PROLINE SPORTS VS.

CA (IPL)

FACTS: By virtue of its merger with A.G. Spalding Bros., Inc., 1 petitioner QUESTOR, a US-based
corporation, became the owner of the trademark "Spalding" appearing in sporting goods, implements
and apparatuses. Co-petitioner PRO LINE, a domestic corporation, is the exclusive distributor of
"Spalding" sports products in the Philippines. 2 Respondent UNIVERSAL, is a domestic corporation
engaged in the sale and manufacture of sporting goods while co-respondent Monico Sehwani is the
president of the corporation.

Edwin Dy Buncio, General Manager of PRO LINE, sent a letter-complaint to the National Bureau of
Investigation (NBI) regarding the alleged manufacture of fake "Spalding" balls by UNIVERSAL. In the
course of the search, some 1,200 basketballs and volleyballs marked "Spalding" were seized and
confiscated by the NBI. PRO LINE and QUESTOR filed a criminal complaint for unfair competition against
respondent Monico Sehwani together with Robert, Kisnu, Arjan and Sawtri, all surnamed Sehwani, and
Arcadio del los Reyes.

Sehwani pleaded not guilty to the charge. But, while he admitted to having manufactured "Spalding"
basketballs and volleyballs, he nevertheless stressed that this was only for the purpose of complying
with the requirement of trademark registration with the Philippine Patent Office. After the prosecution
rested its case, Sehwani filed a demurrer to evidence arguing that the act of selling the manufactured
goods was an essential and constitutive element of the crime of unfair competition under Art. 189 of the
Revised Penal Code, and the prosecution was not able to prove that he sold the products. In its Order
the trial court granted the demurrer and dismissed the charge against Sehwani. PRO LINE and QUESTOR
impugne the dismissal of the criminal case.

ISSUE: Is the act of selling an indispensable element of the crime of unfair competition?

RULING: respondents' act may constitute unfair competition even if the element of selling has not been
proved. To hold that the act of selling is an indispensable element of the crime of unfair competition is
illogical because if the law punishes the seller of imitation goods, then with more reason should the law
penalize the manufacturer. In U.S. v. Manuel, 12 the Court ruled that the test of unfair competition is
whether certain goods have been intentionally clothed with an appearance which is likely to deceive the
ordinary purchasers exercising ordinary care. In this case, it was observed by the Minister of Justice that
the manufacture of the "Spalding" balls was obviously done to deceive would-be buyers. The projected
sale would have pushed through were it not for the timely seizure of the goods made by the NBI. That
there was intent to sell or distribute the product to the public cannot also be disputed given the number
of goods manufactured and the nature of the machinery and other equipment installed in the factory.