08 July 2020

A00 G.R. No. 174379

E.I DUPONT DE NEMOURS AND CO., (assignee of inventors Carino, Duncia and Wong), Petitioner
vs.
DIRECTOR EMMA C. FRANCISCO (in ger capacity as DIRECTOR GENERAL OF
THE INTELLECTUAL PROPERTY OFFICE), DIRECTOR EPIFANIO M. VELASCO
(in his capacity as the DIRECTOR OF THE BUREAU OF PATENTS, and
THERAPHARMA, INC., Respondents
FACTS:

A patent is granted to provide rights and protection to the inventor after an invention is disclosed to the public. It
also seeks to restrain and prevent unauthorized persons from unjustly profiting from a protected invention. However,
ideas not covered by a patent are free for the public to use and exploit. Thus, there are procedural rules on the
application and grant of patents established to protect against any infringement. To balance the public interests
involved, failure to comply with strict procedural rules will result in the failure to obtain a patent.

E.I. Dupont Nemours, an American corporation, filed on July 10, 1987, a Philippine Patent Application 35526
before the Bureau of Patents, Trademarks, and Technology Transfer. The application was for Angiotensin II
Receptor Blocking Imidazole (losartan), an invention related to the treatment of hypertension and congestive heart
failure. The product was produced and marketed by Merck, Sharpe, and Dohme Corporation (Merck), E.I. Dupont
Nemours' licensee, under the brand names Cozaar and Hyzaar.

The patent application was handled by Atty. Mapili, a local resident agent who handled a majority of E.I. Dupont
Nemours' patent applications in the Philippines from 1972 to 1996.

On December 19, 2000, E.I. Dupont Nemours' new counsel, Ortega, Del Castillo, Bacorro, Odulio, Calma, and
Carbonell, sent the Intellectual Property Office a letter requesting that an office action be issued on Philippine Patent
Application No. 35526. 

The appointed attorney on record was the late Atty. Mapili. The reconstituted documents provided no documents
that will show that the authority to prosecute the instant application is now transferred to the present counsel. No
official revocation on record is available.

Therefore, an official revocation of the Power of Attorney of the former counsel and the appointment of the present
by the applicant is therefore required before further action can be undertaken.
....
1. Contrary to what was alleged, the Chemical Examining Division's (CED) record will show that as far as the said
division is concern, it did not fail to issue the proper and timely action on the instant application. CED record shows
that the subject application was assigned to the examiner on June 7, 1988. A month after that was July 19, 1988, the
first Office Action was mailed but was declared abandoned as of September 20, 1988 for applicant's failure to
respond within the period as prescribed under Rule 112. Since then, no other official transactions were recorded.
This record is complemented by the Examiner-in-charge's own record ....
....
2. It was noted that it took thirteen (13) long years for the applicant to request for such Office Action. This is not
expected of the applicant since it is an acceptable fact that almost all inventors/ applicants wish for the early
disposition for their applications.

On May 29, 2002, E.I. Dupont Nemours replied to the office action by submitting a Power of Attorney executed by
Miriam Meconnahey, authorizing Ortega, Castillo, Del Castillo, Bacorro, Odulio, Calma, and Carbonell to prosecute
and handle its patent applications.  On the same day, it also filed a Petition for Revival with Cost of Philippine
Patent Application No. 35526.
In its Petition for Revival, E.I. Dupont Nemours argued that its former counsel, Atty. Mapili, did not inform it about
the abandonment of the application, and it was not aware that Atty. Mapili had already died.  It argued that it
discovered Atty. Mapili's death when its senior-level patent attorney visited the Philippines in 1996.  It argued that it
only had actual notice of the abandonment on January 30, 2002, the date of Paper No. 2.  Thus, it argued that its
Petition for Revival was properly filed under Section 113 of the 1962 Revised Rules of Practice before the
Philippines Patent Office in Patent Cases (1962 Revised Rules of Practice).

On April 18, 2002, the Director of Patents denied the Petition for Revival for having been filed out of time.

In view of the foregoing considerations, applicants' petition to revive the subject application is hereby denied.

E.I. Dupont Nemours appealed the denial to the Director-General (DG) of the Intellectual Property Office . DG
denied the appeal and affirmed the Resolution of the Director of Patents.

Petitioner filed before the CA a Petition for Review seeking to set aside the Intellectual Property Office's Decision
dated October 22, 2003. 

CA granted the Petition for Review on the basis that it found sufficient justification to relax the application of the
above-cited doctrine in this case, and to afford petitioner some relief from the gross negligence committed by its
former lawyer, Atty. Mapili.

The OSG, on behalf of the Intellectual Property Office, moved for reconsideration of this Decision

In the interim, Therapharma, Inc. moved for leave to intervene and admit the Attached Motion for Reconsideration
and argued that the CA’s Decision directly affects its "vested" rights to sell its own product.

Therapharma, Inc. alleged that on January 4, 2003, it filed before the Bureau of Food and Drugs its own application
for a losartan product "Lifezar," a medication for hypertension, which the Bureau granted. It argued that it made a
search of existing patent applications for similar products before its application, and that no existing patent
registration was found since E.I. Dupont Nemours' application for its losartan product was considered abandoned by
the Bureau of Patents, Trademarks, and Technology Transfer.  It alleged that sometime in 2003 to 2004, there was
an exchange of correspondence between Therapharma, Inc. and Merck. In this exchange, Merck informed
Therapharma, Inc. that it was pursuing a patent on the losartan products in the Philippines and that it would pursue
any legal action necessary to protect its product.

The CA issued the Resolution granting the Motion for Leave to Intervene. According to the CA, Therapharma, Inc.
had an interest in the revival of E.I. Dupont Nemours' patent application since it was the local competitor for the
losartan product.  It stated that even if the Petition for Review was premised on the revival of the patent application,
Therapharma, Inc.' s intervention was not premature since E.I. Dupont Nemours, through Merck, already threatened
Therapharma, Inc. with legal action if it continued to market its losartan product.

The CA resolved both Motions for Reconsideration and rendered the Amended Decision reversing its Decision and
ruled that the public interest would be prejudiced by the revival of E.I. Dupont Nemours' application. It found that
losartan was used to treat hypertension, "a chronic ailment afflicting an estimated 12.6 million Filipinos," and noted
that the presence of competition lowered the price for losartan products.  It also found that the revival of the
application prejudiced Therapharma, Inc.' s interest, in that it had already invested more than P20,000,000.00 to
develop its own losartan product and that it acted in good faith when it marketed its product.

Petitioner E.I. Dupont Nemours filed before the SC this Petition for Review on Certiorari.

ISSUE:

Whether the patent application of losartan by Dupont should be revived.

HELD:
No, the patent application for its revival was filed out of time.

TIME FOR RESPONSE BY APPLICANT; ABANDONMENT OF APPLICATION

111. Abandonment for failure to respond within the time limit.-

(a) If an applicant fails to prosecute his application within four months after the date when the last official notice of
action by the Office was mailed to him, or within such time as may be fixed (rule 112), the application will become
abandoned.

According to the records of the Bureau of Patents, Trademarks, and Technology Transfer Chemical Examining
Division, petitioner filed Philippine Patent Application No. 35526 on July 10, 1987. It was assigned to an examiner
on June 7, 1988. An Office Action was mailed to petitioner's agent, Atty. Mapili, on July 19, 1988. Because
petitioner failed to respond within the allowable period, the application was deemed abandoned on September 20,
1988. Under Section 113 (3 months), petitioner had until January 20, 1989 to file for a revival of the patent
application. Its Petition for Revival, however, was filed on May 30, 2002, 13 years after the date of abandonment.

Section 113 has since been superseded by Section 133.4 of the Intellectual Property Code, Rule 930 of the Rules and
Regulations on Inventions, and Rule 929 of the Revised Implementing Rules and Regulations for Patents, Utility
Models and Industrial Design. The period of four (4) months from the date of abandonment, however, remains
unchanged. The Intellectual Property Code even provides for a shorter period of three (3) months within which to
file for revival:

SECTION 133. Examination and Publication. –

....
133.4. An abandoned application may be revived as a pending application within three (3) months from the date of
abandonment, upon good cause shown and the payment of the required fee.

Rule 930 of the Rules and Regulations on Inventions provides:

Rule 930. Revival of application. - An application deemed withdrawn for failure to prosecute may be revived as a
pending application within a period of four (4) months from the mailing date of the notice of withdrawal if it is
shown to the satisfaction of the Director that the failure was due to fraud, accident, mistake or excusable negligence.
A petition to revive an application deemed withdrawn must be accompanied by (1) a showing of the cause of the
failure to prosecute, (2) a complete proposed response, and (3) the required fee.

An application not revived in accordance with this rule shall be deemed forfeited.

Rule 929 of the Revised Implementing Rules and Regulations for Patents, Utility Models and Industrial Design
provides:

Rule 929. Revival of Application. - An application deemed withdrawn for failure to prosecute may be revived as a
pending application within a period of four (4) months from the mailing date of the notice of withdrawal if it is
shown to the satisfaction of the Director that the failure was due to fraud, accident, mistake, or excusable
negligence. A petition to revive an application deemed withdrawn shall be accompanied by:

(a) A showing of a justifiable reason for the failure to prosecute;

(b) A complete proposed response; and
(c) Full payment of the required fee.

No revival shall be granted to an application that has been previously revived with cost.

An application not revived in accordance with this Rule shall be deemed forfeited.
Even if the delay was unavoidable, or the failure to prosecute was due to fraud, accident, mistake, or excusable
negligence, or the Petition was accompanied by a complete proposed response, or all fees were paid, the Petition
would still be denied since these regulations only provide a four (4 )- month period within which to file for the
revival of the application. The rules do not provide any exception that could extend this four (4)-month period to 13
years.

Petitioner’s patent application, therefore, should not be revived since it was filed beyond the allowable period.

Even assuming that the four (4)-month period could be extended, petitioner was inexcussably negligent in the
prosecution of its patent application.

Negligence is inexcusable if its commission could have been avoided through ordinary diligence and prudence.  It is
also settled that negligence of counsel binds the client as this "ensures against the resulting uncertainty and
tentativeness of proceedings if clients were allowed to merely disown.  their counsels' conduct."

Petitioner's resident agent, Atty. Mapili, was undoubtedly negligent in failing to respond to the Office Action sent by
the Bureau of Patents, Trademarks, and Technology Transfer on June 19, 1988. Because of his negligence,
petitioner's patent application was declared abandoned. He was again negligent when he failed to revive the
abandoned application within four (4) months from the date of abandonment.

A01 G.R. No. 148222               August 15, 2003

PEARL & DEAN (PHIL.), INCORPORATED, Petitioner,

vs.
SHOEMART, INCORPORATED, and NORTH EDSA MARKETING, INC., Respondents.
In the instant petition for review on certiorari under Rule 45 of the Rules of Court, petitioner Pearl & Dean (P&D)
assails the decision of the CA reversing the decision of RTC which declared private respondents Shoemart Inc.
(SMI) and North Edsa Marketing Inc. (NEMI) liable for infringement of trademark and copyright, and unfair
competition.

FACTS:

P&D is a corporation engaged in the manufacture of advertising display units simply referred to as light boxes.
These units utilize specially printed posters sandwiched between plastic sheets and illuminated with back lights.
P&D was able to secure a Certificate of Copyright Registration over these illuminated display units. The advertising
light boxes were marketed under the trademark "Poster Ads". The application for registration of the trademark was
filed with the Bureau of Patents, Trademarks and Technology Transfer on June 20, 1983, but was approved only on
September 12, 1988, per Registration No. 41165. From 1981 to about 1988, P&D employed the services of Metro
Industrial Services (MIS) to manufacture its advertising displays.

Sometime in 1985, P&D negotiated with defendant-appellant SMI for the lease and installation of the light boxes in
SM City North Edsa. Since SM City North Edsa was under construction at that time, SMI offered as an alternative,
SM Makati and SM Cubao, to which P&D agreed. On September 11, 1985, P&D’s General Manager, Rodolfo
Vergara, submitted for signature the contracts covering SM Cubao and SM Makati to SMI’s Advertising Promotions
and Publicity Division Manager, Ramonlito Abano. Only the contract for SM Makati, however, was returned signed.
On October 4, 1985, Vergara wrote Abano inquiring about the other contract and reminding him that their
agreement for installation of light boxes was not only for its SM Makati branch, but also for SM Cubao. SMI did not
bother to reply.

In a letter dated January 14, 1986, SMI’s house counsel informed P&D that it was rescinding the contract for SM
Makati due to non-performance of the terms thereof. In his reply, Vergara protested the unilateral action of SMI,
saying it was without basis. In the same letter, he pushed for the signing of the contract for SM Cubao.
Two years later, MIS, the company formerly contracted by P&D to fabricate its display units, offered to construct
light boxes for Shoemart’s chain of stores. SMI approved the proposal and ten (10) light boxes were subsequently
fabricated by MIS for SMI. After its contract with MIS was terminated, SMI engaged the services of EYD Rainbow
Advertising Corporation to make the light boxes. Some 300 units were fabricated in 1991. These were delivered on
a staggered basis and installed at SM Megamall and SM City.

Sometime in 1989, P&D, received reports that exact copies of its light boxes were installed at SM City and in the
fastfood section of SM Cubao. Upon investigation, P&D found out that aside from the two (2) reported SM
branches, light boxes similar to those it manufactures were also installed in two (2) other SM stores. It further
discovered that defendant-appellant North Edsa Marketing Inc. (NEMI), through its marketing arm, Prime Spots
Marketing Services, was set up primarily to sell advertising space in lighted display units located in SMI’s different
branches. P&D noted that NEMI is a sister company of SMI.

In the light of its discoveries, P&D sent a letter dated December 11, 1991 to both SMI and NEMI enjoining them to
cease using the subject light boxes and to remove the same from SMI’s establishments. It also demanded the
discontinued use of the trademark "Poster Ads," and the payment to P&D of compensatory damages in the amount
of Twenty Million Pesos (P20,000,000.00).

Upon receipt of the demand letter, SMI suspended the leasing of two hundred twenty-four (224) light boxes and
NEMI took down its advertisements for "Poster Ads" from the lighted display units in SMI’s stores. Claiming that
both SMI and NEMI failed to meet all its demands, P&D filed this instant case for infringement of trademark and
copyright, unfair competition and damages.

In denying the charges hurled against it, SMI maintained that it independently developed its poster panels using
commonly known techniques and available technology, without notice of or reference to P&D’s copyright. SMI
noted that the registration of the mark "Poster Ads" was only for stationeries such as letterheads, envelopes, and the
like. Besides, according to SMI, the word "Poster Ads" is a generic term which cannot be appropriated as a
trademark, and, as such, registration of such mark is invalid. It also stressed that P&D is not entitled to the reliefs
prayed for in its complaint since its advertising display units contained no copyright notice, in violation of Section
27 of P.D. 49. SMI alleged that P&D had no cause of action against it and that the suit was purely intended to
malign SMI’s good name. On this basis, SMI, aside from praying for the dismissal of the case, also counterclaimed
for moral, actual and exemplary damages and for the cancellation of P&D’s Certification of Copyright Registration
No. PD-R-2558 dated January 20, 1981 and Certificate of Trademark Registration No. 4165.

NEMI, for its part, denied having manufactured, installed or used any advertising display units, nor having engaged
in the business of advertising. It repleaded SMI’s averments, admissions and denials and prayed for similar reliefs
and counterclaims as SMI."

The RTC of Makati City decided in favor of P&D. RTC found defendants SMI and NEMI jointly and severally
liable for infringement of copyright under Section 2 of PD 49, as amended, and infringement of trademark under
Section 22 of RA No. 166, as amended, and are hereby penalized under Section 28 of PD 49, as amended, and
Sections 23 and 24 of RA 166, as amended.

Defendants’ counterclaims are hereby ordered dismissed for lack of merit.

On appeal, however, the CA reversed the order of the RTC. CA averred that since the light boxes cannot, by any
stretch of the imagination, be considered as either prints, pictorial illustrations, advertising copies, labels, tags or box
wraps, to be properly classified as a copyrightable class "O" work, we have to agree with SMI when it posited that
what was copyrighted were the technical drawings only, and not the light boxes themselves, thus:

When a drawing is technical and depicts a utilitarian object, a copyright over the drawings like plaintiff-appellant’s
will not extend to the actual object. It has so been held under jurisprudence, of which the leading case is Baker vs.
Selden (101 U.S. 841 (1879). In that case, Selden had obtained a copyright protection for a book entitled "Selden’s
Condensed Ledger or Bookkeeping Simplified" which purported to explain a new system of bookkeeping. Included
as part of the book were blank forms and illustrations consisting of ruled lines and headings, specially designed for
use in connection with the system explained in the work. These forms showed the entire operation of a day or a
week or a month on a single page, or on two pages following each other. The defendant Baker then produced forms
which were similar to the forms illustrated in Selden’s copyrighted books. The Court held that exclusivity to the
actual forms is not extended by a copyright. The reason was that "to grant a monopoly in the underlying art
when no examination of its novelty has ever been made would be a surprise and a fraud upon the public; that
is the province of letters patent, not of copyright." And that is precisely the point. No doubt aware that its alleged
original design would never pass the rigorous examination of a patent application, plaintiff-appellant fought to foist
a fraudulent monopoly on the public by conveniently resorting to a copyright registration which merely employs a
recordal system without the benefit of an in-depth examination of novelty.

The principle in Baker vs. Selden was likewise applied in Muller vs. Triborough Bridge Authority [43 F. Supp. 298
(S.D.N.Y. 1942)]. In this case, Muller had obtained a copyright over an unpublished drawing entitled "Bridge
Approach – the drawing showed a novel bridge approach to unsnarl traffic congestion". The defendant constructed a
bridge approach which was alleged to be an infringement of the new design illustrated in plaintiff’s drawings. In this
case it was held that protection of the drawing does not extend to the unauthorized duplication of the object drawn
because copyright extends only to the description or expression of the object and not to the object itself. It does not
prevent one from using the drawings to construct the object portrayed in the drawing.

In two other cases, Imperial Homes Corp. v. Lamont, 458 F. 2d 895 and Scholtz Homes, Inc. v. Maddox, 379 F. 2d
84, it was held that there is no copyright infringement when one who, without being authorized, uses a copyrighted
architectural plan to construct a structure. This is because the copyright does not extend to the structures themselves.
In fine, we cannot find SMI liable for infringing P&D’s copyright over the technical drawings of the latter’s
advertising display units.

xxx xxx xxx

The SC trenchantly held in Faberge, Incorporated vs. Intermediate Appellate Court that the protective mantle of the
Trademark Law extends only to the goods used by the first user as specified in the certificate of registration,
following the clear mandate conveyed by Section 20 of Republic Act 166, as amended, otherwise known as the
Trademark Law, which reads:

SEC. 20. Certification of registration prima facie evidence of validity.- A certificate of registration of a mark or
trade-name shall be prima facie evidence of the validity of the registration, the registrant’s ownership of the mark or
trade-name, and of the registrant’s exclusive right to use the same in connection with the goods, business or
services specified in the certificate, subject to any conditions and limitations stated therein."

The records show that on June 20, 1983, P&D applied for the registration of the trademark "Poster Ads" with the
Bureau of Patents, Trademarks, and Technology Transfer. Said trademark was recorded in the Principal Register
covering the following products: stationeries such as letterheads, envelopes and calling cards and newsletters.

Therefore, the SC did not see any legal basis to the finding of liability on the part of the defendants-appellants for
their use of the words "Poster Ads", in the advertising display units in suit. Jurisprudence has interpreted Section 20
of the Trademark Law as "an implicit permission to a manufacturer to venture into the production of goods and
allow that producer to appropriate the brand name of the senior registrant on goods other than those stated in the
certificate of registration." The Supreme Court further emphasized the restrictive meaning of Section 20 when it
stated, through Justice Conrado V. Sanchez, that:

Really, if the certificate of registration were to be deemed as including goods not specified therein, then a situation
may arise whereby an applicant may be tempted to register a trademark on any and all goods which his mind may
conceive even if he had never intended to use the trademark for the said goods. We believe that such omnibus
registration is not contemplated by our Trademark Law.

While the CA did not discount the striking similarity between P&D’s registered trademark and defendants-
appellants’ "Poster Ads" design, as well as the parallel use by which said words were used in the parties’ respective
advertising copies, we cannot find defendants-appellants liable for infringement of trademark. "Poster Ads" was
registered by P&D for specific use in its stationeries, in contrast to defendants-appellants who used the same words
in their advertising display units.

CA was constrained to adopt the view of defendants-appellants that the words "Poster Ads" are a simple contraction
of the generic term poster advertising. In the absence of any convincing proof that "Poster Ads" has acquired a
secondary meaning in this jurisdiction, CA found that P&D’s exclusive right to the use of "Poster Ads" is limited to
what is written in its certificate of registration, namely, stationeries.

Defendants-appellants cannot thus be held liable for infringement of the trademark "Poster Ads".

There being no finding of either copyright or trademark infringement on the part of SMI and NEMI, the monetary
award granted by the lower court to Pearl and Dean has no leg to stand on.

WHEREFORE, premises considered, the assailed decision is REVERSED and SET ASIDE, and another is rendered
DISMISSING the complaint and counterclaims in the above-entitled case for lack of merit.

Hence, this petition.

ISSUE(S):

Whether there was copyright, trademark, and patent infringement on the part of SMI and NEMI.

HELD:

NO. The petition is denied. There was no copyright, trademark, and patent infringement on the part of SMI and
NEMI.

ON THE ISSUE OF COPYRIGHT INFRINGEMENT

The copyright was limited to the drawings alone and not to the light box itself.

Although petitioner’s copyright certificate was entitled "Advertising Display Units" (which depicted the box-type
electrical devices), its claim of copyright infringement cannot be sustained.

Copyright, in the strict sense of the term, is purely a statutory right. Being a mere statutory grant, the rights are
limited to what the statute confers. It may be obtained and enjoyed only with respect to the subjects and by the
persons, and on terms and conditions specified in the statute. Accordingly, it can cover only the works falling
within the statutory enumeration or description.

P&D secured its copyright under the classification class "O" work. This being so, petitioner’s copyright protection
extended only to the technical drawings and not to the light box itself because the latter was not at all in the category
of "prints, pictorial illustrations, advertising copies, labels, tags and box wraps." Stated otherwise, even as we find
that P&D indeed owned a valid copyright, the same could have referred only to the technical drawings within the
category of "pictorial illustrations." It could not have possibly stretched out to include the underlying light box. The
strict application of the law’s enumeration in Section 2 prevents us from giving petitioner even a little leeway, that
is, even if its copyright certificate was entitled "Advertising Display Units." What the law does not include, it
excludes, and for the good reason: the light box was not a literary or artistic piece which could be copyrighted under
the copyright law. And no less clearly, neither could the lack of statutory authority to make the light box
copyrightable be remedied by the simplistic act of entitling the copyright certificate issued by the National Library
as "Advertising Display Units."

During the trial, the president of P&D himself admitted that the light box was neither a literary not an artistic work
but an "engineering or marketing invention." Obviously, there appeared to be some confusion regarding what ought
or ought not to be the proper subjects of copyrights, patents and trademarks. In the leading case previously decided
by the SC, it ruled that these three legal rights are completely distinct and separate from one another, and the
protection afforded by one cannot be used interchangeably to cover items or works that exclusively pertain to the
others:

A trademark is any visible sign capable of distinguishing the goods (trademark) or services (service mark) of an
enterprise and shall include a stamped or marked container of goods. In relation thereto, a trade name means the
name or designation identifying or distinguishing an enterprise. Meanwhile, the scope of a copyright is confined to
literary and artistic works which are original intellectual creations in the literary and artistic domain protected from
the moment of their creation. Patentable inventions, on the other hand, refer to any technical solution of a problem in
any field of human activity which is new, involves an inventive step and is industrially applicable.

ON THE ISSUE OF PATENT INFRINGEMENT

On the issue of patent infringement, petitioner never secured a patent for the light boxes. It therefore acquired no
patent rights which could have protected its invention, if in fact it really was. And because it had no patent,
petitioner could not legally prevent anyone from manufacturing or commercially using the contraption.

An inventor has no common law right to a monopoly of his invention. He has the right to make use of and vend his
invention, but if he voluntarily discloses it, such as by offering it for sale, the world is free to copy and use it with
impunity. A patent, however, gives the inventor the right to exclude all others. As a patentee, he has the exclusive
right of making, selling or using the invention.  On the assumption that petitioner’s advertising units were patentable
inventions, petitioner revealed them fully to the public by submitting the engineering drawings thereof to the
National Library.

To be able to effectively and legally preclude others from copying and profiting from the invention, a patent is a
primordial requirement. No patent, no protection. The ultimate goal of a patent system is to bring new designs and
technologies into the public domain through disclosure. Ideas, once disclosed to the public without the protection
of a valid patent, are subject to appropriation without significant restraint.

The patent law has a three-fold purpose: "first, patent law seeks to foster and reward invention; second, it promotes
disclosures of inventions to stimulate further innovation and to permit the public to practice the invention once the
patent expires; third, the stringent requirements for patent protection seek to ensure that ideas in the public domain
remain there for the free use of the public."

It is only after an exhaustive examination by the patent office that a patent is issued. Such an in-depth investigation
is required because "in rewarding a useful invention, the rights and welfare of the community must be fairly dealt
with and effectively guarded. To that end, the prerequisites to obtaining a patent are strictly observed and when a
patent is issued, the limitations on its exercise are equally strictly enforced. To begin with, a genuine invention or
discovery must be demonstrated lest in the constant demand for new appliances, the heavy hand of tribute be laid on
each slight technological advance in art."

There is no such scrutiny in the case of copyrights nor any notice published before its grant to the effect that a
person is claiming the creation of a work. The law confers the copyright from the moment of creation and the
copyright certificate is issued upon registration with the National Library of a sworn ex-parte claim of creation.

Therefore, not having gone through the arduous examination for patents, the petitioner cannot exclude others from
the manufacture, sale or commercial use of the light boxes on the sole basis of its copyright certificate over the
technical drawings.

ON THE ISSUE OF TRADEMARK INFRINGEMENT

This issue concerns the use by respondents of the mark "Poster Ads" which petitioner’s president said was a
contraction of "poster advertising." P&D was able to secure a trademark certificate for it, but one where the goods
specified were "stationeries such as letterheads, envelopes, calling cards and newsletters." Petitioner admitted it did
not commercially engage in or market these goods. On the contrary, it dealt in electrically operated backlit
advertising units and the sale of advertising spaces thereon, which, however, were not at all specified in the
trademark certificate.
Invoking Section 20 of the old Trademark Law, ruled that "the certificate of registration issued by the Director of
Patents can confer (upon petitioner) the exclusive right to use its own symbol only to those goods specified in the
certificate, subject to any conditions and limitations specified in the certificate x x x. One who has adopted and used
a trademark on his goods does not prevent the adoption and use of the same trademark by others for products which
are of a different description."

Assuming arguendo that "Poster Ads" could validly qualify as a trademark, the failure of P&D to secure a trademark
registration for specific use on the light boxes meant that there could not have been any trademark infringement
since registration was an essential element thereof.

ON THE ISSUE OF UNFAIR COMPETITION

If at all, the cause of action should have been for unfair competition, a situation which was possible even if P&D had
no registration. However, while the petitioner’s complaint in the RTC also cited unfair competition, the trial court
did not find private respondents liable therefor. Petitioner did not appeal this particular point; hence, it cannot now
revive its claim of unfair competition.

But even disregarding procedural issues, we nevertheless cannot hold respondents guilty of unfair competition.

By the nature of things, there can be no unfair competition under the law on copyrights although it is applicable to
disputes over the use of trademarks. Even a name or phrase incapable of appropriation as a trademark or tradename
may, by long and exclusive use by a business (such that the name or phrase becomes associated with the business or
product in the mind of the purchasing public), be entitled to protection against unfair competition.

In this case, there was no evidence that P & D’s use of "Poster Ads" was distinctive or well-known. As noted by the
CA, petitioner’s expert witnesses himself had testified that " ‘Poster Ads’ was too generic a name. So it was difficult
to identify it with any company, honestly speaking." This crucial admission by its own expert witness that "Poster
Ads" could not be associated with P&D showed that, in the mind of the public, the goods and services carrying the
trademark "Poster Ads" could not be distinguished from the goods and services of other entities.

This fact also prevented the application of the doctrine of secondary meaning. "Poster Ads" was generic and
incapable of being used as a trademark because it was used in the field of poster advertising, the very business
engaged in by petitioner. "Secondary meaning" means that a word or phrase originally incapable of exclusive
appropriation with reference to an article in the market (because it is geographically or otherwise descriptive) might
nevertheless have been used for so long and so exclusively by one producer with reference to his article that, in the
trade and to that branch of the purchasing public, the word or phrase has come to mean that the article was his
property. The admission by petitioner’s own expert witness that he himself could not associate "Poster Ads" with
petitioner P & D because it was "too generic" definitely precluded the application of this exception.

The SC reiterated the ruling in the case of Kho vs. CA, differentiating patents, copyrights and trademarks, namely:

A trademark is any visible sign capable of distinguishing the goods (trademark) or services (service mark) of an
enterprise and shall include a stamped or marked container of goods. In relation thereto, a  trade name means the
name or designation identifying or distinguishing an enterprise. Meanwhile, the scope of a copyright is confined to
literary and artistic works which are original intellectual creations in the literary and artistic domain protected from
the moment of their creation. Patentable inventions, on the other hand, refer to any technical solution of a problem in
any field of human activity which is new, involves an inventive step and is industrially applicable.

A02 G.R. No. 118708 February 2, 1998

CRESER PRECISION SYSTEMS, INC., petitioner,

vs.
COURT OF APPEALS AND FLORO INTERNATIONAL CORP., respondents.
FACTS:

Private respondent is a domestic corporation engaged in the manufacture, production, distribution and sale of
military armaments, munitions, airmunitions and other similar materials.

On January 23, 1990, private respondent was granted by the Bureau of Patents, Trademarks and Technology
Transfer (BPTTT), a Letters Patent covering an aerial fuze.

Sometime in November 1993, private respondent, through its president, Mr. Gregory Floro, Jr., discovered that
petitioner submitted samples of its patented aerial fuze to the AFP for testing. He learned that petitioner was
claiming the aforesaid aerial fuze as its own and planning to bid and manufacture the same commercially without
license or authority from private respondent. To protect its right, private respondent on December 3, 1993, sent a
letter to petitioner advising it of its existing patent and its rights thereunder, warning petitioner of a possible court
action and/or application for injunction, should it proceed with the scheduled testing by the military.

In response to private respondent's demand, petitioner filed a complaint for injunction and damages arising from the
alleged infringement before the RTC of Quezon City. The complaint alleged, among others: that petitioner is the
first, true and actual inventor of an aerial fuze denominated as "Fuze, PDR 77 CB4" which it developed as early as
December 1981 under the Self-Reliance Defense Posture Program (SRDP) of the AFP; that sometime in 1986,
petitioner began supplying the AFP with the said aerial fuze; that private respondent's aerial fuze is identical in
every respect to the petitioner's fuze; and that the only difference between the two fuzes are miniscule and merely
cosmetic in nature. Petitioner prayed that a temporary restraining order and/or writ of preliminary injunction be
issued enjoining private respondent including any and all persons acting on its behalf from manufacturing,
marketing and/or profiting therefrom, and/or from performing any other act in connection therewith or tending to
prejudice and deprive it of any rights, privileges and benefits to which it is duly entitled as the first, true and actual
inventor of the aerial fuze.

On December 10, 1993, the trial court issued a temporary restraining order. Thereafter, hearings were held on the
application of petitioner for the issuance of a writ of preliminary injunction, with both parties presenting their
evidence. After the hearings, the trial court directed the parties to submit their respective memoranda in support of
their positions.

On December 27, 1993, private respondent submitted its memorandum alleging that petitioner has no cause of
action to file a complaint for infringement against it since it has no patent for the  aerial fuze which it claims to have
invented; that petitioner's available remedy is to file a petition for cancellation of patent before the Bureau of
Patents; that private respondent as the patent holder cannot be stripped of its property right over the patented  aerial
fuze consisting of the exclusive right to manufacture, use and sell the same and that it stands to suffer irreparable
damage and injury if it is enjoined from the exercise of its property rights over its patent.

RTC granted the issuance of a writ of preliminary injunction against private respondent the dispositive portion of
which reads:

WHEREFORE, plaintiffs application for the issuance of a writ of preliminary injunction is granted and, upon
posting of the corresponding bond by plaintiff in the amount of PHP 200,000.00, let the writ of preliminary
injunction be issued by the branch Clerk of this Court enjoining the defendant and any and all persons acting on its
behalf or by and under its authority, from manufacturing, marketing and/or selling aerial fuzes identical, to those of
plaintiff, and from profiting therefrom, and/or from performing any other act in connection therewith until further
orders from this Court.

Private respondent moved for reconsideration but this was denied by the RTC.

Aggrieved, private respondent filed a petition for certiorari, mandamus and prohibition before respondent CA

raising as grounds the following:
a. Petitioner has no cause of action for infringement against private respondent, the latter not having any patent for
the aerial fuze which it claims to have invented and developed and allegedly infringed by private respondent;

b. the case being an action for cancellation or invalidation of private respondent's Letters Patent over its own aerial
fuze, the proper venue is the Office of the Director of Patents;

c. The trial court acted in grave abuse of discretion and/or in excess of jurisdiction in finding that petitioner has
fully established its clear title or right to preliminary injunction;

d. The trial court acted in grave abuse of discretion and/or in excess of jurisdiction in granting the preliminary
injunction, it being disruptive of the status quo; and

e. The trial court acted in grave abuse of discretion and/or in excess of jurisdiction in granting the preliminary
injunction thereby depriving private respondent of its property rights over the patented aerial fuze and cause it
irreparable damages.

CA reversed the RTC’s decision and dismissed the complaint filed by petitioner.

The motion for reconsideration was also denied.  Hence, this present petition.

ISSUE(S):

Whether Petitioner can file an action for infringement not as a patentee but as an entity in possession of a right, title
or interest in and to the patented invention?

HELD:

NO. The SC found the argument untenable.

Section 42 of R.A. 165, otherwise known as the Patent Law, explicitly provides:

Sec. 42. Civil action for infringement. — Any patentee, or anyone possessing any right, title or interest in and to the
patented invention, whose rights have been infringed, may bring a civil action before the proper Court of First
Instance (now Regional Trial court), to recover from the infringer damages sustained by reason of the infringement
and to secure an injunction for the protection of his right. . . .

Under the aforequoted law, only the patentee or his successors-in-interest may file an action for infringement. The
phrase "anyone possessing any right, title or interest in and to the patented invention" upon which petitioner
maintains its present suit, refers only to the patentee's successors-in-interest, assignees or grantees since actions for
infringement of patent may be brought in the name of the person or persons interested, whether as patentee,
assignees, or as grantees, of the exclusive right. Moreover, there can be no infringement of a patent until a patent has
been issued, since whatever right one has to the invention covered by the patent arises alone from the grant of
patent.  In short, a person or entity who has not been granted letters patent over an invention and has not acquired
any light or title thereto either as assignee or as licensee, has no cause of action for infringement because the right to
maintain an infringement suit depends on the existence of the patent.

Petitioner admits it has no patent over its aerial fuze. Therefore, it has no legal basis or cause of action to institute
the petition for injunction and damages arising from the alleged infringement by private respondent. While
petitioner claims to be the first inventor of the aerial fuze, still it has no right of property over the same upon which
it can maintain a suit unless it obtains a patent therefor.

Under American jurisprudence, an inventor has no common-law right to a monopoly of his invention. He has the
right to make, use and vend his own invention, but if he voluntarily discloses it, such as by offering it for sale, the
world is free to copy and use it with impunity. A patent, however, gives the inventor the right to exclude all others.
As a patentee, he has the exclusive right of making, using or selling the invention.
In fine, in the absence of error or abuse of power or lack of jurisdiction or grave abuse of discretion, the SC
sustained the assailed decision of the respondent CA.

A03 G.R. L-45101 November 28, 1986

ROSARIO C. MAGUAN (formerly ROSARIO C. TAN), petitioner,

vs.
THE HONORABLE COURT OF APPEALS and SUSANA LUCHAN, respondents.
FACTS:

Petitioner is doing business under the firm name and style of SWAN MANUFACTURING" while private
respondent is likewise doing business under the firm name and style of "SUSANA LUCHAN POWDER PUFF
MANUFACTURING."

It is undisputed that petitioner is a patent holder of powder puff namely:

1. UM-423 (extended and/or renewed under Extension No. UM-109 for a period of 5 years from October 6, 1971)
2. UM-450 (extended and/or renewed under Extension No. UM110 for a period of 5 years from January 26, 1972)
3. UM 1184, for a period of 5years from April 5, 1974.

In a letter dated July 10, 1974, petitioner informed private respondent that the powder puffs the latter is
manufacturing and selling to various enterprises particularly those in the cosmetics industry, resemble Identical or
substantially Identical powder puffs of which the former is a patent holder; petitioner explained such production and
sale constitute infringement of said patents and therefore its immediate discontinuance is demanded, otherwise it
will be compelled to take judicial action.

Private respondent replied stating that her products are different and countered that petitioner's patents are void
because the utility models applied for were not new and patentable and the person to whom the patents were issued
was not the true and actual author nor were her rights derived from such author.

In view thereof, petitioner filed a complaint for damages with injunction and preliminary injunction against private
respondent with the then Court of First Instance of Rizal, Pasig Branch, for infringing the aforesaid letters patent,
and prayed, among others, that a writ of preliminary injunction be immediately issued.

In her answer, private respondent alleged that the products she is manufacturing and offering for sale are not
identical, or even only substantially identical to the products covered by petitioner's patents and, by way of
affirmative defenses, further alleged that petitioner's patents in question are void on the following grounds:

(1) at the time of filing of application for the patents involved, the utility models applied for were not new and
patentable under Sec. 55 of R.A. 165, as amended by R.A. 864; and
(2) the person to whom the patents were issued was not the true and actual author of the utility models applied for,
and neither did she derive her rights from any true and actual author of these utility models. for the following
reasons:

(a) since years prior to the filing of applications for the patents involved, powder puffs of the kind applied for
were then already existing and publicly being sold in the market; both in the Philippines and abroad; and

(b) applicant's claims in her applications, of "construction" or process of manufacturing the utility models
applied for, with respect to UM-423 and UM-450, were but a complicated and impractical version of an
old, simple one which has been well known to the cosmetics industry since years previous to her filing of
applications, and which belonged to no one except to the general public; and with respect to UM1184; her
claim in her application of a unitary powder puff, was but an limitation of a product well known to the
 cosmetics industry since years previous to her firing of application, and which belonged to no one except to
the general public;

RTC granted the preliminary injunction prayed for by petitioner. Consequently, the corresponding writ was
subsequently issued enjoining the herein private respondent (then defendant) and all other persons employed by her,
her agents, servants and employees from directly or indirectly manufacturing, making or causing to be made, selling
or causing to be sold, or using or causing to be used in accordance with, or embodying the utility models of the
Philippine Patent Office Utility Model Letters Patent Nos. 423 (Extension No. UM-109), No. 450 (Extension No.
UM-110), and Utility Model No. 1184 or from infringement upon or violating said letters patent in any way
whatsoever.

Private respondent questioned the propriety of the RTC's issuance of the Writ of Preliminary Injunction arguing that
since there is still a pending cancellation proceedings before the Philippine Patent Office concerning petitioner's
patents, such cannot be the basis for preliminary injunction.

RTC denied private respondent's motion for reconsideration.

Private respondent filed a petition for certiorari with the CA reiterating among other things the invalidity of
petitioner's patents and prayed that the trial court be restrained from enforcing or continuing to enforce the
following:

(1) Order dated September 18, 1974, granting the preliminary injunction;
(2) Writ of preliminary injunction dated September 18, 1974; and
(3) Order dated September 11, 1974 denying petitioner's motion petition for reconsideration.

Writ of Preliminary Injunction was issued by the CA.

CA finding no merit in the herein petition, the same is hereby dismissed and the preliminary injunction previously
issued by this Court is hereby set aside, with costs.

ln said decision respondent court stated that in disposing of the petition it tackled only the issue of whether the
court a quo acted with grave abuse of discretion in issuing the challenged orders. It made clear the question of
whether the patents have been infringed or not was not determined considering the court a quo has yet to decide the
case on the merits.

Feeling aggrieved, private respondent moved to reconsider the afore-mentioned Decision based on the following
grounds:

I
THAT THIS HONORABLE COURT ERRED IN NOT APPRECIATING THE EXISTENCE OF A FAIR
QUESTION OF INVALIDITY OF PRIVATE RESPONDENT'S PATENTS.
II
THAT THIS HONORABLE COURT ERRED IN NOT REJECTING THE THEORY OF RESPONDENT JUDGE
THAT HE HAS NO JURISDICTION TO INVALIDATE THE PATENTS UPON GROUND OF LACK OF
NOVELTY OF THE PRODUCTS PATENTED. (Motion for Reconsideration, Rollo, p. 190).

Reviewing on reconsideration, respondent court gave weight to private respondent's allegation that the latter's
products are not identical or even only substantially identical to the products covered by petitioner's patents. Said
court noticed that contrary to the lower courts position that the court a quo had no jurisdiction to determine the
question of invalidity of the patents, Section 45 and 46 of the Patent Law allow the court to make a finding on the
validity or invalidity of patents and in the event there exists a fair question of its invalidity, the situation calls for a
denial of the writ of preliminary injunction pending the evaluation of the evidence presented. Thus, finding the
lower court's position to have been opposed to Patent Law, respondent court considered it a grave abuse of
discretion when the court a quo issued the writ being questioned without looking into the defenses alleged by herein
private respondent. Further, it considered the remedy of appeal, under the circumstances, to be inadequate.
Thus, on July 6, 1976, respondent court made a complete turnabout from its original decision and promulgated a
Resolution, the dispositive portion of which reads:

WHEREFORE, our decision is hereby set aside. The writ of certiorari is ordered issued. Accordingly, the challenged
orders, Exhibit H and H-1 and the order denying the motion for reconsideration (Annex "K", Petition), are hereby
set aside. The writ of preliminary injunction previously ordered by this Court and ordered lifted by the Decision now
being set aside is hereby reinstated and made permanent. Without pronouncement as to costs.

In a Resolution dated November 4, 1976, respondent court, not persuaded by the grounds embodied in the motion
for reconsideration filed by herein petitioner, denied the same for lack of merit, thereby maintaining the same stand.

Hence, this petition.

ISSUE(S):

(1) Whether or not in an action for infringement the Court a quo had jurisdiction to determine the invalidity of the
patents at issue which invalidity was still pending consideration in the patent office.
(2) Whether or not the Court a quo committed grave abuse of discretion in the issuance of a writ of preliminary
injunction.
(3) Whether or not certiorari is the proper remedy.

The first issue has been laid to rest in a number of cases where the Court ruled that "When a patent is sought to be
enforced, the questions of invention, novelty or prior use, and each of them, are open to judicial examination."

Under the present Patent Law, there is even less reason to doubt that the trial court has jurisdiction to declare the
patents in question invalid. A patentee shall have the exclusive right to make, use and sell the patented article or
product and the making, using, or selling by any person without the authorization of the patentee constitutes
infringement of the patent (Sec. 37, R.A. 165). Any patentee whose rights have been infringed upon may bring an
action before the proper CFI now (RTC) and to secure an injunction for the protection of his rights (Sec. 42, R.A.
165).

Defenses in an action for infringement are provided for in Section 45 of the same law which in fact were availed of
by private respondent in this case. Then, as correctly stated by respondent Court of Appeals, this conclusion is
reinforced by Sec. 46 of the same law which provides that if the Court shall find the patent or any claim thereof
invalid, the Director shall on certification of the final judgment ... issue an order cancelling the patent or the claims
found invalid and shall publish a notice thereof in the Official Gazette." Upon such certification, it is ministerial on
the part of the patent office to execute the judgment.

II.

The burden of proof to substantiate a charge of infringement is with the plaintiff. But where the plaintiff introduces
the patent in evidence, and the same is in due form, there is created a prima facie presumption of its correctness and
validity. The decision of the Commissioner (now Director) of Patent in granting the patent is presumed to be correct.
The burden of going forward with the evidence (burden of evidence) then shifts to the defendant to overcome by
competent evidence this legal presumption.

The question then in the instant case is whether or not the evidence introduced by private respondent herein is
sufficient to overcome said presumption.

After a careful review of the evidence consisting of 64 exhibits and oral testimonies of five witnesses presented by
private respondents before the Court of First Instance before the Order of preliminary injunction was issued as well
as those presented by the petitioner, respondent Court of Appeals was satisfied that there is a prima facie showing of
a fair question of invalidity of petitioner's patents on the ground of lack of novelty. As pointed out by said appellate
court said evidence appeared not to have been considered at all by the court a quo for alleged lack of jurisdiction, on
the mistaken notion that such question in within the exclusive jurisdiction of the patent office.
It has been repeatedly held that an invention must possess the essential elements of novelty, originality and
precedence and for the patentee to be entitled to protection, the invention must be new to the world. Accordingly, a
single instance of public use of the invention by a patentee for more than two years (now for more than one year
only under Sec. 9 of the Patent Law) before the date of his application for his patent, will be fatal to, the validity of
the patent when issued.

The law provides:

SEC. 9. Invention not considered new or patentable. — An invention shall not be considered new or capable of
being patented if it was known or used by others in the Philippines before the invention thereof by the inventor
named in an application for patent for the invention; or if it was patented or described in any printed publication in
the Philippines or any foreign country more than one year before the application for a patent therefor; or if it had
been in public use or on sale in the Philippines for more than one year before the application for a patent therefor; or
if it is the subject matter of a validity issued patent in the Philippines granted on an application filed before the filing
of the application for patent therefor.

Thus, more specifically, under American Law from which our Patent Law was derived (Vargas v. F.M. Yaptico &
Co. supra) it is generally held that in patent cases a preliminary injunction will not issue for patent infringement
unless the validity of the patent is clear and beyond question. The issuance of letters patent, standing alone, is not
sufficient to support such drastic relief (8 Deller's Walker on Patents p. 406). In cases of infringement of patent no
preliminary injunction will be granted unless the patent is valid and infringed beyond question and the record
conclusively proves the defense is sham. (Ibid., p. 402)

III.

It will be noted that the validity of petitioner's patents is in question for want of novelty. Private respondent contends
that powder puffs Identical in appearance with that covered by petitioner's patents existed and were publicly known
and used as early as 1963 long before petitioner was issued the patents in question. (List of Exhibits, Rollo, pp. 194-
199). As correctly observed by respondent Court of Appeals, "since sufficient proofs have been introduced in
evidence showing a fair question of the invalidity of the patents issued for such models, it is but right that the
evidence be looked into, evaluated and determined on the merits so that the matter of whether the patents issued
were in fact valid or not may be resolved." (Rollo, pp. 286-287).
All these notwithstanding, the trial court nonetheless issued the writ of preliminary injunction which under the
circumstances should be denied.
For failure to determine first the validity of the patents before aforesaid issuance of the writ, the trial court failed to
satisfy the two requisites necessary if an injunction is to issue, namely: the existence of the right to be protected and
the violation of said right. (Buayan Cattle Co., Inc. v. Quintillan, 128 SCRA 276).
Under the above established principles, it appears obvious that the trial court committed a grave abuse of discretion
which makes certiorari the appropriate remedy.
As found by respondent Court of Appeals, the injunctive order of the trial court is of so general a tenor that
petitioner may be totally barred from the sale of any kind of powder puff. Under the circumstances, respondent
appellate court is of the view that ordinary appeal is obviously inadequate. (Rollo, p. 288). A parallel was drawn
from a decision of the Supreme Court in the case of Sanchez v. Hon. Court of Appeals, 69 SCRA 328 [1976] where
the First Division of the Supreme Court ruled that "The prerogative writ of certiorari may be applied for by proper
petition notwithstanding the existence of the regular remedy of an appeal in due cause when among other reasons,
the broader interests of justice so require or an ordinary appeal is not an adequate remedy."

Private respondent maintains the position that the resolutions sought to be appealed from had long become final and
executory for failure of Hon. Reynaldo P. Honrado, the trial court judge, to appeal by certiorari from the resolutions
of respondent Court of Appeals.

Such contention is untenable.

There is no dispute that petitioner has seasonably petitioned. On the other hand, it is elementary that the trial judge is
a mere nominal party as clearly provided in Section 5, Rule 65 of the Revised Rules of Court where it shall be the
duty of such person or persons interested in sustaining the proceedings in court, "to appear and defend, both in his or
their own behalf and in behalf of the court or judge affected by the proceedings."

Relative thereto "the judge whose order is under attack is merely a nominal party; wherefore, a judge in his official
capacity should not be made to appear as a party seeking reversal of a decision that is unfavorable to the action taken
by him."

As to petitioner's claim of prescription, private respondent's contention that such refers to the filing of petitions for
cancellation in the Patent Office under Sec. 28 of the Patent Law and not to a defense against an action for
infringement under Sec. 45 thereof which may be raised anytime, is evident under aforesaid law.

PREMISES CONSIDERED, the assailed resolutions of the Court of Appeals are hereby AFFIRMED.

A04 G.R. No. 121267            October 23, 2001

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

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

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

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

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

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

In affirming the decision of the BPTTT, the CA held that the grant of a compulsory license to private respondent for
the manufacture and use of Cimetidine is in accord with the Patent Law since the patented product is medicinal in
nature, and therefore necessary for the promotion of public health and safety. It explained further that the provisions
of the Patent Law permitting the grant of a compulsory license are intended not only to give a chance to others to
supply the public with the quantity of the patented article but especially to prevent the building up of patent
monopolies.

Neither did the appellate court find the royalty rate of 2.5% of net sales fixed by the BPTTT unreasonable,
considering that what was granted under the compulsory license is only the right to manufacture Cimetidine, without
any technical assistance from petitioner, and royalty rates identical to that fixed by the BPTTT have been prescribed
for the grant of compulsory license in a good number of patent cases. The CA also ruled that contrary to petitioner's
claim, private respondent complied with the requirement of publication under the Patent Law and had submitted
proof of such compliance.

Petitioner filed a motion for reconsideration thereof as well as a motion for the issuance of a TRO against private
respondent's sister company, Montreal Pharmaceutical, Inc. to refrain from marketing a product similar
to Cimetidine, but both motions were denied.

Hence, this petition:

ISSUE(S):

Whether the grant of a compulsory license to private respondent unjustly deprives Petitioner of a reasonable return
on its investment?

It argues further that the provisions of the Patent Law on compulsory licensing contravene the Convention of Paris
for the Protection of Industrial Property (Paris Convention), which allegedly permits the granting of a compulsory
license over a patented product only to prevent abuses which might result from the exercise of the exclusive rights
conferred by the patent, or on the ground of failure to work or insufficient working of the patented product, within
four years from the date of filing of the patent application or three years from the date of grant of the patent,
whichever expires last.

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

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

HELD:

NO. The petition has no merit.

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

Grounds for Compulsory Licensing.— 

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

(a) If the patented invention is not being worked within the Philippines on a commercial scale, although
capable of being so worked, without satisfactory reason;
(b) If the demand of the patented article in the Philippines is not being met to an adequate extent and on
reasonable terms;
(c) If, by reason of refusal of the patentee to grant a license or licenses on reasonable terms, or by reason of the
conditions attached by the patentee to licensee or to the purchase, lease or use of the patented article or
working of the patented process or machine for production, the establishment of any new trade or industry
in the Philippines is prevented, or the trade or industry therein is unduly restrained;
(d) If the working of the invention within the country is being prevented or hindered by the importation of the
patented article;
(e) If the patented invention or article relates to food or medicine or manufactured substances which can be
used as food or medicine, or is necessary for public health or public safety.

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

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

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

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

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

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

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

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

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

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

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

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

Section 35-B. Terms and Conditions of Compulsory License. –

(1) A compulsory license shall be non-exclusive, but this shall be without prejudice to the licensee's right to oppose
an application for such a new license.

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

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

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

A05 G.R. No. L-27361 May 29, 1981

PARKE, DAVIS & COMPANY, plaintiff-appellant,

vs.
DOCTORS' PHARMACEUTICALS, INC. and V-LAB DRUGHOUSE
CORPORATION, defendants-appellees.

FACTS:

On March 21, 1957, Letters Patent No. 279 was legally issued to plaintiff' by the Patent Office of the Republic of the
Philippines for an invention entitled "Therapeutically Valuable Esters and Method for Obtaining the same"; that
since that date, plaintiff has been and still is, the owner of said Letters Patent No. 279 which is still in force in the
Philippines;

That defendant No. 1 has knowingly infringed and is still knowingly infringing Claim 4 of said Letters Patent No.
279 of plaintiff by selling, causing to be sold, using or causing to be used, "Chloramphenicol Palmitate", the
substance covered by said Claim 4 of said plaintiff's Letters Patent No. 279, under the name "Venimicetin
Suspension", willfully and without the consent or authorization of plaintiff;

That defendant No. 2 has likewise, knowingly infringed and is still knowingly investigation Claim 4 of said letters
Patent No. 279 by acting as distributor of defendant No. 1 of the latter's medicine called "Venimicetin Suspension"
which contains "Chloramphenicol Palmitate":

That plaintiff, through its wholly-owned local subsidiary, Parke, Davis & Company, Inc. a domestic corporation
with main office at Mandaluyong, Rizal, has at great expense, established a market and a continuing demand for
"Chloramphenicol Palmitate" in the Philippines and has for many years sold and is still selling this product in the
Philippines that defendants have derived unlawful gains and profits from the aforesaid infringement to the great and
irreparable injury, damage and prejudice of plaintiff, and have deprive plaintiff of legitimate returns which plaintiff
would have otherwise would have falsely and deceptively concealed that the same contains "Chloramphenicol" and
"Chloramphenicol Palmitate" are entirely different substances; that defendants, advertising and selling "Venimicetin
Suspension", have falsely and deceptively use plaintiffs name and represented that defendant No. 1 holds a license
from plaintiff for said medicine with, inter alia, the following words:

First Compulsory License in the Philippines by Parke-Davis Company Detroit Michigan, U.S.A.;

That plaintiff has never granted defendant No. 1 any kind of license for any product; that defendant No. 1 has not
even applied for a compulsory license under plaintiff's Letters Patent No. 279, the only patent which covers
"Chloramphenicol Palmitate"; that the compulsory licensing case between plaintiff and defendant No. 1 in the
Philippine Patent Office (Inter Partes Case No. 181) dealt with plaintiff's Letters Patent No. 50 (which covers
"Chloramphenicol") and not with plaintiff's Letters Patent No. 279 (which covers "Chloramphenicol Palmitate");
that the resolution of the Director of Patents fixing the terms and conditions of the compulsory license for
"Chloramphenicol" has not yet become final as the same is still subject to a pending motion for reconsideration; that
even if said resolution does become final, the compulsory license will not cover defendants' "Venimicetin
Suspension" which actually contains "Chloramphenicol Palmitate" and, therefore, defendants' statement will still be
false and misleading; and that defendants' use of the aforesaid false statement is designed to induce persons to
purchase and physicians to prescribe the use of "Venimicetin Suspension" in the mistaken belief that it is Identical
with the "Chloramphenicol Palmitate" product manufactured and sold in the Philippines by plaintiff's subsidiary or
that the active ingredient in said product has been obtained from plaintiff and/or that said product has been made
under the supervision or control of plaintiff – thereby causing damage or loss to plaintiff. On the basis of the
foregoing allegations, the plaintiff prayed, among others, that defendants be enjoined from performing the acts
complained of as infringement of patent and unfair competition and to pay the plaintiff all damages due thereto by
reason of said acts.

On May 6, 1966, the Court of First Instance issued an order which, among others, temporarily restrained the
defendants "from directly or indirectly selling, using, causing to be sold or causing to be used any 'Chloramphenicol
Palmitate' not manufactured by plaintiff or plaintiff's wholly-owned subsidiary, Parke, Davis & Company, Inc."
Alleging that the defendants have not complied with such order, the plaintiff filed a motion to punish defendants for
contempt.

Before the court could act on the plaintiff's motion for contempt, the defendants filed a Motion to Dismiss, dated
May 25, 1966, alleging, among others, that the complaint states no cause of action against them since defendant No.
1 "was granted a compulsory license to manufacture, use and sell its own brands of medicinal preparation containing
'chloramphenicol'."

On June 17, 1966, the plaintiff filed its Opposition to Motion to Dismiss controverting, among others, defendants'
contention that the complaint states no cause of action. Plaintiff pointed out that the defendants have confused the
substance which is the subject matter of the complaint, namely, "Chloramphenicol Palmitate", with the substance
covered by the compulsory licensing case, namely, "Chloramphenicol", and the Letters Patent subject of the
complaint, namely, Letters Patent No. 279, with the Letters Patent subject of the compulsory licensing case, namely,
Letters Patent No. 50.

On June 27, 1966, the defendants filed their Reply to Opposition alleging, among others, that in advertising and
selling their product "Venimicetin Suspension," never do they state that the same contains "Chloramphenicol
Palmitate" They pointed out that even in the annexes of plaintiff's complaint (consisting of the packages and labels
allegedly used by the defendants in said product), only the substance "Chloramphenicol" is stated – showing that the
substance involved is Cloramphenicol and not "Chloramphenicol Palmitate".

On July 5, 1966, the plaintiff filed its Rejoinder to Reply to Opposition alleging among others, that while the
packages and labels of defendants' "Venimicetin Suspension" indicate that the same contains "Chloramphenicol",
the truth of the matter is that said product does not contains said substance but the subtance covered by letters
Patents No.279, namely, "Chloramphenicol Palmitate".

This, plaintiff pointed out, is expressly alleged in the complaint; thus, applying the rule that a motion to dismiss
hypothetically admits the truth of the allegations of the complaint, defendants are guilty of (1) infringement of
patent, by selling, causing to be sold, using or causing to be used "Chloramphenicol Palmitate" in their medicine
called "Venimicetin Suspension", and (2) unfair competition, by concealing that said medicine contains
"Chloramphenicol", and, by deceiving and misleading the purchasers who are trade to believe that "Venimicetin
Suspension" is covered by a compulsory license from the plaintiff.

On the basis of the foregoing pleadings, the Court of First Instance of Rizal issued the order dated August 22, 1966,
which dismissed the complaint on the ground of lack of cause of action, to wit:

xxx xxx xxx

After a careful consideration of the arguments for and against the motion to dismiss, and in view of the fact that the
substance covered by Letters Patent No. 50 and Letters Patent No. 279 is the same and that is, the substance known
as "Chloramphenicol", because while under Letters Patent No. 50, the substance is referred to as
"Chloramphenicol", in Letters Patent No. 279; THE SUBSTANCE HAS BEEN DENOMINATED AS
Chloramphenicol Palmitate it is the opinion of the Court that "Chloramphenicol" and "Chloramphenicol Palmitate
are the same, the difference being merely in the taste, and this Court to state that there was infringement of Patent
with respect to Letters Patent No. 279 would be tantamount to preventing the defendant, Doctors" Pharmaceuticals,
Inc., from exercising the right granted it by Letters Patent No. 50. It would further render nugatory the decision of
the Director of Patents, affirmed by the Supreme Court, granting the defendant, Doctors' Pharmaceuticals, Inc., the
right to use and import "Chloramphenicol".

The defendant, V-Lab Drughouse Corporation being merely a sales representative of the defendant, Doctors'
Pharmaceuticals, Inc., and the Court being of the opinion that there is no cause of action with respect to the principal
defendant, is likewise of the opinion that there is no cause of action with respect to the defendant, V-LAB
Drughouse Corporation.

It is likewise the opinion of this Court that there is no cause of action for unfair competition because a perusal of the
records of this case will show that under paragraph 7 of the Resolution of the Director of Patents, Annex "C" of the
Motion to Dismiss, the petitioner (Doctors' Pharmaceuticals, Inc.) shall adopt and use its owntrademarks or labels on
all its products containing Chloramphenicol under license from Parke. Davis, & Co., Inc., of Michigan, U.S.A.

The claim of the plaintiff that the representation:

First Compulsory License in the Philippines by Parke Davis Company, Detroit Michigan, U.S.A. is false and has a
definite tendency to deceive possible purchasers and distort the facts is not well-taken in view of the above-
mentioned (Par. 7) of the Resolution of the Director of Patents.

WHEREFORE, finding the ground of lack of cause of action to be well-taken, this case is ordered DISMISSED,
without pronouncement as to costs. The restraining order heretofore issued is hereby lifted and set aside. Having
reached the above conclusion, the Court will no longer pass upon the issue of contempt.

SO ORDERED.

Hence, the present appeal.

ISSUE(S):

Whether there was infringement of patent and unfair competition on the ground of failure to state a cause of action.

HELD:

YES. As can be gleaned from the appealed order, the lower court premised its ruling that there is no cause of action
for infringement of patent on the assumption that "Chloramphenicol" (the substance covered by Letters Patent No.
50) and "Chloramphenicol Palmitate" (the substance covered by Letters Patent No. 279) are the same. Thus, instead
of hypothetically assuming the truth of the plaintiff's allegation that "Chloramphenicol" and "Chloramphenicol
Palmitate are two different substances, the lower court had ruled against its veracity. This is clearly an error
considering that the said assumed fact cannot qualify as something which the court could take judicial notice of nor
was it competent to so find in the absence of evidence formally presented to that effect. The existence of two patents
separately covering said substances simply militates against said factual assumption and requires the presentation of
evidence sufficient to convince the court that said substances are indeed the same.

Under the law:

SEC. 37. RIGHTS OF PATENTEES. – A patentee shall have the exclusive right to make, use and sell the patented
machine, article or product, and to use the patented process for the purpose of industry or commerce, throughout the
territory of the Philippines for the term of the patent; and such making, using, or selling by any person without the
authorization of the patentee, constitutes infringement of the patent.

SEC. 42. CIVIL ACTION FOR INFRINGEMENT . – Any patentee, or anyone possessing any right, title or interest
in and to the patented invention, whose rights have been infringed, may bring a civil action before the proper Court
of First Instance, to recover from the infringed, damages sustained by reason of the infringement and to secure an
injunction for the protection of his rights.

Likewise, the defendants would be guilty of unfair competition by falsely stating that defendant No. l's medicine
called "Venimicetin Suspension" contains "Chloramphenicol" when in fact it actually contains "Chloramphenicol
Palmitate", and that it is covered by a compulsory license from the plaintiff. Section 29 of R.A. No. 166
provides, inter alia;

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

(c) Any person who shall make any false statement in the course of trade ... .
Clearly, the lower court erred in dismissing, on the ground of failure to state a cause of action, the complaint for
damages for infringement of patent and unfair competition.

WHEREFORE, the appealed order of dismissal is hereby set aside and the complaint for damages for infringement
of patent and unfair competition is hereby reinstated.

A06 G.R. No. 121867 July 24, 1997

SMITH KLINE & FRENCH LABORATORIES, LTD., petitioner,

vs.
COURT OF APPEALS, BUREAU OF PATENTS, TRADEMARKS AND TECHNOLOGY
TRANSFER and DOCTORS PHARMACEUTICALS, INC. respondents.
This is an appeal under Rule 45 of the Rules of Court from the decision CA which affirmed the decision of the
Director of the Bureau of Patents, Trademarks and Technology Transfer (BPTTT) granting a compulsory non-
exclusive and non-transferable license to private respondent to manufacture, use and sell in the Philippines its own
brands of pharmaceutical products containing petitioner's patented pharmaceutical product known as Cimetidine.

FACTS:

Petitioner is a foreign corporation and owns Philippine Letters Patent No. 12207 issued by the BPTTT for the patent
of the drug Cimetidine.

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

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

After appropriate proceedings, the BPTTT handed down its decision issuing a license in favor of the herein private
respondent, United Laboratories, Inc., under Letters Patent No. 12207 issued on November 29, 1978, subject to the
following terms and conditions:

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

5. By virtue of this license, [private respondent] shall pay [petitioner] a royalty on all license products containing the
patented substance made and sold by [private respondent] in the amount equivalent to TWO AND ONE HALF
PERCENT (2.5%) of the net sales in Philippine currency.

Petitioner then appealed to the CA by way of a petition for review. Petitioner claimed that the appealed decision was
erroneous because:

I
. . . [IT] VIOLATES INTERNATIONAL LAW AS EMBODIED IN THE PARIS CONVENTION FOR THE
PROTECTION OF INDUSTRIAL PROPERTY AND MUST ACCORDINGLY BE SET ASIDE AND
MODIFIED.
II
. . . [IT] IS AN INVALID EXERCISE OF POLICE POWER.
III
CONCEDING ARGUENDO THE QUESTIONED DECISION'S VALIDITY, THE BPTTT'S
PRONOUNCEMENT FIXING THE ROYALTY AT 2.5% OF THE NET WHOLESALE PRICE IN PHILIPPINE
CURRENCY WAS RENDERED WITHOUT ANY FACTUAL BASIS AND AMOUNTS TO EXPROPRIATION
OF PRIVATE PROPERTY WITHOUT JUST COMPENSATION WHICH IS VIOLATE OF THE
CONSTITUTION.
IV
. . . [IT] SHOULD NOT HAVE PROCEEDED TO DECIDE THE CASE BELOW FOR FAILURE OF PRIVATE
RESPONDENT TO AFFIRMATIVELY PROVE THE JURISDICTIONAL FACT OF PUBLICATION.5

The CA affirmed in toto the challenged decision. We quote its findings and conclusion upon which the affirmance is
anchored, viz.:

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

As to the claim by the petitioner that it has the capacity to work the patented product although it was not shown that
any pretended abuse has been committed, thus the reason for granting compulsory license "is intended not only to
give a chance to others to supply the public with the quantity of the patented article but especially to prevent the
building up of patent monopolies."

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

ISSUE(S):

Its motion for reconsideration having been denied in the resolution of 31 August 1995, petitioner filed the instant
petition for review on certiorari with the following assignment of errors:
I
THE HON. COURT OF APPEALS ERRED IN NOT HOLDING THAT THE BPTTT'S DECISION VIOLATES
INTERNATIONAL LAW AS EMBODIED IN (A) THE PARIS CONVENTION FOR THE PROTECTION OF
INDUSTRIAL PROPERTY AND (B) THE GATT TREATY, URUGUAY ROUND, AND MUST
ACCORDINGLY BE SET ASIDE AND MODIFIED.
II
THE HON. COURT OF APPEALS ERRED IN NOT HOLDING THAT THE BPTTT'S DECISION IS AN
INVALID EXERCISE OF POLICE POWER, ABSENT ANY SHOWING BY EVIDENCE OF AN
OVERWHELMING PUBLIC NEED FOR A COMPULSORY LICENSE OVER CIMETIDINE IN FAVOR OF
PRIVATE RESPONDENT.
III
THE HON. COURT OF APPEALS ERRED IN NOT HOLDING THAT THE BPTTT'S PRONOUNCEMENT
FIXING THE ROYALTY FOR AN INVOLUNTARY LICENSE AT 2.5% OF THE NET WHOLESALE PRICE
IN PHILIPPINE CURRENCY WAS RENDERED WITHOUT ANY FACTUAL BASIS AND AMOUNTS TO
EXPORTATION OF PRIVATE PROPERTY WITHOUT JUST COMPENSATION AND IS IN VIOLATION OF
THE CONSTITUTIONAL RIGHT TO DUE PROCESS.
IV
THE HON. COURT OF APPEALS ERRED IN NOT HOLDING THE BPTTT'S ACTION WAS RENDERED
NULL AND VOID FOR FAILURE OF PRIVATE RESPONDENT TO AFFIRMATIVELY PROVE THE
JURISDICTIONAL FACT OF PUBLICATION AS REQUIRED BY LAW.

HELD:

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

In its first assigned error, petitioner invokes Article 5 of the Paris Convention, of which the Philippines became a
party thereto only in 1965. Pertinent portions of said Article 5, Section A, provide:

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

(4) A compulsory license may not be applied for on the ground of failure to work or insufficient working before the
expiration of a period of four years from the date of filing of the patent application or three years from the date of
the grant of the patent, whichever period expires last; it shall be refused if the patentee justifies his inaction by
legitimate reasons. Such a compulsory license shall be non-exclusive and shall not be transferable, even in the form
of the grant of a sub-license, except with that part of the enterprise or goodwill which exploits such license.

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

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

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

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

(a) If the patented invention is not being worked within the Philippines on a commercial scale, although capable of
being so worked, without satisfactory reason;
(b) If the demand for the patented article in the Philippines is not being met to an adequate extent and on reasonable
terms;
(c) If, by reason of refusal of the patentee to grant a license or licenses on reasonable terms, or by reason of the
conditions attached by the patentee to licensee or to the purchase, lease or use of the patented article or working of
the patented process or machine for production, the establishment of any new trade or industry in the Philippines is
prevented, or the trade or industry therein is unduly restrained;
(d) If the working of the invention within the country is being prevented or hindered by the importation of the
patented article; or
(e) If the patented invention or article relates to food or medicine or manufactured products or substances which can
be used as food or medicine, or is necessary for public health or public safety.

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

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

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

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

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

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

The second and third assigned errors relate more to the factual findings of the Court of Appeals. Well-established is
the principle that the findings of facts of the latter are conclusive, unless: (1) the conclusion is a finding grounded
entirely on speculation or conjecture; (2) the inference made is manifestly absurd; (3) there is grave abuse of
discretion in the appreciation of facts; (4) the judgment is premised on a misapprehension of facts; (5) the findings
of fact are conflicting; and (6) the Court of Appeals, in making its findings, went beyond the issues of the case and
the same is contrary to the admissions of both the appellant and appellee. Petitioner has not convinced us that the
instant case falls under any of the exceptions. On the contrary, we find the findings of fact and conclusions of
respondent Court of Appeals and that of the BPTTT to be fully supported by the evidence and the applicable law
and jurisprudence on the matter.
Petitioner's claim of violations of the due process and eminent domain clauses of the Bill of Rights are mere
conclusions which it failed to convincingly support. As to due the process argument, suffice it to say that full-blown
adversarial proceedings were conducted before the BPTTT pursuant to the Patent Law. We agree with the Court of
Appeals that the BPTTT exhaustively studied the facts and its findings were fully supported by substantial evidence.
It cannot likewise be claimed that petitioner was unduly deprived of its property rights, as R.A. No. 165 not only
grants the patent holder a protective period of two years to enjoy his exclusive rights thereto; but subsequently, the
law recognizes just compensation in the form of royalties.

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

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

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

WHEREFORE, the petition is hereby DENIED and the challenged decision of the CA is AFIRMED.