that corporate officers and/or agents may be held individually liable for a
crime committed under the Intellectual Property Code: 158

Petitioners, being corporate officers and/or directors, through whose act, default or omission the
corporation commits a crime, may themselves be individually held answerable for the crime. . . . The
existence of the corporate entity does not shield from prosecution the corporate agent who
knowingly and intentionally caused the corporation to commit a crime. Thus, petitioners cannot hide
behind the cloak of the separate corporate personality of the corporation to escape criminal liability.
A corporate officer cannot protect himself behind a corporation where he is the actual, present and
efficient actor.
159

However, the criminal liability of a corporation’s officers or employees stems from their active
participation in the commission of the wrongful act:

The principle applies whether or not the crime requires the consciousness of wrongdoing. It applies
to those corporate agents who themselves commit the crime and to those, who, by virtue of their
managerial positions or other similar relation to the corporation, could be deemed responsible for its
commission, if by virtue of their relationship to the corporation, they had the power to prevent the act.
Moreover, all parties active in promoting a crime, whether agents or not, are principals. Whether
such officers or employees are benefited by their delictual acts is not a touchstone of their criminal
liability. Benefit is not an operative fact.  (Emphasis supplied) An accused’s participation in criminal
160

acts involving violations of intellectual property rights is the subject of allegation and proof. The
showing that the accused did the acts or contributed in a meaningful way in the commission of the
infringements is certainly different from the argument of lack of intent or good faith. Active
participation requires a showing of overt physical acts or intention to commit such acts. Intent or
good faith, on the other hand, are inferences from acts proven to have been or not been committed.

We find that the Department of Justice committed grave abuse of discretion when it resolved to file
the Information against respondents despite lack of proof of their actual participation in the alleged
crime.

Ordering the inclusion of respondents Gozon, GMA-7 President; Duavit, Jr., Executive Vice-
President; Flores, Vice-President for News and Public Affairs; and Soho, Director for News, as
respondents, Secretary Agra overturned the City Prosecutor’s finding that only respondents Dela
Peña-Reyes and Manalastas are responsible for the crime charged due to their duties.  The Agra
161

Resolution reads:

Thus, from the very nature of the offense and the penalty involved, it is necessary that GMA-7’s
directors, officers, employees or other officers thereof responsible for the offense shall be charged
and penalized for violation of the Sections 177 and 211 of Republic Act No. 8293. In their complaint
for libel, respondents Felipe L Gozon, Gilberto R. Duavit, Jr., Marissa L. Flores, Jessica A.Soho,
Grace Dela Pena-Reyes, John Oliver T. Manalastas felt they were aggrieved because they were "in
charge of the management, operations and production of news and public affairs programs of the
network" (GMA-7). This is clearly an admission on respondents’ part. Of course, respondents may
argue they have no intention to infringe the copyright of ABS-CBN; that they acted in good faith; and
that they did not directly cause the airing of the subject footage, but again this is preliminary
investigation and what is required is simply probable cause. Besides, these contentions can best be
addressed in the course of trial.  (Citation omitted)
162
In contrast, the Office of the City Prosecutor, in the Resolution dated December 3, 2004, found that
respondents Gozon, Duavit, Jr., Flores, and Soho did not have active participation in the commission
of the crime charged:

This Office, however, does not subscribe to the view that respondents Atty. Felipe Gozon, Gilberto
Duavit, Marissa Flores and Jessica Soho should be held liable for the said offense. Complainant
failed to present clear and convincing evidence that the said respondents conspired with Reyes and
Manalastas. No evidence was adduced to prove that these respondents had an active participation
in the actual commission of the copyright infringement or they exercised their moral ascendancy
over Reyes and Manalastas in airing the said footage. It must be stressed that, conspiracy must be
established by positive and conclusive evidence. It must be shown to exist as clearly and
convincingly as the commission of the offense itself.  (Emphasis supplied, citations omitted)
163

The City Prosecutor found respondents Dela Peña-Reyes and Manalastas liable due to the nature of
their work and responsibilities. He found that:

[t]his Office however finds respondents Grace Dela Peña-Reyes and John Oliver T. Manalastas
liable for copyright infringement penalized under Republic Act No. 8293. It is undisputed that
complainant ABSCBN holds the exclusive ownership and copyright over the "Angelo [d]ela Cruz
news footage". Hence, any airing and re-broadcast of the said footage without any consent and
authority from ABS-CBN will be held as an infringement and violation of the intellectual property
rights of the latter. Respondents Grace Dela Peña-Reyes as the Head of the News Operation and
John Oliver T. Manalastas as the Program Manager cannot escape liability since the news control
room was under their direct control and supervision. Clearly, they must have been aware that the
said footage coming from Reuters or CNN has a "No Access Philippines" advisory or embargo thus
cannot be re-broadcast. We find no merit to the defense of ignorance interposed by the respondents.
It is simply contrary to human experience and logic that experienced employees of an established
broadcasting network would be remiss in their duty in ascertaining if the said footage has an
embargo.  (Emphasis supplied)
164

We agree with the findings as to respondents Dela Peña-Reyes and Manalastas. Both respondents
committed acts that promoted infringement of ABS-CBN’s footage. We note that embargoes are
common occurrences in and between news agencies and/or broadcast organizations.  Under its
165

Operations Guide, Reuters has two (2) types of embargoes: transmission embargo and publication
embargo.  Under ABS-CBN’s service contract with Reuters, Reuters will embargo any content
166

contributed by ABS-CBN from other broadcast subscribers within the same geographical location:

4a. Contributed Content

You agree to supply us at our request with news and sports news stories broadcast on the Client
Service of up to three (3) minutes each for use in our Services on a non-exclusive basis and at a
cost of US$300.00 (Three Hundred United States Dollars) per story. In respect of such items we
agree to embargo them against use by other broadcast subscribers in the Territory and confirm we
will observe all other conditions of usage regarding Contributed Content, as specified in Section 2.5
of the Reuters Business Principles for Television Services. For the purposes of clarification, any
geographical restriction imposed by you on your use of Contributed Content will not prevent us or
our clients from including such Contributed Content in online transmission services including the
internet. We acknowledge Contributed Content is your copyright and we will not acquire any
intellectual property rights in the Contributed Content.  (Emphasis supplied)
167

Respondents Dela Peña-Reyes and Manalastas merely denied receiving the advisory sent by
Reuters to its clients, including GMA-7. As in the records, the advisory reads:
ADVISORY - - +++LIVE COVER PLANS+++
PHILIPPINES: HOSTAGE RETURN

**ATTENTION ALL CLIENTS**

PLEASE BE ADVISED OF THE FOLLOWING LIVE COVER

PLANNED FOR THURSDAY, JULY 22:

....

SOURCE: ABS-CBN
TV AND WEB RESTRICTIONS: NO ACCESS PHILIPPINES. 168

There is probable cause that respondents Dela Peña-Reyes and Manalastas directly committed
copyright infringement of ABS-CBN’s news footage to warrant piercing of the corporate veil. They
are responsible in airing the embargoed Angelo dela Cruz footage. They could have prevented the
act of infringement had they been diligent in their functions as Head of News Operations and
Program Manager.

Secretary Agra, however, committed grave abuse of discretion when he ordered the filing of the
Information against all respondents despite the erroneous piercing of the corporate veil.
Respondents Gozon, Duavit, Jr., Flores, and Soho cannot be held liable for the criminal liability of
the corporation.

Mere membership in the Board or being President per se does not mean knowledge, approval, and
participation in the act alleged as criminal. There must be a showing of active participation, not
simply a constructive one.

Under principles of criminal law, the principals of a crime are those "who take a direct part in the
execution of the act; [t]hose who directly force or induce others to commit it; [or] [t]hose who
cooperate in the commission of the offense by another act without which it would not have been
accomplished."  There is conspiracy "when two or more persons come to an agreement concerning
169

the commission of a felony and decide to commit it": 170

Conspiracy is not presumed. Like the physical acts constituting the crime itself, the elements of
conspiracy must be proven beyond reasonable doubt.  While conspiracy need not be established by
1âwphi1

direct evidence, for it may be inferred from the conduct of the accused before, during and after the
commission of the crime, all taken together, however, the evidence must be strong enough to show
the community of criminal design. For conspiracy to exist, it is essential that there must be a
conscious design to commit an offense. Conspiracy is the product of intentionality on the part of the
cohorts.

It is necessary that a conspirator should have performed some overt act as a direct or indirect
contribution to the execution of the crime committed. The overt act may consist of active participation
in the actual commission of the crime itself, or it may consist of moral assistance to his co-
conspirators by being present at the commission of the crime or by exerting moral ascendancy over
the other co-conspirators[.]  (Emphasis supplied, citations omitted)
171

In sum, the trial court erred in failing to resume the proceedings after the designated period. The
Court of Appeals erred when it held that Secretary Agra committed errors of jurisdiction despite its
own pronouncement that ABS-CBN is the owner of the copyright on the news footage. News should
be differentiated from expression of the news, particularly when the issue involves rebroadcast of
news footage. The Court of Appeals also erroneously held that good faith, as. well as lack of
knowledge of infringement, is a defense against criminal prosecution for copyright and neighboring
rights infringement. In its current form, the Intellectual Property Code is malum prohibitum and
prescribes a strict liability for copyright infringement. Good faith, lack of knowledge of the copyright,
or lack of intent to infringe is not a defense against copyright infringement. Copyright, however, is
subject to the rules of fair. use and will be judged on a case-to-case basis. Finding probable cause
includes a determination of the defendant's active participation, particularly when the corporate veil
is pierced in cases involving a corporation's criminal liability.

WHEREFORE, the Petition is partially GRANTED. The Department of Justice Resolution dated June
29, 2010 ordering the filing of the Information is hereby REINSTATED as to respondents Grace Dela
Pena-Reyes and John Oliver T. Manalastas. Branch 93 of the Regional Trial Court of Quezon City is
directed to continue with the proceedings in Criminal Case No. Q-04-131533.

SO ORDERED.

MARVIC M.V.F. LEONEN

Associate Justice
 G.R. No. 221732, August 23, 2017

FERNANDO U. JUAN, Petitioner, v. ROBERTO U. JUAN (SUBSTITUTED BY HIS

SON JEFFREY C. JUAN) AND LAUNDROMATIC CORPORATION, Respondents.

DECISION

PERALTA, J.:

For this Court's resolution is the Petition for Review on Certiorari under Rule 45 of the
Rules of Court dated January 25, 2016, of petitioner Fernando U. Juan that seeks to
reverse and set aside the Decision1 dated May 7, 2015 and Resolution2 dated December
4, 2015 of the Court of Appeals (CA) dismissing his appeal for failure to comply with the
requirements of Section 13, Rule 44 and Section 1, Rule 50 of the Rules of Court.

The facts follow.

Respondent Roberto U. Juan claimed that he began using the name and mark
"Lavandera Ko" in his laundry business on July 4, 1994. He then opened his laundry
store at No. 119 Alfaro St., Salcedo St., Makati City in 1995. Thereafter, on March 17,
1997, the National Library issued to him a certificate of copyright over said name and
mark. Over the years, the laundry business expanded with numerous franchise outlets
in Metro Manila and other provinces. Respondent Roberto then formed a corporation to
handle the said business, hence, Laundromatic Corporation (Laundromatic) was
incorporated in 1997, while "Lavandera Ko" was registered as a business name on
November 13, 1998 with the Department of Trade and Industry  (DTI). Thereafter,
respondent Roberto discovered that his brother, petitioner Fernando was able to
register the name and mark "Lavandera Ko" with the Intellectual Property
Office (IPO) on October 18, 2001, the registration of which was filed on June 5, 1995.
Respondent Roberto also alleged that a certain Juliano Nacino  (Juliano)  had been
writing the franchisees of the former threatening them with criminal and civil cases if
they did not stop using the mark and name "Lavandera Ko." It was found out by
respondent Roberto that petitioner Fernando had been selling his own franchises.

Thus, respondent Roberto filed a petition for injunction, unfair competition,

infringement of copyright, cancellation of trademark and name with/and prayer for TRO
and Preliminary Injunction with the Regional Trial Court (RTC) and the case was raffled
off at Branch 149, Makati City. The RTC issued a writ of preliminary injunction against
petitioner Fernando in Order dated June 10, 2004. On July 21, 2008, due to the death
of respondent Roberto, the latter was substituted by his son, Christian Juan (Christian).
Pre-trial conference was concluded on July 13, 2010 and after the presentation of
evidence of both parties, the RTC rendered a Resolution dated September 23, 2013,
dismissing the petition and ruling that neither of the parties had a right to the exclusive
use or appropriation of the mark "Lavandera Ko" because the same was the original
mark and work of a certain Santiago S. Suarez  (Santiago). According to the RTC, the
mark in question was created by Suarez in 1942 in his musical composition called,
"Lavandera Ko" and both parties of the present case failed to prove that they were the
originators of the same mark. The dispositive portion of the RTC's resolution reads as
follows:
WHEREFORE, premises considered, this court finds both the plaintiff-Roberto and
defendant-Fernando guilty of making misrepresentations before this court, done under
oath, hence, the Amended Petition and the Answer with their money claims prayed for
therein are hereby DISMISSED.

Therefore, the Amended Petition and the Answer are hereby DISMISSED for no cause of
action, hence, the prayer for the issuance of a writ of injunction is hereby DENIED for
utter lack of merit; and the Writ of Preliminary Injunction issued on June 10, 2004 is
hereby LIFTED AND SET ASIDE.

Finally, the National Library is hereby ordered to cancel the Certificate of Registration
issued to Roberto U. Juan on March 17, 1997 over the word "Lavandera Ko," under
certificate no. 97-362. Moreover, the Intellectual Property Office is also ordered to
cancel Certificate of Registration No. 4-1995-102749, Serial No. 100556, issued on
October 18, 2001, covering the work LAVANDERA KO AND DESIGN, in favor of
Fernando U. Juan.

The two aforesaid government agencies are hereby requested to furnish this Court of
the copy of their cancellation.

Cost de oficio.

SO ORDERED.3

Herein petitioner elevated the case to the CA through a notice of appeal. In his appeal,
petitioner contended that a mark is different from a copyright and not interchangeable.
Petitioner Fernando insisted that he is the owner of the service mark in question as he
was able to register the same with the IPO pursuant to Section 122 of R.A. No. 8293.
Furthermore, petitioner Fernando argued that the RTC erred in giving credence to the
article of information it obtained from the internet stating that the Filipino folk song
"Lavandera Ko" was a composition of Suarez in 1942 rather than the actual pieces of
evidence presented by the parties. As such, according to petitioner, such information
acquired by the RTC is hearsay because no one was presented to testify on the veracity
of such article.

Respondent Roberto, on the other hand, contended that the appeal should be dismissed
outright for raising purely questions of law. He further raised as a ground for the
dismissal of the appeal, the failure of the petitioner to cite the page references to the
record as required in Section 13, paragraphs (a), (c), (d) and (f) of Rule 44 of the Rules
of Court and petitioner's failure to provide a statement of facts. Respondent also argued
that assuming that the Appellant's Brief complied with the formal requirements of the
Rules of Court, the RTC still did not err in dismissing the petitioner's answer with
counterclaim because he cannot be declared as the owner of "Lavandera Ko," since
there is prior use of said mark by another person.

The CA, in its Decision dated May 7, 2015, dismissed the petitioner's appeal based on
technical grounds, thus:
WHEREFORE, premises considered, the instant appeal is DISMISSED for failure to
comply with the requirements of Section 13, Rule 44 and Section 1, Rule 50 of the
Rules of Court.

SO ORDERED.4

Hence, the present petition after the denial of petitioner Fernando's motion for
reconsideration. Petitioner Fernando raises the following issues:

A.

WHETHER OR NOT THE DISMISSAL OF THE APPEAL BY THE COURT OF APPEALS ON

PURELY TECHNICAL GROUNDS WAS PROPER CONSIDERING THAT THE CASE BEFORE IT
CAN BE RESOLVED BASED ON THE BRIEF ITSELF.

B.

WHETHER OR NOT A MARK IS THE SAME AS A COPYRIGHT.

C.

WHETHER OR NOT FERNANDO U. JUAN IS THE OWNER OF THE MARK "LAVANDERA

KO."

D.

WHETHER OR NOT AN INTERNET ARTICLE IS SUPERIOR THAN ACTUAL EVIDENCE

SUBMITTED BY THE PARTIES.5

According to petitioner Fernando, the CA should have considered that the rules are
there to promote and not to defeat justice, hence, it should have decided the case
based on the merits and not dismiss the same based on a mere technicality. The rest of
the issues are similar to those that were raised in petitioner's appeal with the CA.

In his Comment6 dated April 22, 2016, respondent Roberto insists that the CA did not
commit an error in dismissing the appeal considering that the formal requirements
violated by the petitioner in the Appellant's Brief are basic, thus, inexcusable and that
petitioner did not proffer any valid or substantive reason for his non-compliance with
the rules. He further argues that there was prior use of the mark "Lavandera Ko" by
another, hence, petitioner cannot be declared the owner of the said mark despite his
subsequent registration with the IPO.

The petition is meritorious.

Rules of procedure must be used to achieve speedy and efficient administration of

justice and not derail it.7 Technicality should not be allowed to stand in the way of
equitably and completely resolving the rights and obligations of the parties.8 It is,
[thus] settled that liberal construction of the rules may be invoked in situations where
there may be some excusable formal deficiency or error in a pleading, provided that the
same does not subvert the essence of the proceeding and it at least connotes a
reasonable attempt at compliance with the rules.9 In Aguam v. CA,10 this Court ruled
that:

x x x Technicalities, however, must be avoided. The law abhors technicalities that

impede the cause of justice. The court's primary duty is to render or dispense justice.
"A litigation is not a game of technicalities." "Law suits, unlike duels, are not to be won
by a rapier's thrust. Technicality, when it deserts its proper office as an aid to justice
and becomes its great hindrance and chief enemy, deserves scant consideration from
courts." Litigations must be decided on their merits and not on technicality. Every party
litigant must be afforded the amplest opportunity for the proper and just determination
of his cause, free from the unacceptable plea of technicalities. Thus, dismissal of
appeals purely on technical grounds is frowned upon where the policy of the court is to
encourage hearings of appeals on their merits and the rules of procedure ought not to
be applied in a very rigid, technical sense; rules of procedure are used only to help
secure, not override substantial justice. It is a far better and more prudent course of
action for the court to excuse a technical lapse and afford the parties a review of the
case on appeal to attain the ends of justice rather than dispose of the case on
technicality and cause a grave injustice to the parties, giving a false impression of
speedy disposal of cases while actually resulting in more delay, if not a miscarriage of
justice.

In this case, this Court finds that a liberal construction of the rules is needed due to the
novelty of the issues presented. Besides, petitioner had a reasonable attempt at
complying with the rules. After all, the ends of justice are better served when cases are
determined on the merits, not on mere technicality.11

The RTC, in dismissing the petition, ruled that neither of the parties are entitled to use
the trade name "Lavandera Ko" because the copyright of "Lavandera Ko", a song
composed in 1942 by Santiago S. Suarez belongs to the latter. The following are the
RTC's reasons for such ruling:

The resolution of this Court - NO ONE OF THE HEREIN PARTIES HAS THE RIGHT TO USE
AND ENJOY "LAVANDERA KO"!

Based on the date taken from the internet - References: CCP encyclopedia of Philippine
art, vol. 6 http://www.himig.coin.ph (http://kahimyang.info /
kauswagan/articles/1420/today - in - philippine -history this information was gathered:
"In 1948, Cecil Lloyd established the first Filipino owned record company, the Philippine
Recording System, which featured his rendition of Filipino folk songs among them the
"Lavandera ko" (1942) which is a composition of Santiago S. Suarez". Thus, the herein
parties had made misrepresentation before this court, to say the least, when they
declared that they had coined and created the subject mark and name. How can the
herein parties have coined and created the subject mark and work when these parties
were not yet born; when the subject mark and work had been created and used in
1942.

The heirs of Mr. Santiago S. Suarez are the rightful owners of subject mark and work -
"Lavandera ko".
Therefore, the writ of injunction issued in the instant case was quite not proper, hence
the same shall be lifted and revoked. This is in consonance with the finding of this court
of the origin of the subject mark and work, e.g., a music composition of one Santiago
S. Suarez in 1942.

Moreover, Section 171.1 of R.A. 8293 states: "Author" is the natural person who has
created the work." And, Section 172.1 of R.A. No. 8293 provides: 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:

(d) Letters;

(f) Musical compositions, with or without words;”

Thus, the subject mark and work was created by Mr. Santiago S. Suarez, hence, the
subject mark and work belong to him, alone.

The herein parties are just false claimants, done under oath before this court
(paragraph 4 of Roberto's affidavit, Exhibit A TRO, page 241, Vol. I and paragraph 2 of
Fernando's affidavit, Exhibit 26 TRO, page 354, Vol. I), of the original work of Mr.
Santiago S. Suarez created in 1942.

Furthermore, Section 21 of R.A. 8293 declares: "Patentable Inventions - any technical

solution of a problem in any field of human activity which is new, involves an inventive
step and is industrially applicable shall be patentable. It may be, or may relate to, a
product, or process, or an improvement of any of the foregoing." Thus, the herein
subject mark and work can never be patented for the simple reason that it is not an
invention. It is a title of a music composition originated from the mind of Mr. Santiago
S. Suarez in 1942.

Thus, the proper and appropriate jurisprudence applicable to this instant case is the
wisdom of the High Court in the case of Pearl & Dean (Phil.), Incorporation v.
Shoemart, Incorporated (G.R. No. 148222, August 15, 2003), the Supreme Court ruled:
"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." The Supreme Court concluded: "The description of the art in a book,
though entitled to the benefit of copyright, lays no foundation for an exclusive claim to
the art itself. The object of the one is explanation; the object of the other is use. The
former may be secured by copyright. The latter can only be secured, if it can be
secured at all, by letters patent." (Pearl & Dean v. Shoemart, supra., citing the case of
Baker v. Selden, 101 U.S. 99; 1879 U.S. Lexis 1888; 25 L. Ed. 841; 11 Otto 99,
October, 1879 Term).

It is noted that the subject matter of Exhibit "5" (Annex 5) Of Fernando (IPO certificate
of registration) and Exhibit B of Roberto (Certificate of Copyright Registration) could not
be considered as a literary and artistic work emanating from the creative mind and/or
hand of the herein parties for the simple reason that the subject work was a creation of
the mind of Mr. Santiago S. Suarez in 1942. Thus, neither of the herein parties has an
exclusive right over the subject work "Lavandera Ko" for the simple reason that herein
parties were not the maker, creator or the original one who conceptualized it. Section
171.1 defines the author as the natural person who has created the work. (R.A. No.
8293). Therefore, it can be said here, then and now, that said registrations of the word
"Lavandera Ko" by the herein parties cannot be protected by the law, Republic Act No.
8293. Section 172.2 (R.A. No. 8293) is quite crystal clear on this point, it declares:
"Works are protected by the sole fact of their creation, irrespective of their mode or
form of expressions, as well as of their content, quality and purpose." Herein parties
were not the creators of the subject word. It was a creation of Santiago S. Suarez in
1942.

Finally, in the case of Wilson Ong Ching Kian Chuan v. Court of Appeals and Lorenzo
Tan (G.R. No. 130360, August 15, 2001), the Supreme Court ruled: "A person to be
entitled to a copyright must be the original creator of the work. He must have created it
by his own skill, labor and judgment without directly copying or evasively imitating the
work of another." Again, herein parties, both, miserably failed to prove and establish on
how they have created this alleged work before registering it with the National Library
and the Intellectual Property Office, hence their claim of ownership of the word
"Lavandera Ko" is not conclusive or herein parties are both great pretenders and
imitators. Therefore, it is hereby declared that registration with the IPO by Fernando is
hereby cancelled, for one and many others stated herein, because of the admission of
Fernando that he coined the name from the lyrics of a song popularized in the 1950's
by singer Ruben Tagalog. Admission is admissible without need of evidence. (Section 4,
Rule 129 of the Revised Rules of Court).

Considering that herein parties had made misrepresentations before this court, hence,
both the herein parties came to this court with unclean hands. Thus, no damage could
be awarded to anyone of the herein parties.12

The above ruling is erroneous as it confused trade or business name with copyright.

The law on trademarks, service marks and trade names are found under Part III of
Republic Act (R.A.) No. 8293, or the Intellectual Code of the Philippines, while Part IV of
the same law governs copyrights.

"Lavandera Ko," the mark in question in this case is being used as a trade name or
specifically, a service name since the business in which it pertains involves the
rendering of laundry services. Under Section 121.1 of R.A. No. 8293, "mark" is defined
as any visible sign capable of distinguishing the goods (trademark) or services (service
mark) of an enterprise and shall include a stamped or marked container of goods. As
such, the basic contention of the parties is, who has the better right to use "Lavandera
Ko" as a service name because Section 165.213 of the said law, guarantees the
protection of trade names and business names even prior to or without registration,
against any unlawful act committed by third parties. A cause of action arises when the
subsequent use of any third party of such trade name or business name would likely
mislead the public as such act is considered unlawful. Hence, the RTC erred in denying
the parties the proper determination as to who has the ultimate right to use the said
trade name by ruling that neither of them has the right or a cause of action since
"Lavandera Ko" is protected by a copyright.
By their very definitions, copyright and trade or service name are different. Copyright is
the right of literary property as recognized and sanctioned by positive law.14 An
intangible, incorporeal right granted by statute to the author or originator of certain
literary or artistic productions, whereby he is invested, for a limited period, with the
sole and exclusive privilege of multiplying copies of the same and publishing and selling
them.15 Trade name, on the other hand, is any designation which (a) is adopted and
used by person to denominate goods which he markets, or services which he renders,
or business which he conducts, or has come to be so used by other, and (b) through its
association with such goods, services or business, has acquired a special significance as
the name thereof, and (c) the use of which for the purpose stated in (a) is prohibited
neither by legislative enactment nor by otherwise defined public policy.16

Section 172.1 of R.A. 8293 enumerates the following original intellectual creations in
the literary and artistic domain that are protected from the moment of their creation,
thus:

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:

(a) Books, pamphlets, articles and other writings;

(b) Periodicals and newspapers;
(c) Lectures, sermons, addresses, dissertations prepared for oral delivery, whether or
not reduced in writing or other material form;
(d) Letters;
(e) Dramatic or dramatico-musical compositions; choreographic works or entertainment
in dumb shows;
(f) Musical compositions, with or without words;
(g) Works of drawing, painting, architecture, sculpture, engraving, lithography or other
works of art; models or designs for works of art;
(h) Original ornamental designs or models for articles of manufacture, whether or not
registrable as an industrial design, and other works of applied art;
(i) Illustrations, maps, plans, sketches, charts and three-dimensional works relative to
geography, topography, architecture or science;
(j) Drawings or plastic works of a scientific or technical character;
(k) Photographic works including works produced by a process analogous to
photography; lantern slides;
(l) Audiovisual works and cinematographic works and works produced by a process
analogous to cinematography or any process for making audio-visual recordings;
(m) Pictorial illustrations and advertisements;
(n) Computer programs; and
(o) Other literary, scholarly, scientific and artistic works.

As such, "Lavandera Ko," being a musical composition with words is protected under
the copyright law (Part IV, R.A. No. 8293) and not under the trademarks, service marks
and trade names law (Part III, R.A. No. 8293).

In connection therewith, the RTC's basis or source, an article appearing in a

website,17 in ruling that the song entitled "Lavandera Ko" is protected by a copyright,
cannot be considered a subject of judicial notice that does not need further
authentication or verification. Judicial notice is the cognizance of certain facts that
judges may properly take and act on without proof because these facts are already
known to them.18 Put differently, it is the assumption by a court of a fact without need
of further traditional evidentiary support. The principle is based on convenience and
expediency in securing and introducing evidence on matters which are not ordinarily
capable of dispute and are not bona fide disputed.19 In Spouses Latip v. Chua,20 this
Court expounded on the nature of judicial notice, thus:

Sections 1 and 2 of Rule 129 of the Rules of Court declare when the taking of judicial
notice is mandatory or discretionary on the courts, thus:

SECTION 1. Judicial notice, when mandatory. - A court shall take judicial notice,
without the introduction of evidence, of the existence and territorial extent of states,
their political history, forms of government and symbols of nationality, the law of
nations, the admiralty and maritime courts of the world and their seals, the political
constitution and history of the Philippines, the official acts of the legislative, executive
and judicial departments of the Philippines, the laws of nature, the measure of time,
and the geographical divisions.

SEC. 2. Judicial notice, when discretionary. - A court may take judicial notice of matters
which are of public knowledge, or are capable of unquestionable demonstration or
ought to be known to judges because of their judicial functions.

On this point, State Prosecutors v. Muro is instructive:

I. The doctrine of judicial notice rests on the wisdom and discretion of the courts. The
power to take judicial notice is to be exercised by courts with caution; care must be
taken that the requisite notoriety exists; and every reasonable doubt on the subject
should be promptly resolved in the negative.

Generally speaking, matters of judicial notice have three material requisites: (1) the
matter must be one of common and general knowledge; (2) it must be well and
authoritatively settled and not doubtful or uncertain; and (3) it must be known to be
within the limits of the jurisdiction of the court. The principal guide in determining what
facts may be assumed to be judicially known is that of notoriety. Hence, it can be said
that judicial notice is limited to facts evidenced by public records and facts of general
notoriety.

To say that a court will take judicial notice of a fact is merely another way of saying
that the usual form of evidence will be dispensed with if knowledge of the fact can be
otherwise acquired. This is because the court assumes that the matter is so notorious
that it will not be disputed. But judicial notice is not judicial knowledge. The mere
personal knowledge of the judge is not the judicial knowledge of the court, and he is
not authorized to make his individual knowledge of a fact, not generally or
professionally known, the basis of his action. Judicial cognizance is taken only of those
matters which are "commonly" known.

Things of "common knowledge," of which courts take judicial notice, may be matters
coming to the knowledge of men generally in the course of the ordinary experiences of
life, or they may be matters which are generally accepted by mankind as true and are
capable of ready and unquestioned demonstration. Thus, facts which are universally
known, and which may be found in encyclopedias, dictionaries or other publications, are
judicially noticed, provided they are of such universal notoriety and so generally
understood that they may be regarded as forming part of the common knowledge of
every person.

We reiterated the requisite of notoriety for the taking of judicial notice in the recent
case of Expertravel & Tours, Inc. v. Court of Appeals, which cited State Prosecutors:

Generally speaking, matters of judicial notice have three material requisites: (1) the
matter must be one of common and general knowledge; (2) it must be well and
authoritatively settled and not doubtful or uncertain; and (3) it must be known to be
within the limits of the jurisdiction of the court. The principal guide in determining what
facts may be assumed to be judicially known is that of notoriety. Hence, it can be said
that judicial notice is limited to facts evidenced by public records and facts of general
notoriety. Moreover, a judicially noticed fact must be one not subject to a reasonable
dispute in that it is either: (1) generally known within the territorial jurisdiction of the
trial court; or (2) capable of accurate and ready determination by resorting to sources
whose accuracy cannot reasonably be questionable.

Things of "common knowledge," of which courts take judicial notice, may be matters
coming to the knowledge of men generally in the course of the ordinary experiences of
life, or they may be matters which are generally accepted by mankind as true and are
capable of ready and unquestioned demonstration. Thus, facts which are universally
known, and which may be found in encyclopedias, dictionaries or other publications, are
judicially noticed, provided, they are such of universal notoriety and so generally
understood that they may be regarded as forming part of the common knowledge of
every person. As the common knowledge of man ranges far and wide, a wide variety of
particular facts have been judicially noticed as being matters of common knowledge.
But a court cannot take judicial notice of any fact which, in part, is dependent on the
existence or non-existence of a fact of which the court has no constructive knowledge.

The article in the website cited by the RTC patently lacks a requisite for it to be of
judicial notice to the court because such article is not well and authoritatively settled
and is doubtful or uncertain. It must be remembered that some articles appearing in
the internet or on websites are easily edited and their sources are unverifiable, thus,
sole reliance on those articles is greatly discouraged.

Considering, therefore, the above premise, this Court deems it proper to remand the
case to the RTC for its proper disposition since this Court cannot, based on the records
and some of the issues raised by both parties such as the cancellation of petitioner's
certificate of registration issued by the Intellectual Property Office, make a factual
determination as to who has the better right to use the trade/business/service name,
"Lavandera Ko."

WHEREFORE, the Petition for Review on Certiorari under Rule 45 of the Rules of Court
dated January 25, 2016, of petitioner Fernando U. Juan is GRANTED. Consequently,
the Decision dated May 7, 2015 and Resolution dated December 4, 2015 of the Court of
Appeals are REVERSED andSET ASIDE. This Court,
however, ORDERS the REMAND of this case to the RTC for its prompt disposition.
SO ORDERED.
G.R. No. 197482

FORIETRANS MANUFACTURING CORP., AGERICO CALAQUIAN and ALVIN

MONTERO, Petitioners
vs
DAVIDOFF ET. CIE SA & JAPAN TOBACCCO, INC. (represented by SYCIP SALAZAR
HERNANDEZ & GATMAITAN LAW OFFICE thru ATTY. RONALD MARK LLENO), Respondents

DECISION

JARDELEZA, J.:

This is a Petition for Review on Certiorari  assailing the March 31, 2011 Decision  and July 5, 2011
1 2

Resolution  of the Court of Appeals (CA) in CA-G.R. SP No. 94587.  The CA reversed and set aside
3 4

the February 10, 2006  and March 27, 2006  Resolutions of the Secretary of Justice which found no
5 6

probable cause to charge petitioners for the crimes of infringement and false designation of origin.

Davidoff Et. Cie SA (Davidoff) and Japan Tobacco, Inc. (JTI) [collectively, respondents] are non-
resident foreign corporations organized and existing under the laws of Switzerland and Japan,
respectively.  They are represented in the Philippines by law firm SyCip Salazar Hernandez &
7

Gatmaitan (SyCip Law Firm). It is authorized under a special power of attorney to maintain and
prosecute legal actions against any manufacturers, local importers and/or distributors, dealers or
retailers of counterfeit products bearing Davidoff s and JTI' s trademarks or any products infringing
their trademarks.  Respondents also retained Business Profiles, Inc. (BPI) as their private
8

investigator in the Philippines.

9

Meanwhile, petitioner Forietrans Manufacturing Corporation (FMC) is a domestic corporation with

principal address at Lots 5 and 7, Angeles Industrial Park, Special Economic Zone, Barangay
Calibutbut, Bacolor, Pampanga. 10

BPI reported to respondents that "there were counterfeit Davidoff and JTI products, or products
bearing colorable imitation of Davidoff and JTI products, or which are confusingly or deceivingly
similar to Davidoff and JTI registered trademarks, being manufactured and stored" in FMC' s
warehouses.  SyCip Law Firm then sought the assistance of the Criminal Investigation and
11

Detection Group (CIDG) of the Philippine National Police in securing warrants to search the
warehouses. Upon investigation, the CIDG confirmed the report of BPI. On August 4, 2004, PSI Joel
L. De Mesa (PSI De Mesa) of the CIDG filed four separate applications for search warrant before the
Regional Trial Court (RTC) of San Fernando, Pampanga. The applications were docketed as Search
Warrant (SW) Case Nos. 044, 045, 046, and 047 and raffled to Branch 42 presided by Judge Pedro
M. Sunga, Jr. (Judge Sunga). 12

In the applications, PSI De Mesa alleged that "he had been informed, concluded upon investigation,
and believed that [FMC] and/or its proprietors, directors, officers, employees, and/or occupants of its
premises stored counterfeit cigarettes" bearing: (a) the name "DAGETA

International" purported to be made in Germany; and (b) the name "DAG ET A" which was
confusingly similar to the Davidoff trademark, a product of Imperial Tobacco, Inc. Thus, he asked the
RTC to issue search warrants authorizing any peace officer to take possession of the subject articles
and bring them before the court. 13
The RTC granted the applications. In the same afternoon of August 4, 2004, PSI Nathaniel Villegas
(PSI Villegas) and PSI Eric Maniego (PSI Maniego) implemented SW Nos. 044 and 046, while PSI
De Mesa implemented SW Nos. 045 and 047. During their separate raids, the CIDG teams seized
several boxes containing raw tobacco, cigarettes, cigarette packs, and cigarette reams bearing the
name DAGETA and DAGETA International. They also secured machineries, receptacles, other
paraphernalia, sales invoices and official receipts. Petitioner Agerico Calaquian, president of FMC,
was allegedly apprehended at the premises along with four Chinese nationals. 14

With the seized items as evidence, three separate Complaint-Affidavits were filed before the Office
of the Provincial Prosecutor of San Fernando, Pampanga charging FMC and its employees· with
violation of Republic Act No. 8293, or the Intellectual Property Code of the Philippines (IP
Code).  The charges are as follows:
17

1. LS. No. OCPSF-04-H-2047  (Davidoff infringement case) - Infringement under Section 155 in
18

relation to Section 170 of the IP Code for the illegal manufacture of cigarettes bearing the DA GET A
label, with packaging very similar to the packaging of Davidoff's products and the script "DAGETA"
on the packs being deceivingly or confusingly similar to the registered mark "DAVIDOFF." 19

2. LS. No. OCPSF-04-H-2048 (False Designation of Origin) - False Designation of Origin under
Section 169 in relation to Section 170 of the IP Code for the illegal manufacture and/or storage of
cigarettes bearing the "DA GET A" label with an indication that such cigarettes were "MADE IN
GERMANY" though they were actually processed, manufactured and packaged in FMC's office in
Bacolor, Pampanga. 20

3. LS. No. OCPSF-04-H-2226 (JTI infringement case)- Infringement under Section 155 in relation to
Section 170 of the IP Code for illegally manufacturing cigarettes which are deceivingly or confusingly
similar to, or almost the same as, the registered marks of JTI, which are the "MILD SEVEN" and
"MILD SEVEN LIGHTS" trademarks. 21

Calaquian denied the charges against him and FMC. He countered that during the August 4, 2004
raid, the CIDG did not find counterfeit cigarettes within FMC's premises as nobody was there at the
time. He claimed that what the CIDG found were boxes of genuine Dageta and Dageta International
cigarettes imported from Germany for re-export to Taiwan and China. Calaquian asserted that FMC
is an eco-zone export enterprise registered with the Philippine Economic Zone Authority (PEZA),
and is duly authorized by the National Tobacco Administration to purchase, import and export
tobacco. FMC would not have passed PEZA's strict rules and close monitoring if it had engaged in
trademark infringement. Calaquian also denies that the CIDG made arrests on the occasion of the
raid.
22

In a Joint Resolution  dated September 12, 2005, Second Assistant Provincial Prosecutor Otto B.
23

Macabulos (Prosecutor Macabulos) dismissed the criminal complaints. Prosecutor Macabulos found
the affidavit of Jimmy Trocio (Trocio ), the informant/witness presented by PSI De Mesa in his
application for search warrants, clearly insufficient to show probable cause to search FMC's
premises for fake JTI or Davidoff products. Trocio did not even testify that FMC is manufacturing
fake Dageta cigarettes. The CIDG also did not find Dageta cigarettes during the raid, much less fake
JTI or Davidoff products. This should have been reason enough to quash the warrant.  Further,
24

Prosecutor Macabulos held that there is no confusing similarity between the Dageta and Davidoff
brands. Thus, he found the complaints for the Davidoff infringement and False Designation of Origin
to be without menit.
25

Prosecutor Macabulos also expressed disbelief over the allegation that Mild Seven and Mild Seven
Lights were seized at FMC' s premises. He averred that the Joint Affidavit of Arrest/Seizure dated
August 6, 2004 never mentioned those cigarettes as among the items seized. Furthermore, there
was no proof that FMC manufactured fake Mild Seven cigarettes.  Hence, he also dismissed the JTI
26

infringement case.

Respondents thereafter filed a Petition for Review before then Secretary of Justice Raul M.
Gonzalez (Secretary Gonzalez).

In his Resolution dated February 10, 2006, Secretary Gonzalez affirmed the ruling of Prosecutor
Macabulos. He opined that the seizure of Dageta and Dageta International cigarettes from FMC's
premises does not prove the commission of trademark infringement and false designation of origin. It
cannot be said that there is confusing similarity between Davidoff cigarettes, and Dageta and Dageta
International cigarettes. The difference in their names alone belies the alleged confusing similarity. 27

Secretary Gonzalez also affirmed the dismissal of the charge of false designation of origin. He ruled
that respondents failed to establish the falsity of the claim indicated in the labels of Dageta and
Dageta International cigarettes that they were made in Germany. 28

In addition, Secretary Gonzalez declared that the alleged discovery and seizure of Mild Seven and
Mild Seven Lights in FMC's premises during the August 4 and 5, 2004 raids did not actually happen.
He agreed with Calaquian that if indeed the officers and employees of FMC were found
manufacturing or assisting or supervising the manufacture of Mild Seven and Mild Seven Lights
during the raids, surely the raiding team would have arrested them then and there; but as it was, no
arrest was apparently made. Secretary Gonzalez also agreed with Prosecutor Macabulos'
observation that Mild Seven and Mild Seven Lights cigarettes were never mentioned among the
items seized in the Joint Affidavit of Arrest/Seizure. 29

Respondents moved for reconsideration. This, however, was denied with finality by Secretary
Gonzalez in his Resolution dated March 27, 2006. Respondents elevated the case to the CA via a
petition for certiorari.
30

The CA reversed the resolutions of Secretary Gonzalez. It adjudged that Secretary Gonzalez acted
with grave abuse of discretion in affirming Prosecutor Macabulos' finding that no probable cause
exists against FMC.

The CA explained that Secretary Gonzalez assumed the function of the trial judge of calibrating the
evidence on record when he ruled that:

a. The seizure of Mild Seven and Mild Seven Lights during the raid did not happen as the arresting
officer failed to state in their Joint Affidavit that they seized the said cigarettes and if it were true that
they seized these cigarettes, the raiding team would have arrested Mr. Calaquian and four Chinese
nationals present during the raid; and

b. The seizure of Dageta and Dageta International cigarettes does not prove that FMC violated the
provisions on infringement of trademark and false designation of origin under the IP Code. 31

According to the CA, the foregoing involve evidentiary matters which can be better resolved in the
course of the trial, and Secretary Gonzalez was not in a competent position to pass judgment on
substantive matters.  Petitioners filed a partial motion for reconsideration, but this was denied by the
32

CA. Hence, this petition.

Petitioners fault the CA for interfering with the valid exercise by Prosecutor Macabulos and Secretary
Gonzalez of the executive power to determine the existence or non-existence of probable cause in a
preliminary investigation.  Heavily relying on the Joint Resolution issued by Prosecutor Macabulos,
33

they allege that respondents did not present any proof to show probable cause to indict them for the
crimes of infringement and false designation of origin.  They contend that Secretary Gonzalez
34

affirmed the Joint Resolution and dismissed the criminal complaints based on insufficiency of
evidence since there was no proof that FMC manufactured counterfeit Davidoff or Mild Seven
cigarettes. Petitioners also insist that no court can order the prosecution of a person against whom
the prosecutor does not find sufficient evidence to support at least aprimafacie case. 35

In their Comment, respondents counter that the petition should be dismissed for failure to show any
special and important reason for this Court to exercise its power of review. They claim that the
petition is a mere rehash of FMC's arguments before the CA.  In any case, respondents aver that
36

the CA correctly reversed the Resolutions of Secretary Gonzalez. Secretary Gonzalez acted without
or in excess of jurisdiction and with grave abuse of discretion when he completely disregarded the
evidence attached to the criminal complaints and wrongfully assumed the function of a trial judge in
passing upon factual or evidentiary matters which are best decided after a full-blown trial on the
merits.37

We are now asked to resolve whether the CA erred in ruling that Secretary Gonzalez committed
grave abuse of discretion in finding no probable cause to charge petitioners with trademark
infringement and false designation of origin.

II

We deny the petition.

Probable cause, for purposes of filing a criminal acti01i, is defined as such facts as are sufficient to
engender a well-founded belief that a crime has been committed and that respondent is probably
guilty thereof.  It does not require an inquiry into whether there is sufficient evidence to procure
38

conviction. Only prima facie evidence is required or that which is, on its face, good and sufficient to
establish a given fact, or the group or chain of facts constituting the party's claim or defense; and
which, if not rebutted or contradicted, will remain sufficient.
39

The task of determining probable cause is lodged with the public prosecutor and ultimately, the
Secretary of Justice. Under the doctrine of separation of powers, courts have no right to directly
decide matters over which full discretionary authority has been delegated to the Executive Branch of
the Government. Thus, we have generally adopted a policy of non-interference with the executive
determination of probable cause.  Where, however, there is a clear case of grave abuse of
40

discretion, courts are allowed to reverse the Secretary of Justice's findings and conclusions on
matters of probable cause. 41

By grave abuse of discretion is meant such capricious and whimsical exercise of judgment as is
equivalent to lack of jurisdiction. The abuse of discretion is grave where the power is exercised in an
arbitrary or despotic manner by reason of passion or personal hostility and must be so patent and
gross as to amount to an evasion of positive duty or to a virtual refusal to perform the duty enjoined
by or to act at all in contemplation of the law.
42

In Unilever Philippines, Inc. v. Tan, we have ruled that the dismissal of the complaint by the
Secretary of Justice, despite ample evidence to support a finding of probable cause, clearly
constitutes grave error and warrants judicial intervention and correction. 43
Here, we find that Secretary Gonzalez committed grave abuse of discretion when he disregarded
evidence on record and sustained the Joint Resolution of Prosecutor Macabulos dismissing the
criminal complaints against petitioners.

Preliminarily, we find that Secretary Gonzalez should have set aside the Joint Resolution on the
ground that Prosecutor Macabulos did not undertake to determine the existence or non-existence of
probable cause for the purpose of filing a criminal case. Nowhere in the Joint Resolution is it stated
that the criminal complaints were dismissed on account of lack of probable cause for the filing of a
case against petitioners. Instead, Prosecutor Macabulos attacked Judge Sunga's finding of probable
cause for the issuance of search warrants in SW Nos. 044, 045, 046, 047 and 048. The pertinent
portions of the Joint Resolution read:

As can be seen supra, Trocio's affidavit was clearly insufficient to show probable cause to search
FMC's premises and look for fake JTI or [Davidoff] products.

Xxx

It would seem that reason had taken leave of the senses. The undeniable fact, standing out like a
sore thumb, is that the applicants never presented a single shred of proof to show probable cause
for the issuance of a search warrant. It would have been laughable if not for the fact that persons
were arrested and detained and properties were confiscated. As can be seen, what began as a
search for fake JTI and [Davidoff] products changed into a search for fake Dageta International
cigarettes, then shifted to a sea[r]ch for fake Dageta cigarettes confusingly similar to Davidoff and
finally shifted to fake mislabeled Dageta cigarettes. One can only wonder why the applications were
granted without a shred of proof showing probable cause. The exception against unreasonable
searches and seizures became the very weapon to commit abuses that the provision was designed
to prevent.  (Emphasis supplied.)
44

The determination of probable cause by the judge .should not be confused with the determination of
probable cause by the prosecutor. The first is made by the judge to ascertain whether a warrant of
arrest should be issued against the accused, or for purposes of this case, whether a search warrant
should be issued. The second is made by the prosecutor during preliminary investigation to
determine whether a criminal case should be filed in court. The prosecutor has no power or authority
to review the determination of probable cause by the judge, just as the latter does not act as the
appellate court of the former.  Here, as correctly argued by respondents, Prosecutor Macabulos
45

focused on the evidence submitted before Judge Sunga to support the issuance of search
warrants.  He lost sight of the fact that as a prosecutor, he should evaluate only the evidence
46

presented before him during the preliminary investigation. With his preconceived notion of the
invalidity of the search warrants in mind,

Prosecutor Macabulos appeared to have completely ignored the evidence presented by respondents
during preliminary investigation.

The records show that a prima facie case for trademark infringement and false designation of origin
exists against petitioners.  Section 155 of the IP Code enumerates the instances when infringement
1âwphi1

is committed, viz.:

Sec. 155. Remedies; Infringement. - Any person who shall, without the consent of the owner of the
registered mark:
15 5 .1. Use in commerce any reproduction, counterfeit, copy, or colorable imitation of a registered
mark or the same container or a dominant feature thereof in connection with the sale, offering for
sale, distribution, advertising of any goods or services including other preparatory steps necessary to
carry out the sale of any goods or services on or in connection with which such use is likely to cause
confusion, or to cause mistake, or to deceive; or

155.2. Reproduce, counterfeit, copy or colorably imitate a registered mark or a dominant feature
thereof and apply such reproduction, counterfeit, copy or colorable imitation to labels, signs, prints,
packages, wrappers, receptacles or advertisements intended to be used in commerce upon or in
connection with the sale, offering for sale, distribution, or advertising of goods or services on or in
connection with which such use is likely to cause confusion, or to cause mistake, or to deceive, shall
be liable in a civil action for infringement by the registrant for the remedies hereinafter set forth:
Provided, That the infringement takes place at the moment any of the acts stated in Subsection
155.1 or this subsection are committed regardless of whether there is actual sale of goods or
services using the infringing material.

The essential element of infringement is that the infringing mark is likely to cause confusion.  In this
47

case, the complaint-affidavit for the Davidoff infringement case alleged confusing similarity between
the cigarette packs of the authentic Davidoff cigarette and the sample Dageta cigarette pack seized
during the search of FMC's premises. Respondents submitted samples of the Davidoff and Dageta
cigarette packs during the preliminary investigation. They noted the following similarities:48

Davidoff (Exhibit 1) Dageta (Exhibit 2)

Octagonal designed pack
Black and red covering
Silver coloring of the tear tape and
printing
"Made in Germany by Reemtsman
under license of Davidoff & CIE SA,
Geneva"
Manufacturing Code imprinted on the
base of the pack
Writing at the back says: "These
carefully selected tobaccos have
been skillfully blended to assure your
pleasure" with the signature of Zino
Davidoff
Octagonal designed pack ·
Black and red covering
Silver coloring of the tear tape and
printing
"Made m Germany under license of
DAGETA & Tobacco LT"
Manufacturing Code imprinted on the
base of the pack
Writing at the back says: "These
specifically selected tobaccos have
been professionally blended to ensure
highest quality" with Chinese letters
underneath the name Dageta

Both Prosecutor Macabulos and Secretary Gonzalez disregarded the foregoing evidence of
respondents and confined their resolutions on the finding that there is an obvious difference between
the names "Davidoff' and "Dageta." Petitioners likewise rely on this finding and did not bother to
refute or explain the alleged similarities in the packaging of Davidoff and Dageta cigarettes. While
we agree that no confusion is created insofar as the names "Davidoff' and "Dageta" are concerned,
we cannot say the same with respect to the cigarettes' packaging. Indeed there might be differences
when the two are compared. We have, in previous cases, noted that defendants in cases of
infringement do not normally copy but only make colorable changes. The most successful form of
copying is to employ enough points of similarity to confuse the public, with enough points of
difference to confuse the courts.49
Similarly, in their Complaint-Affidavit in the JTI infringement case, respondents aver that JTI is the
registered owner of the Mild Seven and Mild

Seven Lights trademarks; and that FMC manufactures cigarettes deceivingly or confusingly similar
to, or almost the same as, the registered marks of JTJ. They asserted that FMC is not authorized to
manufacture, pack, distribute or otherwise deal in products using JTI' s trademarks. Respondents
also submitted authentic Mild Seven and Mild Seven Lights cigarettes and samples of the cigarettes
taken from FMC's premises. 50

When Secretary Gonzalez dismissed respondents' complaint, he made a factual determination that

no Mild Seven and Mild Seven Lights were actually seized from FMC's premises. He cited
Prosecutor Macabulos' observation that the Joint Affidavit of Arrest/Seizure dated August 6, 2004
never mentioned the foregoing cigarettes as among the items seized. The CA, on the other hand,
reversed the dismissal of the complaint and declared that the issue of whether or not there was an
actual seizure of Mild Seven and Mild Seven Lights during the raid is evidentiary in character.

We concur with the CA. The validity and merits of a party's defense or accusation, as well as the
admissibility of testimonies and evidence, are better ventilated during trial proper than at the
preliminary investigation level.  Further, the presence or absence of the elements of the crime is
51

evidentiary in nature and a matter of defense that may be passed upon only after a full-blown trial on
the merits.52

In Metropolitan Bank & Trust Co. v. Gonzales,  we ruled that:

53

x x x [T]he abuse of discretion is patent in the act of the Secretary of Justice holding that the
contractual relationship forged by the parties was a simple loan, for in so doing, the Secretary of
Justice assumed the function of the trial judge of calibrating the evidence on record, done only after
a full-blown trial on the merits. The fact of existence or non-existence of a trust receipt transaction is
evidentiary in nature, the veracity of which can best be passed upon after trial on the merits, for it is
virtually impossible to ascertain the real nature of the transaction involved based solely on the self-
serving allegations contained in the opposing parties' pleadings. Clearly, the Secretary of Justice is
not in a competent position to pass judgment on substantive matters. The bases of a part[ie]'s
accusation and defenses are better ventilated at the trial proper than at the preliminary
investigation.  (Emphasis supplied.)
54

In this case, Secretary Gonzalez found no probable cause against petitioners for infringement of the
JTI trademarks based on his conclusion that no fake Mild Seven and Mild Seven Lights were seized
from FMC's premises during the raid. He already passed upon as authentic and credible the Joint
Affidavit of Arrest/Seizure presented by petitioners which did not list Mild Seven and Mild Seven
Lights cigarettes as among those items seized during the raid. In so doing, Secretary Gonzalez
assumed the function of a trial judge, determining and weighing the evidence submitted by the
parties.

Meanwhile, the Complaint-Affidavit in the JTI infringement case shows that, more likely than not,
petitioners have committed the offense charged. FMC, alleged to be without authority to deal with
JTI products, is claimed to have been manufacturing cigarettes that have almost the same
appearance as JTI' s Mild Seven and Mild Seven Lights cigarettes.

As to the crime of False Designation of Origin, Section 169 of the IP Code provides:

Sec. 169. False Designations of Origin; False Description or Representation. -

169 .1. Any person who, on or in connection with any goods or services, or any container for goods,
uses in commerce any word, term, name, symbol, or device, or any combination thereof, or any false
designation of origin, false or misleading description of fact, or false or misleading representation of
fact, which:

(a) Is likely to cause confusion, or to cause mistake, or to deceive as to the affiliation, connection, or
association of such person with another person, or as to the origin, sponsorship, or approval of his or
her goods, services, or commercial activities by another person; or

(b) In commercial advertising or promotion, misrepresents the nature, characteristics, qualities, or

geographic origin of his or her or another person's goods, services, or commercial activities, shall be
liable to a civil action for damages and injunction provided in Sections 156 and 157 of this Act by any
person who believes that he or she is or is likely to be damaged by such act.

xxx

Respondents alleged in their Complaint-Affidavit that petitioners illegally manufactured and/or stored
cigarettes bearing the "DAGETA" label with an indication that these cigarettes were made in
Germany even if they were actually processed, manufactured and packed in the premises of FMC.
To support their claim, respondents submitted samples and attached a copy of the receipt/inventory
of the items seized during the August 4, 2004 raid. These included cigarettes bearing the infringing
DAGETA trademark and various machineries, receptacles, boxes and other paraphernalia used in
the manufacturing and packing of the infringing products. 55

Petitioners, for their part, disputed respondents' claim and maintained that the items seized from
their warehouse were genuine Dageta and Dageta International cigarettes imported from Germany.
In dismissing the charge,

Secretary Gonzalez ruled that respondents failed to establish the falsity of the claim indicated in the
cigarettes' labels that they were made in Gennany without providing the factual or legal basis for his
conclusion. He also brushed aside the allegations that (1) machines intended for manufacturing
cigarettes and (2) cigarettes' bearing the label "Made in Germany" were found and seized from
FMC's warehouse in the Philippines. To our mind, however, these circumstances are enough to
excite the belief that indeed petitioners were manufacturing cigarettes in their warehouse here in the
Philippines but misrepresenting the cigarettes' origin to be Germany. The CA, therefore, did not err
in reversing the Resolution of the Secretary of Justice.

In fine, we see no compelling reason to disturb the ruling of the CA finding probable cause against
petitioners for trademark infringement and false designation of origin.

WHEREFORE, the petition is DENIED for lack of merit. The Decision dated March 31, 2011 and
Resolution dated July 5, 2011 of the Court of Appeals in CA-G.R. SP No. 94587
are AFFIRMED. The Provincial Prosecutor of Pampanga is thus DIRECTED to file Informations
against petitioners for violations of:

(a) Section 155 (Infringement), in relation to Section 170 of the IP Code in LS. No. OCPSF-04-H-
2047;

(b) Section 169 (False Designation of Origin), in relation to Section 170 of the IP Code in LS. No.
OCPSF-04-H-2048; and
(c) Section 155 (Infringment), in relation to Section 170 of the IP Code in LS. No. OCPSF-04-H-
2226.

SO ORDERED.

FRANCIS H. JARDELEZA
Associate Justice
G.R. No. 194062               June 17, 2013

REPUBLIC GAS CORPORATION, ARNEL U. TY, MARI ANTONETTE N. TY, ORLANDO REYES,
FERRER SUAZO and ALVIN U. TV, Petitioners,
vs.
PETRON CORPORATION, PILIPINAS SHELL PETROLEUM CORPORATION, and SHELL
INTERNATIONAL PETROLEUM COMPANY LIMITED, Respondents.

DECISION

PERALTA, J.:

This resolves the Petition for Review on Certiorari under Rule 45 of the Rules of Court filed by
petitioners seeking the reversal of the Decision1 dated July 2, 2010, and Resolution2 dated October
11, 2010 of the Court of Appeals (CA) in CA-G.R. SP No. 106385.

Stripped of non-essentials, the facts of the case, as summarized by the CA, are as follows:

Petitioners Petron Corporation ("Petron" for brevity) and Pilipinas Shell Petroleum Corporation
("Shell" for brevity) are two of the largest bulk suppliers and producers of LPG in the Philippines.
Petron is the registered owner in the Philippines of the trademarks GASUL and GASUL cylinders
used for its LGP products. It is the sole entity in the Philippines authorized to allow refillers and
distributors to refill, use, sell, and distribute GASUL LPG containers, products and its trademarks.

Pilipinas Shell, on the other hand, is the authorized user in the Philippines of the tradename,
trademarks, symbols or designs of its principal, Shell International Petroleum Company Limited,
including the marks SHELLANE and SHELL device in connection with the production, sale and
distribution of SHELLANE LPGs. It is the only corporation in the Philippines authorized to allow
refillers and distributors to refill, use, sell and distribute SHELLANE LGP containers and products.
Private respondents, on the other hand, are the directors and officers of Republic Gas Corporation
("REGASCO" for brevity), an entity duly licensed to engage in, conduct and carry on, the business of
refilling, buying, selling, distributing and marketing at wholesale and retail of Liquefied Petroleum
Gas ("LPG").

LPG Dealers Associations, such as the Shellane Dealers Association, Inc., Petron Gasul Dealers
Association, Inc. and Totalgaz Dealers Association, received reports that certain entities were
engaged in the unauthorized refilling, sale and distribution of LPG cylinders bearing the registered
tradenames and trademarks of the petitioners. As a consequence, on February 5, 2004, Genesis
Adarlo (hereinafter referred to as Adarlo), on behalf of the aforementioned dealers associations, filed
a letter-complaint in the National Bureau of Investigation ("NBI") regarding the alleged illegal trading
of petroleum products and/or underdelivery or underfilling in the sale of LPG products.

Acting on the said letter-complaint, NBI Senior Agent Marvin E. De Jemil (hereinafter referred to as
"De Jemil") was assigned to verify and confirm the allegations contained in the letter-complaint. An
investigation was thereafter conducted, particularly within the areas of Caloocan, Malabon,
Novaliches and Valenzuela, which showed that several persons and/or establishments, including
REGASCO, were suspected of having violated provisions of Batas Pambansa Blg. 33 (B.P. 33). The
surveillance revealed that REGASCO LPG Refilling Plant in Malabon was engaged in the refilling
and sale of LPG cylinders bearing the registered marks of the petitioners without authority from the
latter. Based on its General Information Sheet filed in the Securities and Exchange Commission,
REGASCO’s members of its Board of Directors are: (1) Arnel U. Ty – President, (2) Marie Antoinette
Ty – Treasurer, (3) Orlando Reyes – Corporate Secretary, (4) Ferrer Suazo and (5) Alvin Ty
(hereinafter referred to collectively as private respondents).

De Jemil, with other NBI operatives, then conducted a test-buy operation on February 19, 2004 with
the former and a confidential asset going undercover. They brought with them four (4) empty LPG
cylinders bearing the trademarks of SHELLANE and GASUL and included the same with the
purchase of J&S, a REGASCO’s regular customer. Inside REGASCO’s refilling plant, they witnessed
that REGASCO’s employees carried the empty LPG cylinders to a refilling station and refilled the
LPG empty cylinders. Money was then given as payment for the refilling of the J&S’s empty
cylinders which included the four LPG cylinders brought in by De Jemil and his companion. Cash
Invoice No. 191391 dated February 19, 2004 was issued as evidence for the consideration paid.

After leaving the premises of REGASCO LPG Refilling Plant in Malabon, De Jemil and the other NBI
operatives proceeded to the NBI headquarters for the proper marking of the LPG cylinders. The LPG
cylinders refilled by REGASCO were likewise found later to be underrefilled.

Thus, on March 5, 2004, De Jemil applied for the issuance of search warrants in the Regional Trial
Court, Branch 24, in the City of Manila against the private respondents and/or occupants of
REGASCO LPG Refilling Plant located at Asucena Street, Longos, Malabon, Metro Manila for
alleged violation of Section 2 (c), in relation to Section 4, of B.P. 33, as amended by PD 1865. In his
sworn affidavit attached to the applications for search warrants, Agent De Jemil alleged as follows:

"x x x.

"4. Respondent’s REGASCO LPG Refilling Plant-Malabon is not one of those entities authorized to
refill LPG cylinders bearing the marks of PSPC, Petron and Total Philippines Corporation. A
Certification dated February 6, 2004 confirming such fact, together with its supporting documents,
are attached as Annex "E" hereof.

6. For several days in the month of February 2004, the other NBI operatives and I conducted
surveillance and investigation on respondents’ REGASCO LPG refilling Plant-Malabon. Our
surveillance and investigation revealed that respondents’ REGASCO LPG Refilling Plant-Malabon is
engaged in the refilling and sale of LPG cylinders bearing the marks of Shell International, PSPC
and Petron.

x x x.

8. The confidential asset and I, together with the other operatives of the NBI, put together a test-buy
operation. On February 19, 2004, I, together with the confidential asset, went undercover and
executed our testbuy operation. Both the confidential assets and I brought with us four (4) empty
LPG cylinders branded as Shellane and Gasul. x x x in order to have a successful test buy, we
decided to "ride-on" our purchases with the purchase of Gasul and Shellane LPG by J & S, one of
REGASCO’s regular customers.

9. We proceeded to the location of respondents’ REGASCO LPG Refilling Plant-Malabon and asked
from an employee of REGASCO inside the refilling plant for refill of the empty LPG cylinders that we
have brought along, together with the LPG cylinders brought by J & S. The REGASCO employee,
with some assistance from other employees, carried the empty LPG cylinders to a refilling station
and we witnessed the actual refilling of our empty LPG cylinders.
10. Since the REGASCO employees were under the impression that we were together with J & S,
they made the necessary refilling of our empty LPG cylinders alongside the LPG cylinders brought
by J & S. When we requested for a receipt, the REGASCO employees naturally counted our LPG
cylinders together with the LPG cylinders brought by J & S for refilling. Hence, the amount stated in
Cash Invoice No. 191391 dated February 19, 2004, equivalent to Sixteen Thousand Two Hundred
Eighty-Six and 40/100 (Php16,286.40), necessarily included the amount for the refilling of our four
(4) empty LPG cylinders. x x x.

11. After we accomplished the purchase of the illegally refilled LPG cylinders from respondents’
REGASCO LPG Refilling Plant-Malabon, we left its premises bringing with us the said LPG
cylinders. Immediately, we proceeded to our headquarters and made the proper markings of the
illegally refilled LPG cylinders purchased from respondents’ REGASCO LPG Refilling Plant-Malabon
by indicating therein where and when they were purchased. Since REGASCO is not an authorized
refiller, the four (4) LPG cylinders illegally refilled by respondents’ REGASCO LPG Refilling Plant-
Malabon, were without any seals, and when weighed, were underrefilled. Photographs of the LPG
cylinders illegally refilled from respondents’ REGASCO LPG Refilling Plant-Malabon are attached as
Annex "G" hereof. x x x."

After conducting a personal examination under oath of Agent De Jemil and his witness, Joel Cruz,
and upon reviewing their sworn affidavits and other attached documents, Judge Antonio M. Eugenio,
Presiding Judge of the RTC, Branch 24, in the City of Manila found probable cause and
correspondingly issued Search Warrants Nos. 04-5049 and 04-5050.

Upon the issuance of the said search warrants, Special Investigator Edgardo C. Kawada and other
NBI operatives immediately proceeded to the REGASCO LPG Refilling Station in Malabon and
served the search warrants on the private respondents. After searching the premises of REGASCO,
they were able to seize several empty and filled Shellane and Gasul cylinders as well as other allied
paraphernalia.

Subsequently, on January 28, 2005, the NBI lodged a complaint in the Department of Justice against
the private respondents for alleged violations of Sections 155 and 168 of Republic Act (RA) No.
8293, otherwise known as the Intellectual Property Code of the Philippines.

On January 15, 2006, Assistant City Prosecutor Armando C. Velasco recommended the dismissal of
the complaint. The prosecutor found that there was no proof introduced by the petitioners that would
show that private respondent REGASCO was engaged in selling petitioner’s products or that it
imitated and reproduced the registered trademarks of the petitioners. He further held that he saw no
deception on the part of REGASCO in the conduct of its business of refilling and marketing LPG.
The Resolution issued by Assistant City Prosecutor Velasco reads as follows in its dispositive
portion:

"WHEREFORE, foregoing considered, the undersigned finds the evidence against the respondents
to be insufficient to form a well-founded belief that they have probably committed violations of
Republic Act No. 9293. The DISMISSAL of this case is hereby respectfully recommended for
insufficiency of evidence."

On appeal, the Secretary of the Department of Justice affirmed the prosecutor’s dismissal of the
complaint in a Resolution dated September 18, 2008, reasoning therein that:

"x x x, the empty Shellane and Gasul LPG cylinders were brought by the NBI agent specifically for
refilling. Refilling the same empty cylinders is by no means an offense in itself – it being the
legitimate business of Regasco to engage in the refilling and marketing of liquefied petroleum gas. In
other words, the empty cylinders were merely filled by the employees of Regasco because they
were brought precisely for that purpose. They did not pass off the goods as those of complainants’
as no other act was done other than to refill them in the normal course of its business.

"In some instances, the empty cylinders were merely swapped by customers for those which are
already filled. In this case, the end-users know fully well that the contents of their cylinders are not
those produced by complainants. And the reason is quite simple – it is an independent refilling
station.

"At any rate, it is settled doctrine that a corporation has a personality separate and distinct from its
stockholders as in the case of herein respondents. To sustain the present allegations, the acts
complained of must be shown to have been committed by respondents in their individual capacity by
clear and convincing evidence. There being none, the complaint must necessarily fail. As it were,
some of the respondents are even gainfully employed in other business pursuits. x x x."3

Dispensing with the filing of a motion for reconsideration, respondents sought recourse to the CA
through a petition for certiorari.

In a Decision dated July 2, 2010, the CA granted respondents’ certiorari petition. The fallo states:

WHEREFORE, in view of the foregoing premises, the petition filed in this case is hereby GRANTED.
The assailed Resolution dated September 18, 2008 of the Department of Justice in I.S. No. 2005-
055 is hereby REVERSED and SET ASIDE.

SO ORDERED.4

Petitioners then filed a motion for reconsideration. However, the same was denied by the CA in a
Resolution dated October 11, 2010.

Accordingly, petitioners filed the instant Petition for Review on Certiorari raising the following issues
for our resolution:

Whether the Petition for Certiorari filed by RESPONDENTS should have been denied outright.

Whether sufficient evidence was presented to prove that the crimes of Trademark Infringement and
Unfair Competition as defined and penalized in Section 155 and Section 168 in relation to Section
170 of Republic Act No. 8293 (The Intellectual Property Code of the Philippines) had been
committed.

Whether probable cause exists to hold INDIVIDUAL PETITIONERS liable for the offense charged.5

Let us discuss the issues in seriatim.

Anent the first issue, the general rule is that a motion for reconsideration is a condition sine qua non
before a certiorari petition may lie, its purpose being to grant an opportunity for the court a quo to
correct any error attributed to it by re-examination of the legal and factual circumstances of the
case.6

However, this rule is not absolute as jurisprudence has laid down several recognized exceptions
permitting a resort to the special civil action for certiorari without first filing a motion for
reconsideration, viz.:
 (a) Where the order is a patent nullity, as where the court a quo has no jurisdiction;

(b) Where the questions raised in the certiorari proceedings have been duly raised and
passed upon by the lower court, or are the same as those raised and passed upon in the
lower court.

(c) Where there is an urgent necessity for the resolution of the question and any further
delay would prejudice the interests of the Government or of the petitioner or the subject
matter of the petition is perishable;

(d) Where, under the circumstances, a motion for reconsideration would be useless;

(e) Where petitioner was deprived of due process and there is extreme urgency for relief;

(f) Where, in a criminal case, relief from an order of arrest is urgent and the granting of such
relief by the trial court is improbable;

(g) Where the proceedings in the lower court are a nullity for lack of due process;

(h) Where the proceeding was ex parte or in which the petitioner had no opportunity to
object; and,

(i) Where the issue raised is one purely of law or public interest is involved.7

In the present case, the filing of a motion for reconsideration may already be dispensed with
considering that the questions raised in this petition are the same as those that have already been
squarely argued and passed upon by the Secretary of Justice in her assailed resolution.

Apropos the second and third issues, the same may be simplified to one core issue: whether
probable cause exists to hold petitioners liable for the crimes of trademark infringement and unfair
competition as defined and penalized under Sections 155 and 168, in relation to Section 170 of
Republic Act (R.A.) No. 8293.

Section 155 of R.A. No. 8293 identifies the acts constituting trademark infringement as follows:

Section 155. Remedies; Infringement. – Any person who shall, without the consent of the owner of
the registered mark:

155.1 Use in commerce any reproduction, counterfeit, copy or colorable imitation of a registered
mark of the same container or a dominant feature thereof in connection with the sale, offering for
sale, distribution, advertising of any goods or services including other preparatory steps necessary to
carry out the sale of any goods or services on or in connection with which such use is likely to cause
confusion, or to cause mistake, or to deceive; or

155.2 Reproduce, counterfeit, copy or colorably imitate a registered mark or a dominant feature
thereof and apply such reproduction, counterfeit, copy or colorable imitation to labels, signs, prints,
packages, wrappers, receptacles or advertisements intended to be used in commerce upon or in
connection with the sale, offering for sale, distribution, or advertising of goods or services on or in
connection with which such use is likely to cause confusion, or to cause mistake, or to deceive, shall
be liable in a civil action for infringement by the registrant for the remedies hereinafter set forth:
Provided, That the infringement takes place at the moment any of the acts stated in Subsection
155.1 or this subsection are committed regardless of whether there is actual sale of goods or
services using the infringing material.8

From the foregoing provision, the Court in a very similar case, made it categorically clear that the
mere unauthorized use of a container bearing a registered trademark in connection with the sale,
distribution or advertising of goods or services which is likely to cause confusion, mistake or
deception among the buyers or consumers can be considered as trademark infringement.9

Here, petitioners have actually committed trademark infringement when they refilled, without the
respondents’ consent, the LPG containers bearing the registered marks of the respondents. As
noted by respondents, petitioners’ acts will inevitably confuse the consuming public, since they have
no way of knowing that the gas contained in the LPG tanks bearing respondents’ marks is in reality
not the latter’s LPG product after the same had been illegally refilled. The public will then be led to
believe that petitioners are authorized refillers and distributors of respondents’ LPG products,
considering that they are accepting empty containers of respondents and refilling them for resale.

As to the charge of unfair competition, Section 168.3, in relation to Section 170, of R.A. No. 8293
describes the acts constituting unfair competition as follows:

Section 168. Unfair Competition, Rights, Regulations and Remedies. x x x.

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;

xxxx

Section 170. Penalties. Independent of the civil and administrative sanctions imposed by law, a
criminal penalty of imprisonment from two (2) years to five (5) years and a fine ranging from Fifty
thousand pesos (₱50,000) to Two hundred thousand pesos (₱200,000), shall be imposed on any
person who is found guilty of committing any of the acts mentioned in Section 155, Section 168 and
Subsection 169.1.

From jurisprudence, unfair competition has been defined as the passing off (or palming off) or
attempting to pass off upon the public of the goods or business of one person as the goods or
business of another with the end and probable effect of deceiving the public.10

Passing off (or palming off) takes place where the defendant, by imitative devices on the general
appearance of the goods, misleads prospective purchasers into buying his merchandise under the
impression that they are buying that of his competitors. Thus, the defendant gives his goods the
general appearance of the goods of his competitor with the intention of deceiving the public that the
goods are those of his competitor.11
In the present case, respondents pertinently observed that by refilling and selling LPG cylinders
bearing their registered marks, petitioners are selling goods by giving them the general appearance
of goods of another manufacturer.

What's more, the CA correctly pointed out that there is a showing that the consumers may be misled
into believing that the LPGs contained in the cylinders bearing the marks "GASUL" and
"SHELLANE" are those goods or products of the petitioners when, in fact, they are not. Obviously,
the mere use of those LPG cylinders bearing the trademarks "GASUL" and "SHELLANE" will give
the LPGs sold by REGASCO the general appearance of the products of the petitioners.

In sum, this Court finds that there is sufficient evidence to warrant the prosecution of petitioners for
trademark infringement and unfair competition, considering that petitioner Republic Gas Corporation,
being a corporation, possesses a personality separate and distinct from the person of its officers,
directors and stockholders.12 Petitioners, being corporate officers and/or directors, through whose
act, default or omission the corporation commits a crime, may themselves be individually held
answerable for the crime.13 Veritably, the CA appropriately pointed out that petitioners, being in direct
control and supervision in the management and conduct of the affairs of the corporation, must have
known or are aware that the corporation is engaged in the act of refilling LPG cylinders bearing the
marks of the respondents without authority or consent from the latter which, under the
circumstances, could probably constitute the crimes of trademark infringement and unfair
competition. The existence of the corporate entity does not shield from prosecution the corporate
agent who knowingly and intentionally caused the corporation to commit a crime. Thus, petitioners
cannot hide behind the cloak of the separate corporate personality of the corporation to escape
criminal liability. A corporate officer cannot protect himself behind a corporation where he is the
actual, present and efficient actor.14

WHEREFORE, premises considered, the petition is hereby DENIED and the Decision dated July 2,
2010 and Resolution dated October 11, 2010 of the Court of Appeals in CA-G.R. SP No. 106385 are
AFFIRMED.

SO ORDERED.

DIOSDADO M. PERALTA
Associate Justice
 [ G.R. Nos. 213365-66, December 10, 2018 ]
ASIA PACIFIC RESOURCES INTERNATIONAL HOLDINGS, LTD., PETITIONER,
VS. PAPERONE, INC., RESPONDENT.

DECISION
GESMUNDO, J.:
Before the Court is a Petition for Review on Certiorari[1] under Rule 45 of the Rules of Court, assailing the November
28, 2013 Decision[2] and the July 9, 2014 Resolution[3] of the Court of Appeals (CA) in CA-G.R. SP Nos. 122288 and
122535. The CA reversed and set aside the November 10, 2011 Decision[4] of the Intellectual Property Office (IPO)
Director General, finding Paperone, Inc. (respondent) liable for unfair competition.

The Facts

The dispute in this case arose from a complaint for unfair competition, trademark infringement, and damages filed
against respondent by Asia Pacific Resources International Holdings, Ltd. (petitioner).

Petitioner is engaged in the production, marketing, and sale of pulp and premium wood free paper.[5] It alleged that it
is the owner of a well-known trademark, PAPER ONE, with Certificate of Registration No. 4-1999-01957 issued on
September 5, 2003.[6] The said trademark enjoyed legal protection in different countries worldwide and enjoyed
goodwill and high reputation because of aggressive marketing and promotion. Petitioner claimed that the use of
PAPERONE in respondent's corporate name without its prior consent and authority was done in bad faith and
designed to unfairly ride on its good name and to take advantage of its goodwill. It was calculated to mislead the
public into believing that respondent's business and/or products were manufactured, licensed or sponsored by
petitioner. It was also alleged that respondent had presumptive, if not actual knowledge, of petitioner's rights to the
trademark PAPER ONE, even prior to respondent's application for registration of its corporate name before the
Securities and Exchange Commission (SEC).[7]

Respondent, on its part, averred that it had no obligation to secure prior consent or authority from petitioner to adopt
and use its corporate name. The Department of Trade and Industry (DTI) and the SEC had allowed it to
use Paperone, Inc., thereby negating any violation on petitioner's alleged prior rights. Respondent was registered
with the SEC, having been organized and existing since March 30, 2001. Its business name was likewise registered
with the DTI. Respondent also denied any awareness of the existence of petitioner and/or the registration of PAPER
ONE, as the latter is a foreign corporation not doing business in the Philippines. While the business of respondent
dealt with paper conversion such as manufacture of table napkins, notebooks and intermediate/collegiate writing
pads, it did not use its corporate name PAPERONE on any of its products. Further, its products had been widely sold
in the Philippines even before petitioner could claim any business transaction in the country. The public could not
have possibly been deceived into believing that any relation or sponsorship existed between the parties, considering
these circumstances.[8]

In its decision,[9] the Bureau of Legal Affairs (BLA) Director, Intellectual Property Office, found respondent liable £or
unfair competition. It ordered respondent to cease and desist from using PAPERONE in its corporate name, and to
pay petitioner P300,000.00, as temperate damages; P200,000.00, as exemplary damages; and P100,000.00, as
attorney's fees. It ruled that petitioner was the first to use PAPER ONE in 1999 which had become a symbol of
goodwill of its paper business. Respondent's use of PAPERONE in its corporate name was to benefit from the
established goodwill of petitioner. There was, however, no trademark infringement since PAPER ONE was registered
in the Philippines only in 2003.[10]

On appeal to the IPO Director General, the BLA decision was affirmed with modification insofar as the increase in the
award of attorney's fees to P300,000.00.[11]

The CA Ruling

Both parties appealed to the CA. Petitioner maintained that it was entitled to actual damages amounting to
P46,032,569.72 due to unfair competition employed by respondent. Respondent claimed that it was not liable for
unfair competition.

In its decision, the CA reversed and set aside the IPO Director General's decision. It held that there was no confusing
similarity in the general appearance of the goods of both parties. Petitioner failed to establish through substantial
evidence that respondent intended to deceive the public or to defraud petitioner. Thus, the essential elements of
unfair competition were not present.[12]
 ISSUES

In the petition before us, petitioner raises various issues for our resolution. However, given the facts of this case, we
find that the only issues to be resolved are:
I.

WHETHER RESPONDENT IS LIABLE FOR UNFAIR COMPETITION, and

II.

WHETHER PETITIONER IS ENTITLED TO ACTUAL DAMAGES.

OUR RULING

The core of the controversy is the adoption of "PAPERONE" in the trade name of respondent, which petitioner claims
it has prior right to, since it was the first to use it as its trademark for its paper products. Petitioner claims that
respondent committed unfair competition by adopting PAPERONE in its trade name. It is noteworthy that the issue of
trademark infringement is not the subject of the appeal before us.

The relevant provisions of the Intellectual Property Code[13] provide:

SECTION 168. Unfair Competition, Rights, Regulation and Remedies. -

168.1. A person who has identified in the mind of the public the goods he manufactures or deals in, his business or
services from those of others, whether or not a registered mark is employed, has a property right in the goodwill of
the said goods, business or services so identified, which will be protected in the same manner as other property
rights.

168.2. Any person who shall employ deception or any other means contrary to good faith by which he shall pass off
the goods manufactured by him or in which he deals, or his business, or services for those of the one having
established such goodwill, or who shall commit any acts calculated to produce said result, shall be guilty of unfair
competition, and shall be subject to an action therefor.

168.3. In particular, and without in any way limiting the scope of protection against unfair competition, the following
shall be deemed guilty of unfair competition:
(a) Any person, who is selling his goods and gives them the general appearance of goods of another manufacturer or
dealer, either as to the goods themselves or in the wrapping of the packages in which they are contained, or the
devices or words thereon, or in any other feature of their appearance, which would be likely to influence purchasers
to believe that the goods offered are those of a manufacturer or dealer, other than the actual manufacturer or dealer,
or who, otherwise, clothes the goods with such appearance as shall deceive the public and defraud another of his
legitimate trade, or any subsequent vendor of such goods or any agent of any vendor engaged in selling such goods
with a like purpose.
The essential elements of an action for unfair competition are: (1) confusing similarity in the general appearance of
the goods, and (2) intent to deceive the public and defraud a competitor.[14] Unfair competition is always a question of
fact.[15] At this point, it bears to stress that findings of fact of the highly technical agency - the IPO - which has the
expertise in this field, should have been given great weight by the Court of Appeals.[16]

a) Confusing similarity

As to the first element, the confusing similarity may or may not result from similarity in the marks, but may result from
other external factors in the packaging or presentation of the goods.[17] Likelihood of confusion of goods or business is
a relative concept, to be determined only according to peculiar circumstances of each case.[18]

The marks under scrutiny in this case are hereby reproduced for easy reference:

Petitioner's:

(See image p. 6)

Respondent's:

(See image p. 6)

It can easily be observed that both have the same spelling and are pronounced the same. Although respondent has a
different logo, it was always used together with its trade name. It bears to emphasize that, initially, respondent's trade
name had separate words that read "Paper One, Inc." under its original Articles of Incorporation. This was later on
revised to make it one word, and now reads "Paperone, Inc."[19]

At first glance, respondent may be correct that there would be no confusion as to the presentation or packaging of its
products since it is not using its corporate name as a trademark of its goods/products. There is an apparent
dissimilarity of presentation of the trademark PAPER ONE and the trade name and logo of Paperone, Inc.
Nevertheless, a careful scrutiny of the mark shows that the use of PAPERONE by respondent would likely cause
confusion or deceive the ordinary purchaser, exercising ordinary care, into believing that the goods bearing the mark
are products of one and the same enterprise.

Relative to the issue on confusion of marks and trade names, jurisprudence has noted two types of confusion, viz.:
(1) confusion of goods (product confusion), where the ordinarily prudent purchaser would be induced to purchase one
product in the belief that he was purchasing the other; and (2) confusion of business (source or origin confusion),
where, although the goods of the parties are different, the product, the mark of which registration is applied for by one
party, is such as might reasonably be assumed to originate with the registrant of an earlier product; and the public
would then be deceived either into that belief or into the belief that there is some connection between the two parties,
though inexistent.[20] Thus, while there is confusion of goods when the products are competing, confusion of business
exists when the products are non-competing but related enough to produce confusion of affiliation.[21]

This case falls under the second type of confusion. Although we see a noticeable difference on how the trade name
of respondent is being used in its products as compared to the trademark of petitioner, there could likely be confusion
as to the origin of the products. Thus, a consumer might conclude that PAPER ONE products are manufactured by or
are products of Paperone, Inc. Additionally, although respondent claims that its products are not the same as
petitioner's, the goods of the parties are obviously related as they are both kinds of paper products.

The BLA Director aptly ruled that "[t]o permit respondent to continue using the same or identical Paperone in its
corporate name although not [used] as label for its paper products, but the same line of business, that of
manufacturing goods such as PAPER PRODUCTS, therefore their coexistence would result in confusion as to source
of goods and diversion of sales to [r]espondent knowing that purchasers are getting products from [petitioner] APRIL
with the use of the corporate name Paper One, Inc. or Paperone, Inc. by herein [r]espondent."[22]

The matter of prior right over PAPERONE, again, is a matter of factual determination; therefore, we give credence to
the findings of the IPO, who has the expertise in this matter, being supported by substantial evidence. The Court has
consistently recognized the specialized functions of the administrative agencies - in this case, the IPO. Berris
Agricultural Co., Inc. v. Abyadang[23] states, thus:
The determination of priority of use of a mark is a question of fact. Adoption of the mark alone does not suffice. One
may make advertisements, issue circulars, distribute price lists on certain goods, but these alone will not inure to the
claim of ownership of the mark until the goods bearing the mark are sold to the public in the market. Accordingly,
receipts, sales invoices, and testimonies of witnesses as customers, or orders of buyers, best prove the actual use of
a mark in trade and commerce during a certain period of time.

xxxx

Verily, the protection of trademarks as intellectual property is intended not only to preserve the goodwill and
reputation of the business established on the goods bearing the mark through actual use over a period of time, but
also to safeguard the public as consumers against confusion on these goods. On this matter of particular concern,
administrative agencies, such as the IPO, by reason of their special knowledge and expertise over matters
falling under their jurisdiction, are in a better position to pass judgment thereon. Thus, their findings of fact
in that regard are generally accorded great respect, if not finality by the courts, as long as they are supported
by substantial evidence, even if such evidence might not be overwhelming or even p1reponderant. It is not
th1e task of the appellate court to weigh once more the evidence submitted before the administrative body
and to substitute its own judgment for that of the administrative agency in respect to sufficiency of evidence.
[24]
 (Emphasis supplied)
The BLA Director found, as affirmed by the IPO Director General, that it was petitioner who has priority rights over
PAPER ONE, thus:
One essential factor that has led this Office to tilt the scales of justice in favor of Complainant is the latter's
establishment of prior use of the word PaperOne for paper products in the Philippines. Records will show that there
was prior use and adoption by Complainant of the word "PaperOne." PaperOne was filed for trademark registration
on 22 March 1999 (Exhibit "D", Complainant) in the name of Complainant Asia Pacific Resources International
Holdings, Ltd. and matured into registration on 10 February 2003. Respondent's corporate or trade name is Paper
One, Inc. which existed and was duly registered with the Securities and Exchange Commission on 31 March 2001
(Exhibit "11", Respondent). If anyone files a suit and can prove priority of adoption, he can assert his right to the
exclusive use of a corporate name with freedom from infringement by similarity (Philips Export B.V. et al. vs. CA, G.R.
No. 96161). Respondent was incorporated in March 2001 by virtue of SEC registration No. A200104788 (Exhibit "11",
Complainant) and was registered two (2) years thereafter as business name with the Department of Trade and
Industry under DTI Business Name Registration No. 00068456 (Exhibit "13", Respondent). Complainant Asia Pacific
Resources International Holdings, Ltd., APRIL for brevity, presented evidence of its use of the label PaperOne on
paper products in the Philippines earlier than the date of its trademark application in 1999 when its marketing and
promotion agent JND International Corporation ("JND" for brevity) licensed one of its clients, National Paper Products
& Printing Corporation ("NAPPCO" for brevity) to import, sell and distribute Complainant's APRIL paper products in
1998 (par. 3, Exhibit "AA", Complainant). To support this declaration are documents evidencing transactions of
NAPPCO with Complainant APRIL with the earliest documented transaction on 22 January 1999 (Exhibit "G",
Complainant) bearing [I]nvoice [N]o. LCA9812133.

[The] fact of earlier use was not disputed by the Respondent. In point of fact, Respondent already knew of
Complainant's APRIL existence prior to Respondent's incorporation as Paper One, Inc. in 2001. Most of the
incorporators of National Paper Products & Printing Corporation or NAPPCO for brevity (Exhibits "H" and "H-
A" to "H-H", Complainant) which in late 1990s transacted with Complainant APRIL through Invoice No.
LCA9812133 dated 22 January 1999, the earliest invoice noted (Exhibit "G", Complainant) are likewise
incorporators of Paper One, Inc. (Exhibit "11", Respondent) namely Tan Tian Siong, Chong Ping Tat, Thelma
J. Uy, Conchita Francisco, Sy Siong Sun, to name a few. Also, NAPPCO, through Complainant's marketing
and promotion agent JND International Corporation, or JND for brevity (Exhibit "AA", Complainant)
expressed interest in a letter dated 19 January 2000 to work with JND and APRIL, as its exclusive distributor
and we quote "to become your exclusive distributor of 'Paper One' Multi Purpose Copy Paper" (Exhibit "AA-
1-d", Complainant). Worth mentioning at this point is the jurisprudence pronounced in the case of Converse Rubber
Corporation vs. Universal Rubber Products, Inc. and Tiburcio S. Evalle (G.R. No. L-27906, Jan. 18, 1987) where the
court said:
Knowing therefore that the word "CONVERSE" belongs to and is being used by petitioner, and is in fact the dominant
word in petitioner's corporate name, respondent has no right to appropriate the same for use on its products which
are similar to those being produced by petitioner.[25] (Emphasis supplied)
b) intent to deceive the public and defraud a competitor

The element of intent to deceive and to defraud may be inferred from the similarity of the appearance of the
goods[26] as offered for sale to the public.[27] Contrary to the ruling of the CA, actual fraudulent intent need not be
shown.[28] Factual circumstances were established showing that respondent adopted PAPERONE in its trade name
even with the prior knowledge of the existence of PAPER ONE as a trademark of petitioner. As in all other cases of
colorable imitations, the unanswered riddle is why, of the millions of terms and combinations of letters available,
respondent had to choose those so closely similar to another's trademark if there was no intent to take advantage of
the goodwill generated by the other mark.[29]

With regard to the issue on damages, we likewise agree with the IPO that the actual damages prayed for cannot be
granted because petitioner has not presented sufficient evidence to prove the amount claimed and the basis to
measure actual damages.

WHEREFORE, the petition is GRANTED. The November 28, 2013 Decision and the July 9, 2014 Resolution of the:
Court of Appeals in CA G.R. SP Nos. 122288 and 122535 are REVERSED and SET ASIDE. Accordingly, the
November 10, 2011 Decision of the Intellectual Property Office Director General finding respondent liable for unfair
competition is hereby REINSTATED.

SO ORDERED.
G.R. No. 158589             June 27, 2006

PHILIP MORRIS, INC., BENSON & HEDGES (CANADA), INC., and FABRIQUES DE TABAC
REUNIES, S.A., (now known as PHILIP MORRIS PRODUCTS S.A.), Petitioners,
vs.
FORTUNE TOBACCO CORPORATION, Respondent.

DECISION

GARCIA, J.:

Via this petition for review under Rule 45 of the Rules of Court, herein petitioners Philip Morris, Inc.,
Benson & Hedges (Canada) Inc., and Fabriques de Tabac Reunies, S.A. (now Philip Morris
Products S.A.) seek the reversal and setting aside of the following issuances of the Court of Appeals
(CA) in CA-G.R. CV No. 66619, to wit:

1. Decision dated January 21, 20031 affirming an earlier decision of the Regional Trial Court
of Pasig City, Branch 166, in its Civil Case No. 47374, which dismissed the complaint for
trademark infringement and damages thereat commenced by the petitioners against
respondent Fortune Tobacco Corporation; and

2. Resolution dated May 30, 20032 denying petitioners’ motion for reconsideration.

Petitioner Philip Morris, Inc., a corporation organized under the laws of the State of Virginia, United
States of America, is, per Certificate of Registration No. 18723 issued on April 26, 1973 by the
Philippine Patents Office (PPO), the registered owner of the trademark "MARK VII" for cigarettes.
Similarly, petitioner Benson & Hedges (Canada), Inc., a subsidiary of Philip Morris, Inc., is the
registered owner of the trademark "MARK TEN" for cigarettes as evidenced by PPO Certificate of
Registration No. 11147. And as can be seen in Trademark Certificate of Registration No. 19053,
another subsidiary of Philip Morris, Inc., the Swiss company Fabriques de Tabac Reunies, S.A., is
the assignee of the trademark "LARK," which was originally registered in 1964 by Ligget and Myers
Tobacco Company. On the other hand, respondent Fortune Tobacco Corporation, a company
organized in the Philippines, manufactures and sells cigarettes using the trademark "MARK."

The legal dispute between the parties started when the herein petitioners, on the claim that an
infringement of their respective trademarks had been committed, filed, on August 18, 1982, a
Complaint for Infringement of Trademark and Damages against respondent Fortune Tobacco
Corporation, docketed as Civil Case No. 47374 of the Regional Trial Court of Pasig, Branch 166.

The decision under review summarized what happened next, as follows:

In the Complaint xxx with prayer for the issuance of a preliminary injunction, [petitioners] alleged that
they are foreign corporations not doing business in the Philippines and are suing on an isolated
transaction. xxx they averred that the countries in which they are domiciled grant xxx to corporate or
juristic persons of the Philippines the privilege to bring action for infringement, xxx without need of a
license to do business in those countries. [Petitioners] likewise manifested [being registered owners
of the trademark "MARK VII" and "MARK TEN" for cigarettes as evidenced by the corresponding
certificates of registration and an applicant for the registration of the trademark "LARK MILDS"]. xxx.
[Petitioners] claimed that they have registered the aforementioned trademarks in their respective
countries of origin and that, by virtue of the long and extensive usage of the same, these trademarks
have already gained international fame and acceptance. Imputing bad faith on the part of the
[respondent], petitioners claimed that the [respondent], without any previous consent from any of the
[petitioners], manufactured and sold cigarettes bearing the identical and/or confusingly similar
trademark "MARK" xxx Accordingly, they argued that [respondent’s] use of the trademark "MARK" in
its cigarette products have caused and is likely to cause confusion or mistake, or would deceive
purchasers and the public in general into buying these products under the impression and mistaken
belief that they are buying [petitioners’] products.

Invoking the provisions of the Paris Convention for the Protection of Industrial and Intellectual
Property (Paris Convention, for brevity), to which the Philippines is a signatory xxx, [petitioners]
pointed out that upon the request of an interested party, a country of the Union may prohibit the use
of a trademark which constitutes a reproduction, imitation, or translation of a mark already belonging
to a person entitled to the benefits of the said Convention. They likewise argued that, in accordance
with Section 21-A in relation to Section 23 of Republic Act 166, as amended, they are entitled to
relief in the form of damages xxx [and] the issuance of a writ of preliminary injunction which should
be made permanent to enjoin perpetually the [respondent] from violating [petitioners’] right to the
exclusive use of their aforementioned trademarks.

[Respondent] filed its Answer xxx denying [petitioners’] material allegations and xxx averred [among
other things] xxx that "MARK" is a common word, which cannot particularly identify a product to be
the product of the [petitioners] xxx

xxx
lawphil.net
xxx xxx.

Meanwhile, after the [respondent] filed its Opposition (Records, Vo. I, p. 26), the matter of the
[petitioners’] prayer for the issuance of a writ of preliminary injunction was negatively resolved by the
court in an Order xxx dated March 28, 1973. [The incidental issue of the propriety of an injunction
would eventually be elevated to the CA and would finally be resolved by the Supreme Court in its
Decision dated July 16, 1993 in G.R. No. 91332]. xxx.

xxx xxx xxx

After the termination of the trial on the merits xxx trial court rendered its Decision xxx dated
November 3, 1999 dismissing the complaint and counterclaim after making a finding that the
[respondent] did not commit trademark infringement against the [petitioners]. Resolving first the
issue of whether or not [petitioners] have capacity to institute the instant action, the trial court opined
that [petitioners’] failure to present evidence to support their allegation that their respective countries
indeed grant Philippine corporations reciprocal or similar privileges by law xxx justifies the dismissal
of the complaint xxx. It added that the testimonies of [petitioners’] witnesses xxx essentially declared
that [petitioners] are in fact doing business in the Philippines, but [petitioners] failed to establish that
they are doing so in accordance with the legal requirement of first securing a license. Hence, the
court declared that [petitioners] are barred from maintaining any action in Philippine courts pursuant
to Section 133 of the Corporation Code.

The issue of whether or not there was infringement of the [petitioners’] trademarks by the
[respondent] was likewise answered xxx in the negative. It expounded that "in order for a name,
symbol or device to constitute a trademark, it must, either by itself or by association, point distinctly
to the origin or ownership of the article to which it is applied and be of such nature as to permit an
exclusive appropriation by one person". Applying such principle to the instant case, the trial court
was of the opinion that the words "MARK", "TEN", "LARK" and the Roman Numerals "VII", either
alone or in combination of each other do not by themselves or by association point distinctly to the
origin or ownership of the cigarettes to which they refer, such that the buying public could not be
deceived into believing that [respondent’s] "MARK" cigarettes originated either from the USA,
Canada, or Switzerland.

Emphasizing that the test in an infringement case is the likelihood of confusion or deception, the trial
court stated that the general rule is that an infringement exists if the resemblance is so close that it
deceives or is likely to deceive a customer exercising ordinary caution in his dealings and induces
him to purchase the goods of one manufacturer in the belief that they are those of another. xxx. The
trial court ruled that the [petitioners] failed to pass these tests as it neither presented witnesses or
purchasers attesting that they have bought [respondent’s] product believing that they bought
[petitioners’] "MARK VII", "MARK TEN" or "LARK", and have also failed to introduce in evidence a
specific magazine or periodical circulated locally, which promotes and popularizes their products in
the Philippines. It, moreover, elucidated that the words consisting of the trademarks allegedly
infringed by [respondent] failed to show that they have acquired a secondary meaning as to identify
them as [petitioners’] products. Hence, the court ruled that the [petitioners] cannot avail themselves
of the doctrine of secondary meaning.

As to the issue of damages, the trial court deemed it just not to award any to either party stating that,
since the [petitioners] filed the action in the belief that they were aggrieved by what they perceived to
be an infringement of their trademark, no wrongful act or omission can be attributed to them.
xxx.3 (Words in brackets supplied)

Maintaining to have the standing to sue in the local forum and that respondent has committed
trademark infringement, petitioners went on appeal to the CA whereat their appellate recourse was
docketed as CA-G.R. CV No. 66619.

Eventually, the CA, in its Decision dated January 21, 2003, while ruling for petitioners on the matter
of their legal capacity to sue in this country for trademark infringement, nevertheless affirmed the trial
court’s decision on the underlying issue of respondent’s liability for infringement as it found that:

xxx the appellants’ [petitioners’] trademarks, i.e., "MARK VII", "MARK TEN" and "LARK", do not
qualify as well-known marks entitled to protection even without the benefit of actual use in the local
market and that the similarities in the trademarks in question are insufficient as to cause deception
or confusion tantamount to infringement. Consequently, as regards the third issue, there is likewise
no basis for the award of damages prayed for by the appellants herein.4 (Word in bracket supplied)

With their motion for reconsideration having been denied by the CA in its equally challenged
Resolution of May 30, 2003, petitioners are now with this Court via this petition for review essentially
raising the following issues: (1) whether or not petitioners, as Philippine registrants of trademarks,
are entitled to enforce trademark rights in this country; and (2) whether or not respondent has
committed trademark infringement against petitioners by its use of the mark "MARK" for its
cigarettes, hence liable for damages.

In its Comment,5 respondent, aside from asserting the correctness of the CA’s finding on its liability
for trademark infringement and damages, also puts in issue the propriety of the petition as it
allegedly raises questions of fact.

The petition is bereft of merit.

Dealing first with the procedural matter interposed by respondent, we find that the petition raises
both questions of fact and law contrary to the prescription against raising factual questions in a
petition for review on certiorari filed before the Court. A question of law exists when the doubt or
difference arises as to what the law is on a certain state of facts; there is a question of fact when the
doubt or difference arises as to the truth or falsity of alleged facts.6

Indeed, the Court is not the proper venue to consider factual issues as it is not a trier of
facts.7 Unless the factual findings of the appellate court are mistaken, absurd, speculative,
conflicting, tainted with grave abuse of discretion, or contrary to the findings culled by the court of
origin,8 we will not disturb them.

It is petitioners’ posture, however, that their contentions should

be treated as purely legal since they are assailing erroneous conclusions deduced from a set of
undisputed facts.

Concededly, when the facts are undisputed, the question of whether or not the conclusion drawn
therefrom by the CA is correct is one of law.9 But, even if we consider and accept as pure questions
of law the issues raised in this petition, still, the Court is not inclined to disturb the conclusions
reached by the appellate court, the established rule being that all doubts shall be resolved in favor of
the correctness of such conclusions.10

Be that as it may, we shall deal with the issues tendered and determine whether the CA ruled in
accordance with law and established jurisprudence in arriving at its assailed decision.

A "trademark" is any distinctive word, name, symbol, emblem, sign, or device, or any combination
thereof adopted and used by a manufacturer or merchant on his goods to identify and distinguish
them from those manufactured, sold, or dealt in by others.11 Inarguably, a trademark deserves
protection. For, as Mr. Justice Frankfurter observed in Mishawaka Mfg. Co. v. Kresge Co.:12

The protection of trademarks is the law’s recognition of the psychological function of symbols. If it is
true that we live by symbols, it is no less true that we purchase goods by them. A trade-mark is a
merchandising short-cut which induces a purchaser to select what he wants, or what he has been
led to believe what he wants. The owner of a mark exploits this human propensity by making every
effort to impregnate the atmosphere of the market with the drawing power of a congenial symbol.
Whatever the means employed, the aim is the same - to convey through the mark, in the minds of
potential customers, the desirability of the commodity upon which it appears. Once this is attained,
the trade-mark owner has something of value. If another poaches upon the commercial magnetism
of the symbol he has created, the owner can obtain legal redress.

It is thus understandable for petitioners to invoke in this recourse their entitlement to enforce
trademark rights in this country, specifically, the right to sue for trademark infringement in Philippine
courts and be accorded protection against unauthorized use of their Philippine-registered
trademarks.

In support of their contention respecting their right of action, petitioners assert that, as corporate
nationals of member-countries of the Paris Union, they can sue before Philippine courts for
infringement of trademarks, or for unfair competition, without need of obtaining registration or a
license to do business in the Philippines, and without necessity of actually doing business in the
Philippines. To petitioners, these grievance right and mechanism are accorded not only by Section
21-A of Republic Act (R.A.) No. 166, as amended, or the Trademark Law, but also by Article 2 of the
Paris Convention for the Protection of Industrial Property, otherwise known as the Paris Convention.
In any event, petitioners point out that there is actual use of their trademarks in the Philippines as
evidenced by the certificates of registration of their trademarks. The marks "MARK TEN" and "LARK"
were registered on the basis of actual use in accordance with Sections 2-A13 and 5(a)14 of R.A. No.
166, as amended, providing for a 2-month pre-registration use in local commerce and trade while the
registration of "MARK VII" was on the basis of registration in the foreign country of origin pursuant to
Section 37 of the same law wherein it is explicitly provided that prior use in commerce need not be
alleged.15

Besides, petitioners argue that their not doing business in the Philippines, if that be the case, does
not mean that cigarettes bearing their trademarks are not available and sold locally. Citing Converse
Rubber Corporation v. Universal Rubber Products, Inc.,16 petitioners state that such availability and
sale may be effected through the acts of importers and distributors.

Finally, petitioners would press on their entitlement to protection even in the absence of actual use of
trademarks in the country in view of the Philippines’ adherence to the Trade Related Aspects of
Intellectual Property Rights or the TRIPS Agreement and the enactment of R.A. No. 8293, or the
Intellectual Property Code (hereinafter the "IP Code"), both of which provide that the fame of a
trademark may be acquired through promotion or advertising with no explicit requirement of actual
use in local trade or commerce.

Before discussing petitioners’ claimed entitlement to enforce trademark rights in the Philippines, it
must be emphasized that their standing to sue in Philippine courts had been recognized, and rightly
so, by the CA. It ought to be pointed out, however, that the appellate court qualified its holding with a
statement, following G.R. No. 91332, entitled Philip Morris, Inc., et al. v. The Court of Appeals and
Fortune Tobacco Corporation,17 that such right to sue does not necessarily mean protection of their
registered marks in the absence of actual use in the Philippines.

Thus clarified, what petitioners now harp about is their entitlement to protection on the strength of
registration of their trademarks in the Philippines.

As we ruled in G.R. No. 91332,18 supra, so it must be here.

Admittedly, the registration of a trademark gives the registrant, such as petitioners, advantages
denied non-registrants or ordinary users, like respondent. But while petitioners enjoy the statutory
presumptions arising from such registration,19 i.e., as to the validity of the registration, ownership and
the exclusive right to use the registered marks, they may not successfully sue on the basis alone of
their respective certificates of registration of trademarks. For, petitioners are still foreign
corporations. As such, they ought, as a condition to availment of the rights and privileges vis-à-vis
their trademarks in this country, to show proof that, on top of Philippine registration, their country
grants substantially similar rights and privileges to Filipino citizens pursuant to Section 21-A20 of R.A.
No. 166.

In Leviton Industries v. Salvador,21 the Court further held that the aforementioned reciprocity
requirement is a condition sine qua non to filing a suit by a foreign corporation which, unless alleged
in the complaint, would justify dismissal thereof, a mere allegation that the suit is being pursued
under Section 21-A of R.A. No. 166 not being sufficient. In a subsequent case,22 however, the Court
held that where the complainant is a national of a Paris Convention- adhering country, its allegation
that it is suing under said Section 21-A would suffice, because the reciprocal agreement between the
two countries is embodied and supplied by the Paris Convention which, being considered part of
Philippine municipal laws, can be taken judicial notice of in infringement suits.23
As well, the fact that their respective home countries, namely, the United States, Switzerland and
Canada, are, together with the Philippines, members of the Paris Union does not automatically
entitle petitioners to the protection of their trademarks in this country absent actual use of the marks
in local commerce and trade.

True, the Philippines’ adherence to the Paris Convention24 effectively obligates the country to honor
and enforce its provisions25 as regards the protection of industrial property of foreign nationals in this
country. However, any protection accorded has to be made subject to the limitations of Philippine
laws.26 Hence, despite Article 2 of the Paris Convention which substantially provides that (1)
nationals of member-countries shall have in this country rights specially provided by the Convention
as are consistent with Philippine laws, and enjoy the privileges that Philippine laws now grant or may
hereafter grant to its nationals, and (2) while no domicile requirement in the country where protection
is claimed shall be required of persons entitled to the benefits of the Union for the enjoyment of any
industrial property rights,27 foreign nationals must still observe and comply with the conditions
imposed by Philippine law on its nationals.

Considering that R.A. No. 166, as amended, specifically Sections 228 and 2-A29 thereof, mandates
actual use of the marks and/or emblems in local commerce and trade before they may be registered
and ownership thereof acquired, the petitioners cannot, therefore, dispense with the element of
actual use. Their being nationals of member-countries of the Paris Union does not alter the legal
situation.

In Emerald Garment Mfg. Corporation v. Court of Appeals,30 the Court reiterated its rulings in Sterling
Products International, Inc. v. Farbenfabriken Bayer Aktiengesellschaft,31 Kabushi Kaisha Isetan v.
Intermediate Appellate Court,32 and Philip Morris v. Court of Appeals and Fortune Tobacco
Corporation33 on the importance of actual commercial use of a trademark in the Philippines
notwithstanding the Paris Convention:

The provisions of the 1965 Paris Convention … relied upon by private respondent and Sec. 21-A of
the Trademark Law were sufficiently expounded upon and qualified in the recent case of Philip
Morris, Inc., et. al. vs. Court of Appeals:

xxx xxx xxx

Following universal acquiescence and comity, our municipal law on trademarks regarding the
requirements of actual use in the Philippines must subordinate an international agreement inasmuch
as the apparent clash is being decided by a municipal tribunal. Xxx. Withal, the fact that international
law has been made part of the law of the land does not by any means imply the primacy of
international law over national law in the municipal sphere. Under the doctrine of incorporation as
applied in most countries, rules of International Law are given a standing equal, not superior, to
national legislative enactments.

xxx xxx xxx

In other words, (a foreign corporation) may have the capacity to sue for infringement … but the
question of whether they have an exclusive right over their symbol as to justify issuance of the
controversial writ will depend on actual use of their trademarks in the Philippines in line with Sections
2 and 2-A of the same law. It is thus incongruous for petitioners to claim that when a foreign
corporation not licensed to do business in the Philippines files a complaint for infringement, the entity
need not be actually using its trademark in commerce in the Philippines. Such a foreign corporation
may have the personality to file a suit for infringement but it may not necessarily be entitled to
protection due to absence of actual use of the emblem in the local market.
Contrary to what petitioners suggest, the registration of trademark cannot be deemed conclusive as
to the actual use of such trademark in local commerce. As it were, registration does not confer upon
the registrant an absolute right to the registered mark. The certificate of registration merely
constitutes prima facie evidence that the registrant is the owner of the registered mark. Evidence of
non-usage of the mark rebuts the presumption of trademark ownership,34 as what happened here
when petitioners no less admitted not doing business in this country.35

Most importantly, we stress that registration in the Philippines of trademarks does not ipso facto
convey an absolute right or exclusive ownership thereof. To borrow from Shangri-La International
Hotel Management, Ltd. v. Development Group of Companies, Inc.36 trademark is a creation of use
and, therefore, actual use is a pre-requisite to exclusive ownership; registration is only an
administrative confirmation of the existence of the right of ownership of the mark, but does not
perfect such right; actual use thereof is the perfecting ingredient.37

Petitioners’ reliance on Converse Rubber Corporation38 is quite misplaced, that case being cast in a
different factual milieu. There, we ruled that a foreign owner of a Philippine trademark, albeit not
licensed to do, and not so engaged in, business in the Philippines, may actually earn reputation or
goodwill for its goods in the country. But unlike in the instant case, evidence of actual sales of
Converse rubber shoes, such as sales invoices, receipts and the testimony of a legitimate trader,
was presented in Converse.

This Court also finds the IP Code and the TRIPS Agreement to be inapplicable, the infringement
complaint herein having been filed in August 1982 and tried under the aegis of R.A. No. 166, as
amended. The IP Code, however, took effect only on January 1, 1998 without a provision as to its
retroactivity.39 In the same vein, the TRIPS Agreement was inexistent when the suit for infringement
was filed, the Philippines having adhered thereto only on December 16, 1994.

With the foregoing perspective, it may be stated right off that the registration of a trademark
unaccompanied by actual use thereof in the country accords the registrant only the standing to sue
for infringement in Philippine courts. Entitlement to protection of such trademark in the country is
entirely a different matter.

This brings us to the principal issue of infringement.

Section 22 of R.A. No. 166, as amended, defines what constitutes trademark infringement, as
follows:

Sec. 22. Infringement, what constitutes. – Any person who shall use, without the consent of the
registrant, any reproduction, counterfeit, copy or colorable imitation of any registered mark or
tradename in connection with the sale, offering for sale, or advertising of any goods, business or
services on or in connection with which such use is likely to cause confusion or mistake or to
deceive purchasers or others as to the source or origin of such goods or services, or identity of such
business; or reproduce, counterfeit, copy of color ably imitate any such mark or tradename and
apply such reproduction, counterfeit, copy or colorable imitation to labels, signs, prints, packages,
wrappers, receptacles or advertisements intended to be used upon or in connection with such
goods, business, or services, shall be liable to a civil action by the registrant for any or all of the
remedies herein provided.

Petitioners would insist on their thesis of infringement since respondent’s mark "MARK" for
cigarettes is confusingly or deceptively similar with their duly registered "MARK VII," "MARK TEN"
and "LARK" marks likewise for cigarettes. To them, the word "MARK" would likely cause confusion in
the trade, or deceive purchasers, particularly as to the source or origin of respondent’s cigarettes.
The "likelihood of confusion" is the gravamen of trademark infringement.40 But likelihood of confusion
is a relative concept, the particular, and sometimes peculiar, circumstances of each case being
determinative of its existence. Thus, in trademark infringement cases, more than in other kinds of
litigation, precedents must be evaluated in the light of each particular case.41

In determining similarity and likelihood of confusion, jurisprudence has developed two tests: the
dominancy test and the holistic test.42 The dominancy test43 sets sight on the similarity of the
prevalent features of the competing trademarks that might cause confusion and deception, thus
constitutes infringement. Under this norm, the question at issue turns on whether the use of the
marks involved would be likely to cause confusion or mistake in the mind of the public or deceive
purchasers.44

In contrast, the holistic test45 entails a consideration of the entirety of the marks as applied to the
products, including the labels and packaging, in determining confusing similarity.

Upon consideration of the foregoing in the light of the peculiarity of this case, we rule against the
likelihood of confusion resulting in infringement arising from the respondent’s use of the trademark
"MARK" for its particular cigarette product.

For one, as rightly concluded by the CA after comparing the trademarks involved in their entirety as
they appear on the products,46 the striking dissimilarities are significant enough to warn any
purchaser that one is different from the other. Indeed, although the perceived offending word
"MARK" is itself prominent in petitioners’ trademarks "MARK VII" and "MARK TEN," the entire
marking system should be considered as a whole and not dissected, because a discerning eye
would focus not only on the predominant word but also on the other features appearing in the labels.
Only then would such discerning observer draw his conclusion whether one mark would be
confusingly similar to the other and whether or not sufficient differences existed between the marks.47

This said, the CA then, in finding that respondent’s goods cannot be mistaken as any of the three
cigarette brands of the petitioners, correctly relied on the holistic test.

But, even if the dominancy test were to be used, as urged by the petitioners, but bearing in mind that
a trademark serves as a tool to point out distinctly the origin or ownership of the goods to which it is
affixed,48 the likelihood of confusion tantamount to infringement appears to be farfetched. The reason
for the origin and/or ownership angle is that unless the words or devices do so point out the origin or
ownership, the person who first adopted them cannot be injured by any appropriation or imitation of
them by others, nor can the public be deceived.49

Since the word "MARK," be it alone or in combination with the word "TEN" and the Roman numeral
"VII," does not point to the origin or ownership of the cigarettes to which they apply, the local buying
public could not possibly be confused or deceived that respondent’s "MARK" is the product of
petitioners and/or originated from the U.S.A., Canada or Switzerland. And lest it be overlooked, no
actual commercial use of petitioners’ marks in local commerce was proven. There can thus be no
occasion for the public in this country, unfamiliar in the first place with petitioners’ marks, to be
confused.

For another, a comparison of the trademarks as they appear on the goods is just one of the
appreciable circumstances in determining likelihood of confusion. Del Monte Corp. v. CA50 dealt with
another, where we instructed to give due regard to the "ordinary purchaser," thus:

The question is not whether the two articles are distinguishable by their label when set side by side
but whether the general confusion made by the article upon the eye of the casual purchaser who is
unsuspicious and off his guard, is such as to likely result in his confounding it with the original. As
observed in several cases, the general impression of the ordinary purchaser, buying under the
normally prevalent conditions in trade and giving the attention such purchasers usually give in
buying that class of goods is the touchstone.

When we spoke of an "ordinary purchaser," the reference was not to the "completely unwary
customer" but to the "ordinarily intelligent buyer" considering the type of product involved.51

It cannot be over-emphasized that the products involved are addicting cigarettes purchased mainly
by those who are already predisposed to a certain brand. Accordingly, the ordinary buyer thereof
would be all too familiar with his brand and discriminating as well. We, thus, concur with the CA
when it held, citing a definition found in Dy Buncio v. Tan Tiao Bok,52 that the "ordinary purchaser" in
this case means "one accustomed to buy, and therefore to some extent familiar with, the goods in
question."

Pressing on with their contention respecting the commission of trademark infringement, petitioners
finally point to Section 22 of R.A. No. 166, as amended. As argued, actual use of trademarks in local
commerce is, under said section, not a requisite before an aggrieved trademark owner can restrain
the use of his trademark upon goods manufactured or dealt in by another, it being sufficient that he
had registered the trademark or trade-name with the IP Office. In fine, petitioners submit that
respondent is liable for infringement, having manufactured and sold cigarettes with the trademark
"MARK" which, as it were, are identical and/or confusingly similar with their duly registered
trademarks "MARK VII," "MARK TEN" and "LARK".

This Court is not persuaded.

In Mighty Corporation v. E & J Gallo Winery,53 the Court held that the following constitute the
elements of trademark infringement in accordance not only with Section 22 of R.A. No. 166, as
amended, but also Sections 2, 2-A, 9-A54 and 20 thereof:

(a) a trademark actually used in commerce in the Philippines and registered in the principal
register of the Philippine Patent Office,

(b) is used by another person in connection with the sale, offering for sale, or advertising of
any goods, business or services or in connection with which such use is likely to cause
confusion or mistake or to deceive purchasers or others as to the source or origin of such
goods or services, or identity of such business; or such trademark is reproduced,
counterfeited, copied or colorably imitated by another person and such reproduction,
counterfeit, copy or colorable imitation is applied to labels, signs, prints, packages, wrappers,
receptacles or advertisements intended to be used upon or in connection with such goods,
business or services as to likely cause confusion or mistake or to deceive purchasers,

(c) the trademark is used for identical or similar goods, and

(d) such act is done without the consent of the trademark registrant or assignee. lawphil.net

As already found herein, while petitioners have registered the trademarks "MARK VII," "MARK TEN"
and "LARK" for cigarettes in the Philippines, prior actual commercial use thereof had not been
proven. In fact, petitioners’ judicial admission of not doing business in this country effectively belies
any pretension to the contrary.
Likewise, we note that petitioners even failed to support their claim that their respective marks are
well-known and/or have acquired goodwill in the Philippines so as to be entitled to protection even
without actual use in this country in accordance with Article 6bis55 of the Paris Convention. As
correctly found by the CA, affirming that of the trial court:

xxx the records are bereft of evidence to establish that the appellants’ [petitioners’] products are
indeed well-known in the Philippines, either through actual sale of the product or through different
forms of advertising. This finding is supported by the fact that appellants admit in their Complaint that
they are not doing business in the Philippines, hence, admitting that their products are not being sold
in the local market. We likewise see no cogent reason to disturb the trial court’s finding that the
appellants failed to establish that their products are widely known by local purchasers as "(n)o
specific magazine or periodical published in the Philippines, or in other countries but circulated
locally" have been presented by the appellants during trial. The appellants also were not able to
show the length of time or the extent of the promotion or advertisement made to popularize their
products in the Philippines.56

Last, but not least, we must reiterate that the issue of trademark infringement is factual, with both the
trial and appellate courts having peremptorily found allegations of infringement on the part of
respondent to be without basis. As we said time and time again, factual determinations of the trial
court, concurred in by the CA, are final and binding on this Court.57

For lack of convincing proof on the part of the petitioners of actual use of their registered trademarks
prior to respondent’s use of its mark and for petitioners’ failure to demonstrate confusing similarity
between said trademarks, the dismissal of their basic complaint for infringement and the concomitant
plea for damages must be affirmed. The law, the surrounding circumstances and the equities of the
situation call for this disposition.

WHEREFORE, the petition is hereby DENIED. Accordingly, the assailed decision and resolution of
the Court of Appeals are AFFIRMED.

Costs against the petitioners.

SO ORDERED.