Caterpillar, Inc. vs.

Manolo Samson

Facts: Petitioner Caterpillar is a foreign corporation engaged in the manufacture and distribution of
footwear, clothing and related items, all of which are alleged as internationally known “Caterpillar”,
“CAT”, “Caterpillar & Design”, “Cat and Design”, “Walking Machines”and “Track-Type Tractor & Design.
(Core Marks).

Respondent Samson, doing business under the names and styles of Itti Shoes Corporation, Kolm’s
Manufacturing Corporation and Caterpillar Boutique and General Merchandise, is the proprietor of
various retail outlets in the Philippines selling footwear, bags, clothing, and related items under the
trademark “Caterpillar”, issued by the Intellectual Property Office (IPO).

The RTC Makati City, issued Search Warrants upon application of the National Bureau of Investigation
(NBI), to search the establishments owned, controlled and operated by Samson. It led to the seizure of
various products bearing Caterpillar’s Core Marks.

Petitioner commenced a civil action against Respondent and his business entities, with the IPO as a
nominal party-for Unfair Competition, Damages and Cancellation of Trademark with Application for
Temporary Restraining Order, which the RTC denied the TRO.

However, respondent and his affiliate companies still continued to sell and distribute products clothed
with the general appearance of its own products. Petitioner again applied for another set of search
warrants. Upon application of the NBI, the RTC Valenzuela issued a search warrant. As a consequence,
petitioner filed a criminal complaints for unfair competition against respondent before the DOJ. Again
the DOJ issued a joint resolution recommending the filing of criminal complaints under Certain sections
of RA No. 8293, or the Intellectual Property Code of the Philippines.

Respondent filed a petitions for review with the Office of the Secretary of Justice to appeal the joint
resolution. However, it was denied. Respondent also filed a motion to suspend arraignment citing that
there exists prejudicial questions pending litigation. It was granted, holding that there exists a
prejudicial question since the determination of who is really the lawful or registered user of the
trademark “Caterpillar”will ultimately determine whether or not the instant criminal action shall
proceed.

Issue: Whether or not it is correct to suspend the proceedings in the criminal cases on the basis of
prejudicial questions.

Ruling: NO. The civil cases are independent civil action that did not operate as a prejudicial question to
justify the suspension of the proceedings in Criminal Cases. A common element of all such cases for
unfair competition in civil and criminal was fraud. Under Article 33 of the Civil Code, a civil action
entirely separate and distinct from the criminal action may be brought by the injured party in cases of
fraud, and such civil action shall proceed independently of the criminal prosecution. In view of its being
independent civil action, did not operate as a prejudicial question that justified the suspension of the
proceedings in Criminal Cases.

Under Rule 111, Sec. 3 of the Revised Rules on Criminal Procedure, in the cases provided in Article 32,
33, 34 and 2176 of the Civil Code, the independent Civil action maybe brought by the offended party. It
shall proceed independently of the Criminal Action and shall require only a preponderance of evidence.
Hence, Civil Case which as admitted by private respondent also relate to unfair competition, is an
independent civil action under Article 33 of the Civil Code. As such, it will not operate as a prejudicial
question that will justify the suspension of the criminal cases at bar.

A civil action for damages and cancellation of trademark cannot be considered a prejudicial question by
which to suspend the proceedings in the criminal cases for unfair competition.

The elements of a prejudicial question are provided in Sec. 7 of Rule 111, Rules of Court.

a) a previously instituted civil action involves an issue similar to or intimately related to the issue raised
in the subsequent criminal action, and

b) the resolution of such issue determines whether or not the criminal action may proceed.

An action for the cancellation of trademark like in the civil cases is a remedy available to a person who
believes that he is or will be damaged by the registration of a mark. On the otherhand, the criminal
actions for unfair competition involved the determination of whether or not respondent had given his
goods the general appearance of the goods of Caterpillar, with the intent to deceive the public or
defraud Caterpillar as his competitor. In the suit for the cancellation of trademark, the issue of lawful
registration should necessarily be determined, but registration was not a consideration necessary in
unfair competition.

Clearly, the determination of the lawful ownership of the trademark in the civil action was not
determinative of whether or not the criminal actions for unfair competition shall proceed against the
respondent.