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G.R. No. 118295 May 2, 1997 WIGBERTO E.

TAADA and ANNA DOMINIQUE COSETENG, as members of the Philippine Senate and as taxpayers; GREGORIO ANDOLANA and JOKER ARROYO as members of the House of Representatives and as taxpayers; NICANOR P. PERLAS and HORACIO R. MORALES, both as taxpayers; CIVIL LIBERTIES UNION, NATIONAL ECONOMIC PROTECTIONISM ASSOCIATION, CENTER FOR ALTERNATIVE DEVELOPMENT INITIATIVES, LIKAS-KAYANG KAUNLARAN FOUNDATION, INC., PHILIPPINE RURAL RECONSTRUCTION MOVEMENT, DEMOKRATIKONG KILUSAN NG MAGBUBUKID NG PILIPINAS, INC., and PHILIPPINE PEASANT INSTITUTE, in representation of various taxpayers and as non-governmental organizations, petitioners, vs. EDGARDO ANGARA, ALBERTO ROMULO, LETICIA RAMOS-SHAHANI, HEHERSON ALVAREZ, AGAPITO AQUINO, RODOLFO BIAZON, NEPTALI GONZALES, ERNESTO HERRERA, JOSE LINA, GLORIA. MACAPAGAL-ARROYO, ORLANDO MERCADO, BLAS OPLE, JOHN OSMEA, SANTANINA RASUL, RAMON REVILLA, RAUL ROCO, FRANCISCO TATAD and FREDDIE WEBB, in their respective capacities as members of the Philippine Senate who concurred in the ratification by the President of the Philippines of the Agreement Establishing the World Trade Organization; SALVADOR ENRIQUEZ, in his capacity as Secretary of Budget and Management; CARIDAD VALDEHUESA, in her capacity as National Treasurer; RIZALINO NAVARRO, in his capacity as Secretary of Trade and Industry; ROBERTO SEBASTIAN, in his capacity as Secretary of Agriculture; ROBERTO DE OCAMPO, in his capacity as Secretary of Finance; ROBERTO ROMULO, in his capacity as Secretary of Foreign Affairs; and TEOFISTO T. GUINGONA, in his capacity as Executive Secretary, respondents. PANGANIBAN, J.: The emergence on January 1, 1995 of the World Trade Organization, abetted by the membership thereto of the vast majority of countries has revolutionized international business and economic relations amongst states. It has irreversibly propelled the world towards trade liberalization and economic globalization. Liberalization, globalization, deregulation and privatization, the third-millennium buzz words, are ushering in a new borderless world of business by sweeping away as mere historical relics the heretofore traditional modes of promoting and protecting national economies like tariffs, export subsidies, import quotas, quantitative restrictions, tax exemptions and currency controls. Finding market niches and becoming the best in specific industries in a market-driven and export-oriented global scenario are replacing age-old "beggar-thy-neighbor" policies that unilaterally protect weak and inefficient domestic producers of goods and services. In the words of Peter Drucker, the well-known management guru, "Increased participation in the world economy has become the key to domestic economic growth and prosperity." Brief Historical Background To hasten worldwide recovery from the devastation wrought by the Second World War, plans for the establishment of three multilateral institutions inspired by that grand political body, the United Nations were discussed at Dumbarton Oaks and Bretton Woods. The first was the World Bank (WB) which was to address the rehabilitation and reconstruction of war-ravaged and later developing countries; the second, the International Monetary Fund (IMF) which was to deal with currency problems; and the third, the International Trade Organization (ITO), which was to foster order and predictability in world trade and to minimize unilateral protectionist policies that invite challenge, even retaliation, from other states. However, for a variety of reasons, including its non-ratification by the United States, the ITO, unlike the IMF and WB, never took off. What remained was only GATT the General Agreement on Tariffs and Trade. GATT was a collection of treaties governing access to the economies of treaty adherents with no institutionalized body administering the agreements or dependable system of dispute settlement. After half a century and several dizzying rounds of negotiations, principally the Kennedy Round, the Tokyo Round and the Uruguay Round, the world finally gave birth to that administering body the World Trade Organization with the signing of the "Final Act" in Marrakesh, Morocco and the ratification of the WTO Agreement by its members. 1 Like many other developing countries, the Philippines joined WTO as a founding member with the goal, as articulated by President Fidel V. Ramos in two letters to the Senate (infra), of improving "Philippine access to foreign markets, especially its major trading partners, through the reduction of tariffs on its exports, particularly agricultural and industrial products." The President also saw in the WTO the opening of "new opportunities for the services sector . . . , (the reduction of) costs and uncertainty associated with exporting . . . , and (the attraction of) more investments into the country." Although the Chief Executive did not expressly mention it in his letter, the Philippines and this is of special interest to the legal profession will benefit from the WTO system of dispute settlement by judicial adjudication through the independent WTO settlement bodies called (1) Dispute Settlement Panels and (2) Appellate Tribunal. Heretofore, trade disputes were settled mainly through negotiations where solutions were arrived at frequently on the basis of relative bargaining strengths, and where naturally, weak and underdeveloped countries were at a disadvantage. The Petition in Brief Arguing mainly (1) that the WTO requires the Philippines "to place nationals and products of member-countries on the same footing as Filipinos and local products" and (2) that the WTO "intrudes, limits and/or impairs" the constitutional powers of both Congress and the Supreme Court, the instant petition before this Court assails the WTO Agreement for violating the mandate of the 1987 Constitution to "develop a self-reliant and independent national economy effectively controlled by Filipinos . . . (to) give preference to qualified Filipinos (and to) promote the preferential use of Filipino labor, domestic materials and locally produced goods."

Simply stated, does the Philippine Constitution prohibit Philippine participation in worldwide trade liberalization and economic globalization? Does it proscribe Philippine integration into a global economy that is liberalized, deregulated and privatized? These are the main questions raised in this petition for certiorari, prohibition and mandamus under Rule 65 of the Rules of Court praying (1) for the nullification, on constitutional grounds, of the concurrence of the Philippine Senate in the ratification by the President of the Philippines of the Agreement Establishing the World Trade Organization (WTO Agreement, for brevity) and (2) for the prohibition of its implementation and enforcement through the release and utilization of public funds, the assignment of public officials and employees, as well as the use of government properties and resources by respondent-heads of various executive offices concerned therewith. This concurrence is embodied in Senate Resolution No. 97, dated December 14, 1994. The Facts On April 15, 1994, Respondent Rizalino Navarro, then Secretary of The Department of Trade and Industry (Secretary Navarro, for brevity), representing the Government of the Republic of the Philippines, signed in Marrakesh, Morocco, the Final Act Embodying the Results of the Uruguay Round of Multilateral Negotiations (Final Act, for brevity). By signing the Final Act, 2 Secretary Navarro on behalf of the Republic of the Philippines, agreed: (a) to submit, as appropriate, the WTO Agreement for the consideration of their respective competent authorities, with a view to seeking approval of the Agreement in accordance with their procedures; and (b) to adopt the Ministerial Declarations and Decisions. On August 12, 1994, the members of the Philippine Senate received a letter dated August 11, 1994 from the President of the Philippines, 3 stating among others that "the Uruguay Round Final Act is hereby submitted to the Senate for its concurrence pursuant to Section 21, Article VII of the Constitution." On August 13, 1994, the members of the Philippine Senate received another letter from the President of the Philippines 4 likewise dated August 11, 1994, which stated among others that "the Uruguay Round Final Act, the Agreement Establishing the World Trade Organization, the Ministerial Declarations and Decisions, and the Understanding on Commitments in Financial Services are hereby submitted to the Senate for its concurrence pursuant to Section 21, Article VII of the Constitution." On December 9, 1994, the President of the Philippines certified the necessity of the immediate adoption of P.S. 1083, a resolution entitled "Concurring in the Ratification of the Agreement Establishing the World Trade Organization."

On December 14, 1994, the Philippine Senate adopted Resolution No. 97 which "Resolved, as it is hereby resolved, that the Senate concur, as it hereby concurs, in the ratification by the President of the Philippines of the Agreement Establishing the World Trade Organization." 6 The text of the WTO Agreement is written on pages 137 et seq. of Volume I of the 36-volume Uruguay Round of Multilateral Trade Negotiations and includes various agreements and associated legal instruments (identified in the said Agreement as Annexes 1, 2 and 3 thereto and collectively referred to as Multilateral Trade Agreements, for brevity) as follows: ANNEX 1 Annex 1A: Multilateral Agreement on Trade in Goods General Agreement on Tariffs and Trade 1994 Agreement on Agriculture Agreement on the Application of Sanitary and Phytosanitary Measures Agreement on Textiles and Clothing Agreement on Technical Barriers to Trade Agreement on Trade-Related Investment Measures Agreement on Implementation of Article VI of he General Agreement on Tariffs and Trade 1994 Agreement on Implementation of Article VII of the General on Tariffs and Trade 1994 Agreement on Pre-Shipment Inspection Agreement on Rules of Origin Agreement on Imports Licensing Procedures Agreement on Subsidies and Coordinating Measures Agreement on Safeguards Annex 1B: General Agreement on Trade in Services and Annexes Annex 1C: Agreement on Trade-Related Aspects of Intellectual Property Rights ANNEX 2 Understanding on Rules and Procedures Governing the Settlement of Disputes ANNEX 3 Trade Policy Review Mechanism On December 16, 1994, the President of the Philippines signed 7 the Instrument of Ratification, declaring: NOW THEREFORE, be it known that I, FIDEL V. RAMOS, President of the Republic of the Philippines, after having seen and considered the aforementioned Agreement Establishing the World Trade

Organization and the agreements and associated legal instruments included in Annexes one (1), two (2) and three (3) of that Agreement which are integral parts thereof, signed at Marrakesh, Morocco on 15 April 1994, do hereby ratify and confirm the same and every Article and Clause thereof. To emphasize, the WTO Agreement ratified by the President of the Philippines is composed of the Agreement Proper and "the associated legal instruments included in Annexes one (1), two (2) and three (3) of that Agreement which are integral parts thereof." On the other hand, the Final Act signed by Secretary Navarro embodies not only the WTO Agreement (and its integral annexes aforementioned) but also (1) the Ministerial Declarations and Decisions and (2) the Understanding on Commitments in Financial Services. In his Memorandum dated May 13, 1996, 8 the Solicitor General describes these two latter documents as follows: The Ministerial Decisions and Declarations are twenty-five declarations and decisions on a wide range of matters, such as measures in favor of least developed countries, notification procedures, relationship of WTO with the International Monetary Fund (IMF), and agreements on technical barriers to trade and on dispute settlement. The Understanding on Commitments in Financial Services dwell on, among other things, standstill or limitations and qualifications of commitments to existing non-conforming measures, market access, national treatment, and definitions of nonresident supplier of financial services, commercial presence and new financial service. On December 29, 1994, the present petition was filed. After careful deliberation on respondents' comment and petitioners' reply thereto, the Court resolved on December 12, 1995, to give due course to the petition, and the parties thereafter filed their respective memoranda. The court also requested the Honorable Lilia R. Bautista, the Philippine Ambassador to the United Nations stationed in Geneva, Switzerland, to submit a paper, hereafter referred to as "Bautista Paper," 9 for brevity, (1) providing a historical background of and (2) summarizing the said agreements. During the Oral Argument held on August 27, 1996, the Court directed: (a) the petitioners to submit the (1) Senate Committee Report on the matter in controversy and (2) the transcript of proceedings/hearings in the Senate; and (b) the Solicitor General, as counsel for respondents, to file (1) a list of Philippine treaties signed prior to the Philippine

adherence to the WTO Agreement, which derogate from Philippine sovereignty and (2) copies of the multi-volume WTO Agreement and other documents mentioned in the Final Act, as soon as possible. After receipt of the foregoing documents, the Court said it would consider the case submitted for resolution. In a Compliance dated September 16, 1996, the Solicitor General submitted a printed copy of the 36-volume Uruguay Round of Multilateral Trade Negotiations, and in another Compliance dated October 24, 1996, he listed the various "bilateral or multilateral treaties or international instruments involving derogation of Philippine sovereignty." Petitioners, on the other hand, submitted their Compliance dated January 28, 1997, on January 30, 1997. The Issues In their Memorandum dated March 11, 1996, petitioners summarized the issues as follows: A. Whether the petition presents a political question or is otherwise not justiciable. B. Whether the petitioner members of the Senate who participated in the deliberations and voting leading to the concurrence are estopped from impugning the validity of the Agreement Establishing the World Trade Organization or of the validity of the concurrence. C. Whether the provisions of the Agreement Establishing the World Trade Organization contravene the provisions of Sec. 19, Article II, and Secs. 10 and 12, Article XII, all of the 1987 Philippine Constitution. D. Whether provisions of the Agreement Establishing the World Trade Organization unduly limit, restrict and impair Philippine sovereignty specifically the legislative power which, under Sec. 2, Article VI, 1987 Philippine Constitution is "vested in the Congress of the Philippines"; E. Whether provisions of the Agreement Establishing the World Trade Organization interfere with the exercise of judicial power. F. Whether the respondent members of the Senate acted in grave abuse of discretion amounting to lack or excess of jurisdiction when they voted for concurrence in the ratification of the constitutionally-infirm Agreement Establishing the World Trade Organization.

G. Whether the respondent members of the Senate acted in grave abuse of discretion amounting to lack or excess of jurisdiction when they concurred only in the ratification of the Agreement Establishing the World Trade Organization, and not with the Presidential submission which included the Final Act, Ministerial Declaration and Decisions, and the Understanding on Commitments in Financial Services. On the other hand, the Solicitor General as counsel for respondents "synthesized the several issues raised by petitioners into the following": 10 1. Whether or not the provisions of the "Agreement Establishing the World Trade Organization and the Agreements and Associated Legal Instruments included in Annexes one (1), two (2) and three (3) of that agreement" cited by petitioners directly contravene or undermine the letter, spirit and intent of Section 19, Article II and Sections 10 and 12, Article XII of the 1987 Constitution. 2. Whether or not certain provisions of the Agreement unduly limit, restrict or impair the exercise of legislative power by Congress. 3. Whether or not certain provisions of the Agreement impair the exercise of judicial power by this Honorable Court in promulgating the rules of evidence. 4. Whether or not the concurrence of the Senate "in the ratification by the President of the Philippines of the Agreement establishing the World Trade Organization" implied rejection of the treaty embodied in the Final Act. By raising and arguing only four issues against the seven presented by petitioners, the Solicitor General has effectively ignored three, namely: (1) whether the petition presents a political question or is otherwise not justiciable; (2) whether petitioner-members of the Senate (Wigberto E. Taada and Anna Dominique Coseteng) are estopped from joining this suit; and (3) whether the respondent-members of the Senate acted in grave abuse of discretion when they voted for concurrence in the ratification of the WTO Agreement. The foregoing notwithstanding, this Court resolved to deal with these three issues thus: (1) The "political question" issue being very fundamental and vital, and being a matter that probes into the very jurisdiction of this Court to hear and decide this case was deliberated upon by the Court and will thus be ruled upon as the first issue; (2) The matter of estoppel will not be taken up because this defense is waivable and the respondents have effectively waived it by not pursuing it in any of their pleadings; in any

event, this issue, even if ruled in respondents' favor, will not cause the petition's dismissal as there are petitioners other than the two senators, who are not vulnerable to the defense of estoppel; and (3) The issue of alleged grave abuse of discretion on the part of the respondent senators will be taken up as an integral part of the disposition of the four issues raised by the Solicitor General. During its deliberations on the case, the Court noted that the respondents did not question the locus standi of petitioners. Hence, they are also deemed to have waived the benefit of such issue. They probably realized that grave constitutional issues, expenditures of public funds and serious international commitments of the nation are involved here, and that transcendental public interest requires that the substantive issues be met head on and decided on the merits, rather than skirted or deflected by procedural matters. 11 To recapitulate, the issues that will be ruled upon shortly are: (1) DOES THE PETITION PRESENT A JUSTICIABLE CONTROVERSY? OTHERWISE STATED, DOES THE PETITION INVOLVE A POLITICAL QUESTION OVER WHICH THIS COURT HAS NO JURISDICTION? (2) DO THE PROVISIONS OF THE WTO AGREEMENT AND ITS THREE ANNEXES CONTRAVENE SEC. 19, ARTICLE II, AND SECS. 10 AND 12, ARTICLE XII, OF THE PHILIPPINE CONSTITUTION? (3) DO THE PROVISIONS OF SAID AGREEMENT AND ITS ANNEXES LIMIT, RESTRICT, OR IMPAIR THE EXERCISE OF LEGISLATIVE POWER BY CONGRESS? (4) DO SAID PROVISIONS UNDULY IMPAIR OR INTERFERE WITH THE EXERCISE OF JUDICIAL POWER BY THIS COURT IN PROMULGATING RULES ON EVIDENCE? (5) WAS THE CONCURRENCE OF THE SENATE IN THE WTO AGREEMENT AND ITS ANNEXES SUFFICIENT AND/OR VALID, CONSIDERING THAT IT DID NOT INCLUDE THE FINAL ACT, MINISTERIAL DECLARATIONS AND DECISIONS, AND THE UNDERSTANDING ON COMMITMENTS IN FINANCIAL SERVICES? The First Issue: Does the Court Have Jurisdiction Over the Controversy?

In seeking to nullify an act of the Philippine Senate on the ground that it contravenes the Constitution, the petition no doubt raises a justiciable controversy. Where an action of the legislative branch is seriously alleged to have infringed the Constitution, it becomes not only the right but in fact the duty of the judiciary to settle the dispute. "The question thus posed is judicial rather than political. The duty (to adjudicate) remains to assure that the supremacy of the Constitution is upheld." 12 Once a "controversy as to the application or interpretation of a constitutional provision is raised before this Court (as in the instant case), it becomes a legal issue which the Court is bound by constitutional mandate to decide." 13 The jurisdiction of this Court to adjudicate the matters 14 raised in the petition is clearly set out in the 1987 Constitution, 15 as follows: Judicial power includes the duty of the courts of justice to settle actual controversies involving rights which are legally demandable and enforceable, and to determine whether or not there has been a grave abuse of discretion amounting to lack or excess of jurisdiction on the part of any branch or instrumentality of the government. The foregoing text emphasizes the judicial department's duty and power to strike down grave abuse of discretion on the part of any branch or instrumentality of government including Congress. It is an innovation in our political law. 16 As explained by former Chief Justice Roberto Concepcion, 17 "the judiciary is the final arbiter on the question of whether or not a branch of government or any of its officials has acted without jurisdiction or in excess of jurisdiction or so capriciously as to constitute an abuse of discretion amounting to excess of jurisdiction. This is not only a judicial power but a duty to pass judgment on matters of this nature." As this Court has repeatedly and firmly emphasized in many cases, 18 it will not shirk, digress from or abandon its sacred duty and authority to uphold the Constitution in matters that involve grave abuse of discretion brought before it in appropriate cases, committed by any officer, agency, instrumentality or department of the government. As the petition alleges grave abuse of discretion and as there is no other plain, speedy or adequate remedy in the ordinary course of law, we have no hesitation at all in holding that this petition should be given due course and the vital questions raised therein ruled upon under Rule 65 of the Rules of Court. Indeed, certiorari, prohibition and mandamus are appropriate remedies to raise constitutional issues and to review and/or prohibit/nullify, when proper, acts of legislative and executive officials. On this, we have no equivocation. We should stress that, in deciding to take jurisdiction over this petition, this Court will not review the wisdom of the decision of the President and the Senate in enlisting the country into the WTO, or pass upon the merits of trade liberalization as a policy espoused by said international body. Neither will it rule on the propriety of the

government's economic policy of reducing/removing tariffs, taxes, subsidies, quantitative restrictions, and other import/trade barriers. Rather, it will only exercise its constitutional duty "to determine whether or not there had been a grave abuse of discretion amounting to lack or excess of jurisdiction" on the part of the Senate in ratifying the WTO Agreement and its three annexes. Second Issue: The WTO Agreement and Economic Nationalism This is the lis mota, the main issue, raised by the petition. Petitioners vigorously argue that the "letter, spirit and intent" of the Constitution mandating "economic nationalism" are violated by the so-called "parity provisions" and "national treatment" clauses scattered in various parts not only of the WTO Agreement and its annexes but also in the Ministerial Decisions and Declarations and in the Understanding on Commitments in Financial Services. Specifically, the "flagship" constitutional provisions referred to are Sec 19, Article II, and Secs. 10 and 12, Article XII, of the Constitution, which are worded as follows: Article II DECLARATION OF PRINCIPLES AND STATE POLICIES xxx xxx xxx Sec. 19. The State shall develop a selfreliant and independent national economy effectively controlled by Filipinos. xxx xxx xxx Article XII NATIONAL ECONOMY AND PATRIMONY xxx xxx xxx Sec. 10. . . . The Congress shall enact measures that will encourage the formation and operation of enterprises whose capital is wholly owned by Filipinos. In the grant of rights, privileges, and concessions covering the national economy and patrimony, the State shall give preference to qualified Filipinos. xxx xxx xxx Sec. 12. The State shall promote the preferential use of Filipino labor, domestic materials and locally produced goods, and adopt measures that help make them competitive.

Petitioners aver that these sacred constitutional principles are desecrated by the following WTO provisions quoted in their memorandum: 19 a) In the area of investment measures related to trade in goods (TRIMS, for brevity): Article 2 National Treatment Restrictions. and Quantitative

or value of local products that it exports. 2. TRIMS that are inconsistent with the obligations of general elimination of quantitative restrictions provided for in paragraph 1 of Article XI of GATT 1994 include those which are mandatory or enforceable under domestic laws or under administrative rulings, or compliance with which is necessary to obtain an advantage, and which restrict: (a) the importation by an enterprise of products used in or related to the local production that it exports; (b) the importation by an enterprise of products used in or related to its local production by restricting its access to foreign exchange inflows attributable to the enterprise; or (c) the exportation or sale for export specified in terms of particular products, in terms of volume or value of products, or in terms of a preparation of volume or value of its local production. (Annex to the Agreement on Trade-Related Investment Measures, Vol. 27, Uruguay Round Legal Documents, p. 22125, emphasis supplied). The paragraph 4 of Article III of GATT 1994 referred to is quoted as follows: The products of the territory of any contracting party imported into the territory of any other contracting party shall be accorded treatment no less favorable than that accorded to like products of national origin in respect of laws, regulations and requirements affecting their internal sale, offering for sale, purchase, transportation, distribution or use, the provisions of this paragraph shall not prevent the application of differential internal transportation charges which are based exclusively on the economic operation of the means of transport and not on the nationality of the product." (Article III, GATT 1947, as amended by the Protocol Modifying Part II, and Article

1. Without prejudice to other rights and obligations under GATT 1994, no Member shall apply any TRIM that is inconsistent with the provisions of Article II or Article XI of GATT 1994. 2. An illustrative list of TRIMS that are inconsistent with the obligations of general elimination of quantitative restrictions provided for in paragraph I of Article XI of GATT 1994 is contained in the Annex to this Agreement." (Agreement on Trade-Related Investment Measures, Vol. 27, Uruguay Round, Legal Instruments, p. 22121, emphasis supplied). The Annex referred to reads as follows: ANNEX Illustrative List 1. TRIMS that are inconsistent with the obligation of national treatment provided for in paragraph 4 of Article III of GATT 1994 include those which are mandatory or enforceable under domestic law or under administrative rulings, or compliance with which is necessary to obtain an advantage, and which require: (a) the purchase or use by an enterprise of products of domestic origin or from any domestic source, whether specified in terms of particular products, in terms of volume or value of products, or in terms of proportion of volume or value of its local production; or (b) that an enterprise's purchases or use of imported products be limited to an amount related to the volume

XXVI of GATT, 14 September 1948, 62 UMTS 82-84 in relation to paragraph 1(a) of the General Agreement on Tariffs and Trade 1994, Vol. 1, Uruguay Round, Legal Instruments p. 177, emphasis supplied). (b) In the area of trade related aspects of intellectual property rights (TRIPS, for brevity): Each Member shall accord to the nationals of other Members treatment no less favourable than that it accords to its own nationals with regard to the protection of intellectual property. . . (par. 1 Article 3, Agreement on Trade-Related Aspect of Intellectual Property rights, Vol. 31, Uruguay Round, Legal Instruments, p. 25432 (emphasis supplied) (c) In the area of the General Agreement on Trade in Services: National Treatment 1. In the sectors inscribed in its schedule, and subject to any conditions and qualifications set out therein, each Member shall accord to services and service suppliers of any other Member, in respect of all measures affecting the supply of services, treatment no less favourable than it accords to its own like services and service suppliers. 2. A Member may meet the requirement of paragraph I by according to services and service suppliers of any other Member, either formally suppliers of any other Member, either formally identical treatment or formally different treatment to that it accords to its own like services and service suppliers. 3. Formally identical or formally different treatment shall be considered to be less favourable if it modifies the conditions of completion in favour of services or service suppliers of the Member compared to like services or service suppliers of any other

Member. (Article XVII, General Agreement on Trade in Services, Vol. 28, Uruguay Round Legal Instruments, p. 22610 emphasis supplied). It is petitioners' position that the foregoing "national treatment" and "parity provisions" of the WTO Agreement "place nationals and products of member countries on the same footing as Filipinos and local products," in contravention of the "Filipino First" policy of the Constitution. They allegedly render meaningless the phrase "effectively controlled by Filipinos." The constitutional conflict becomes more manifest when viewed in the context of the clear duty imposed on the Philippines as a WTO member to ensure the conformity of its laws, regulations and administrative procedures with its obligations as provided in the annexed agreements. 20 Petitioners further argue that these provisions contravene constitutional limitations on the role exports play in national development and negate the preferential treatment accorded to Filipino labor, domestic materials and locally produced goods. On the other hand, respondents through the Solicitor General counter (1) that such Charter provisions are not selfexecuting and merely set out general policies; (2) that these nationalistic portions of the Constitution invoked by petitioners should not be read in isolation but should be related to other relevant provisions of Art. XII, particularly Secs. 1 and 13 thereof; (3) that read properly, the cited WTO clauses do not conflict with Constitution; and (4) that the WTO Agreement contains sufficient provisions to protect developing countries like the Philippines from the harshness of sudden trade liberalization. We shall now discuss and rule on these arguments. Declaration of Principles Not Self-Executing By its very title, Article II of the Constitution is a "declaration of principles and state policies." The counterpart of this article in the 1935 Constitution 21 is called the "basic political creed of the nation" by Dean Vicente Sinco. 22 These principles in Article II are not intended to be self-executing principles ready for enforcement through the courts. 23 They are used by the judiciary as aids or as guides in the exercise of its power of judicial review, and by the legislature in its enactment of laws. As held in the leading case of Kilosbayan, Incorporated vs. Morato, 24 the principles and state policies enumerated in Article II and some sections of Article XII are not "self-executing provisions, the disregard of which can give rise to a cause of action in the courts. They do not embody judicially enforceable constitutional rights but guidelines for legislation." In the same light, we held in Basco vs. Pagcor 25 that broad constitutional principles need legislative enactments to implement the, thus: On petitioners' allegation that P.D. 1869 violates Sections 11 (Personal Dignity) 12 (Family) and 13 (Role of Youth) of Article II; Section 13 (Social Justice) of

Article XIII and Section 2 (Educational Values) of Article XIV of the 1987 Constitution, suffice it to state also that these are merely statements of principles and policies. As such, they are basically not self-executing, meaning a law should be passed by Congress to clearly define and effectuate such principles. In general, therefore, the 1935 provisions were not intended to be self-executing principles ready for enforcement through the courts. They were rather directives addressed to the executive and to the legislature. If the executive and the legislature failed to heed the directives of the article, the available remedy was not judicial but political. The electorate could express their displeasure with the failure of the executive and the legislature through the language of the ballot. (Bernas, Vol. II, p. 2). The reasons for denying a cause of action to an alleged infringement of board constitutional principles are sourced from basic considerations of due process and the lack of judicial authority to wade "into the uncharted ocean of social and economic policy making." Mr. Justice Florentino P. Feliciano in his concurring opinion in Oposa vs. Factoran, Jr., 26 explained these reasons as follows: My suggestion is simply that petitioners must, before the trial court, show a more specific legal right a right cast in language of a significantly lower order of generality than Article II (15) of the Constitution that is or may be violated by the actions, or failures to act, imputed to the public respondent by petitioners so that the trial court can validly render judgment grating all or part of the relief prayed for. To my mind, the court should be understood as simply saying that such a more specific legal right or rights may well exist in our corpus of law, considering the general policy principles found in the Constitution and the existence of the Philippine Environment Code, and that the trial court should have given petitioners an effective opportunity so to demonstrate, instead of aborting the proceedings on a motion to dismiss. It seems to me important that the legal right which is an essential component of a cause of action be a specific, operable legal right, rather than a constitutional or statutory policy, for at least two (2) reasons. One is that unless the legal right claimed to have been violated or disregarded is given specification in

operational terms, defendants may well be unable to defend themselves intelligently and effectively; in other words, there are due process dimensions to this matter. The second is a broader-gauge consideration where a specific violation of law or applicable regulation is not alleged or proved, petitioners can be expected to fall back on the expanded conception of judicial power in the second paragraph of Section 1 of Article VIII of the Constitution which reads: Sec. 1. . . . Judicial power includes the duty of the courts of justice to settle actual controversies involving rights which are legally demandable and enforceable, and to determine whether or not there has been a grave abuse of discretion amounting to lack or excess of jurisdiction on the part of any branch or instrumentality of the Government. (Emphasis supplied) When substantive standards as general as "the right to a balanced and healthy ecology" and "the right to health" are combined with remedial standards as broad ranging as "a grave abuse of discretion amounting to lack or excess of jurisdiction," the result will be, it is respectfully submitted, to propel courts into the uncharted ocean of social and economic policy making. At least in respect of the vast area of environmental protection and management, our courts have no claim to special technical competence and experience and professional qualification. Where no specific, operable norms and standards are shown to exist, then the policy making departments the legislative and executive departments must be given a real and effective opportunity to fashion and promulgate those norms and standards, and to implement them before the courts should intervene. Economic Nationalism Should Be Read with Other Constitutional Mandates to Attain Balanced Development of Economy On the other hand, Secs. 10 and 12 of Article XII, apart from merely laying down general principles relating to the national economy and patrimony, should be read and understood in relation to the other sections in said article, especially Secs. 1 and 13 thereof which read:

Sec. 1. The goals of the national economy are a more equitable distribution of opportunities, income, and wealth; a sustained increase in the amount of goods and services produced by the nation for the benefit of the people; and an expanding productivity as the key to raising the quality of life for all especially the underprivileged. The State shall promote industrialization and full employment based on sound agricultural development and agrarian reform, through industries that make full and efficient use of human and natural resources, and which are competitive in both domestic and foreign markets. However, the State shall protect Filipino enterprises against unfair foreign competition and trade practices. In the pursuit of these goals, all sectors of the economy and all regions of the country shall be given optimum opportunity to develop. . . . xxx xxx xxx Sec. 13. The State shall pursue a trade policy that serves the general welfare and utilizes all forms and arrangements of exchange on the basis of equality and reciprocity. As pointed out by the Solicitor General, Sec. 1 lays down the basic goals of national economic development, as follows: 1. A more equitable distribution of opportunities, income and wealth; 2. A sustained increase in the amount of goods and services provided by the nation for the benefit of the people; and 3. An expanding productivity as the key to raising the quality of life for all especially the underprivileged. With these goals in context, the Constitution then ordains the ideals of economic nationalism (1) by expressing preference in favor of qualified Filipinos "in the grant of rights, privileges and concessions covering the national economy and patrimony" 27 and in the use of "Filipino labor, domestic materials and locally-produced goods"; (2) by mandating the State to "adopt measures that help make them competitive; 28 and (3) by requiring the State to "develop a self-reliant and independent national economy effectively controlled by Filipinos." 29 In similar language, the Constitution takes into account the realities of the outside world as it requires the pursuit of "a trade policy that serves the general welfare and utilizes all forms and arrangements of exchange on the basis of equality ad reciprocity"; 30 and speaks of industries "which are competitive in both domestic and foreign markets" as well as of the protection of "Filipino enterprises against unfair foreign competition and trade practices."

It is true that in the recent case of Manila Prince Hotel vs. Government Service Insurance System, et al., 31 this Court held that "Sec. 10, second par., Art. XII of the 1987 Constitution is a mandatory, positive command which is complete in itself and which needs no further guidelines or implementing laws or rule for its enforcement. From its very words the provision does not require any legislation to put it in operation. It is per se judicially enforceable." However, as the constitutional provision itself states, it is enforceable only in regard to "the grants of rights, privileges and concessions covering national economy and patrimony" and not to every aspect of trade and commerce. It refers to exceptions rather than the rule. The issue here is not whether this paragraph of Sec. 10 of Art. XII is self-executing or not. Rather, the issue is whether, as a rule, there are enough balancing provisions in the Constitution to allow the Senate to ratify the Philippine concurrence in the WTO Agreement. And we hold that there are. All told, while the Constitution indeed mandates a bias in favor of Filipino goods, services, labor and enterprises, at the same time, it recognizes the need for business exchange with the rest of the world on the bases of equality and reciprocity and limits protection of Filipino enterprises only against foreign competition and trade practices that are unfair. 32 In other words, the Constitution did not intend to pursue an isolationist policy. It did not shut out foreign investments, goods and services in the development of the Philippine economy. While the Constitution does not encourage the unlimited entry of foreign goods, services and investments into the country, it does not prohibit them either. In fact, it allows an exchange on the basis of equality and reciprocity, frowning only on foreign competition that is unfair. WTO Recognizes Need to Protect Weak Economies Upon the other hand, respondents maintain that the WTO itself has some built-in advantages to protect weak and developing economies, which comprise the vast majority of its members. Unlike in the UN where major states have permanent seats and veto powers in the Security Council, in the WTO, decisions are made on the basis of sovereign equality, with each member's vote equal in weight to that of any other. There is no WTO equivalent of the UN Security Council. WTO decides by consensus whenever possible, otherwise, decisions of the Ministerial Conference and the General Council shall be taken by the majority of the votes cast, except in cases of interpretation of the Agreement or waiver of the obligation of a member which would require three fourths vote. Amendments would require two thirds vote in general. Amendments to MFN provisions and the Amendments provision will require assent of all members. Any member may withdraw from the Agreement upon the expiration of six months from the date of notice of withdrawals. 33

Hence, poor countries can protect their common interests more effectively through the WTO than through one-on-one negotiations with developed countries. Within the WTO, developing countries can form powerful blocs to push their economic agenda more decisively than outside the Organization. This is not merely a matter of practical alliances but a negotiating strategy rooted in law. Thus, the basic principles underlying the WTO Agreement recognize the need of developing countries like the Philippines to "share in the growth in international trade commensurate with the needs of their economic development." These basic principles are found in the preamble 34 of the WTO Agreement as follows: The Parties to this Agreement, Recognizing that their relations in the field of trade and economic endeavour should be conducted with a view to raising standards of living, ensuring full employment and a large and steadily growing volume of real income and effective demand, and expanding the production of and trade in goods and services, while allowing for the optimal use of the world's resources in accordance with the objective of sustainable development, seeking both to protect and preserve the environment and to enhance the means for doing so in a manner consistent with their respective needs and concerns at different levels of economic development, Recognizing further that there is need for positive efforts designed to ensure that developing countries, and especially the least developed among them, secure a share in the growth in international trade commensurate with the needs of their economic development, Being desirous of contributing to these objectives by entering into reciprocal and mutually advantageous arrangements directed to the substantial reduction of tariffs and other barriers to trade and to the elimination of discriminatory treatment in international trade relations, Resolved, therefore, to develop an integrated, more viable and durable multilateral trading system encompassing the General Agreement on Tariffs and Trade, the results of past trade liberalization efforts, and all of the results of the Uruguay Round of Multilateral Trade Negotiations, Determined to preserve the basic principles and to further the objectives underlying this multilateral trading system, . . . (emphasis supplied.)

Specific WTO Provisos Protect Developing Countries So too, the Solicitor General points out that pursuant to and consistent with the foregoing basic principles, the WTO Agreement grants developing countries a more lenient treatment, giving their domestic industries some protection from the rush of foreign competition. Thus, with respect to tariffs in general, preferential treatment is given to developing countries in terms of the amount of tariff reduction and the period within which the reduction is to be spread out. Specifically, GATT requires an average tariff reduction rate of 36% for developed countries to be effected within a period of six (6) years while developing countries including the Philippines are required to effect an average tariff reduction of only 24% within ten (10) years. In respect to domestic subsidy, GATT requires developed countries to reduce domestic support to agricultural products by 20% over six (6) years, as compared to only 13% for developing countries to be effected within ten (10) years. In regard to export subsidy for agricultural products, GATT requires developed countries to reduce their budgetary outlays for export subsidy by 36% and export volumes receiving export subsidy by 21% within a period of six (6) years. For developing countries, however, the reduction rate is only two-thirds of that prescribed for developed countries and a longer period of ten (10) years within which to effect such reduction. Moreover, GATT itself has provided built-in protection from unfair foreign competition and trade practices including anti-dumping measures, countervailing measures and safeguards against import surges. Where local businesses are jeopardized by unfair foreign competition, the Philippines can avail of these measures. There is hardly therefore any basis for the statement that under the WTO, local industries and enterprises will all be wiped out and that Filipinos will be deprived of control of the economy. Quite the contrary, the weaker situations of developing nations like the Philippines have been taken into account; thus, there would be no basis to say that in joining the WTO, the respondents have gravely abused their discretion. True, they have made a bold decision to steer the ship of state into the yet uncharted sea of economic liberalization. But such decision cannot be set aside on the ground of grave abuse of discretion, simply because we disagree with it or simply because we believe only in other economic policies. As earlier stated, the Court in taking jurisdiction of this case will not pass upon the advantages and disadvantages of trade liberalization as an economic policy. It will only perform its constitutional duty of determining whether the Senate committed grave abuse of discretion. Constitution Does Not Rule Out Foreign Competition Furthermore, the constitutional policy of a "self-reliant and independent national economy" 35 does not necessarily rule out the entry of foreign investments, goods and services. It contemplates neither "economic seclusion" nor "mendicancy in the international community." As explained by Constitutional Commissioner Bernardo Villegas, sponsor of this constitutional policy:

Economic self-reliance is a primary objective of a developing country that is keenly aware of overdependence on external assistance for even its most basic needs. It does not mean autarky or economic seclusion; rather, it means avoiding mendicancy in the international community. Independence refers to the freedom from undue foreign control of the national economy, especially in such strategic industries as in the development of natural resources and public utilities. 36 The WTO reliance on "most favored nation," "national treatment," and "trade without discrimination" cannot be struck down as unconstitutional as in fact they are rules of equality and reciprocity that apply to all WTO members. Aside from envisioning a trade policy based on "equality and reciprocity," 37 the fundamental law encourages industries that are "competitive in both domestic and foreign markets," thereby demonstrating a clear policy against a sheltered domestic trade environment, but one in favor of the gradual development of robust industries that can compete with the best in the foreign markets. Indeed, Filipino managers and Filipino enterprises have shown capability and tenacity to compete internationally. And given a free trade environment, Filipino entrepreneurs and managers in Hongkong have demonstrated the Filipino capacity to grow and to prosper against the best offered under a policy of laissez faire. Constitution Favors Consumers, Not Industries or Enterprises The Constitution has not really shown any unbalanced bias in favor of any business or enterprise, nor does it contain any specific pronouncement that Filipino companies should be pampered with a total proscription of foreign competition. On the other hand, respondents claim that WTO/GATT aims to make available to the Filipino consumer the best goods and services obtainable anywhere in the world at the most reasonable prices. Consequently, the question boils down to whether WTO/GATT will favor the general welfare of the public at large. Will adherence to the WTO treaty bring this ideal (of favoring the general welfare) to reality? Will WTO/GATT succeed in promoting the Filipinos' general welfare because it will as promised by its promoters expand the country's exports and generate more employment? Will it bring more prosperity, employment, purchasing power and quality products at the most reasonable rates to the Filipino public? The responses to these questions involve "judgment calls" by our policy makers, for which they are answerable to our people during appropriate electoral exercises. Such questions and the answers thereto are not subject to judicial pronouncements based on grave abuse of discretion. Constitution Designed to Meet Future Events and Contingencies

No doubt, the WTO Agreement was not yet in existence when the Constitution was drafted and ratified in 1987. That does not mean however that the Charter is necessarily flawed in the sense that its framers might not have anticipated the advent of a borderless world of business. By the same token, the United Nations was not yet in existence when the 1935 Constitution became effective. Did that necessarily mean that the then Constitution might not have contemplated a diminution of the absoluteness of sovereignty when the Philippines signed the UN Charter, thereby effectively surrendering part of its control over its foreign relations to the decisions of various UN organs like the Security Council? It is not difficult to answer this question. Constitutions are designed to meet not only the vagaries of contemporary events. They should be interpreted to cover even future and unknown circumstances. It is to the credit of its drafters that a Constitution can withstand the assaults of bigots and infidels but at the same time bend with the refreshing winds of change necessitated by unfolding events. As one eminent political law writer and respected jurist 38 explains: The Constitution must be quintessential rather than superficial, the root and not the blossom, the base and frame-work only of the edifice that is yet to rise. It is but the core of the dream that must take shape, not in a twinkling by mandate of our delegates, but slowly "in the crucible of Filipino minds and hearts," where it will in time develop its sinews and gradually gather its strength and finally achieve its substance. In fine, the Constitution cannot, like the goddess Athena, rise full-grown from the brow of the Constitutional Convention, nor can it conjure by mere fiat an instant Utopia. It must grow with the society it seeks to re-structure and march apace with the progress of the race, drawing from the vicissitudes of history the dynamism and vitality that will keep it, far from becoming a petrified rule, a pulsing, living law attuned to the heartbeat of the nation. Third Issue: The WTO Agreement and Legislative Power The WTO Agreement provides that "(e)ach Member shall ensure the conformity of its laws, regulations and administrative procedures with its obligations as provided in the annexed Agreements." 39 Petitioners maintain that this undertaking "unduly limits, restricts and impairs Philippine sovereignty, specifically the legislative power which under Sec. 2, Article VI of the 1987 Philippine Constitution is vested in the Congress of the Philippines. It is an assault on the sovereign powers of the Philippines because this means that Congress could not pass legislation that will be good for our national interest and general welfare if such legislation will not conform with the WTO Agreement, which not only relates to the trade in goods . . . but also to the flow of investments and money . . . as well as to a whole slew of agreements on socio-cultural matters . . . 40

More specifically, petitioners claim that said WTO proviso derogates from the power to tax, which is lodged in the Congress. 41 And while the Constitution allows Congress to authorize the President to fix tariff rates, import and export quotas, tonnage and wharfage dues, and other duties or imposts, such authority is subject to "specified limits and . . . such limitations and restrictions" as Congress may provide, 42 as in fact it did under Sec. 401 of the Tariff and Customs Code. Sovereignty Limited by International Law and Treaties This Court notes and appreciates the ferocity and passion by which petitioners stressed their arguments on this issue. However, while sovereignty has traditionally been deemed absolute and all-encompassing on the domestic level, it is however subject to restrictions and limitations voluntarily agreed to by the Philippines, expressly or impliedly, as a member of the family of nations. Unquestionably, the Constitution did not envision a hermit-type isolation of the country from the rest of the world. In its Declaration of Principles and State Policies, the Constitution "adopts the generally accepted principles of international law as part of the law of the land, and adheres to the policy of peace, equality, justice, freedom, cooperation and amity, with all nations." 43 By the doctrine of incorporation, the country is bound by generally accepted principles of international law, which are considered to be automatically part of our own laws. 44 One of the oldest and most fundamental rules in international law is pacta sunt servanda international agreements must be performed in good faith. "A treaty engagement is not a mere moral obligation but creates a legally binding obligation on the parties . . . A state which has contracted valid international obligations is bound to make in its legislations such modifications as may be necessary to ensure the fulfillment of the obligations undertaken." 45 By their inherent nature, treaties really limit or restrict the absoluteness of sovereignty. By their voluntary act, nations may surrender some aspects of their state power in exchange for greater benefits granted by or derived from a convention or pact. After all, states, like individuals, live with coequals, and in pursuit of mutually covenanted objectives and benefits, they also commonly agree to limit the exercise of their otherwise absolute rights. Thus, treaties have been used to record agreements between States concerning such widely diverse matters as, for example, the lease of naval bases, the sale or cession of territory, the termination of war, the regulation of conduct of hostilities, the formation of alliances, the regulation of commercial relations, the settling of claims, the laying down of rules governing conduct in peace and the establishment of international organizations. 46 The sovereignty of a state therefore cannot in fact and in reality be considered absolute. Certain restrictions enter into the picture: (1) limitations imposed by the very nature of membership in the family of nations and (2) limitations imposed by treaty stipulations. As aptly put by John F. Kennedy, "Today, no nation can build its destiny alone. The age of self-sufficient nationalism is over. The age of interdependence is here." 47 UN Charter and Other Treaties Limit Sovereignty

Thus, when the Philippines joined the United Nations as one of its 51 charter members, it consented to restrict its sovereign rights under the "concept of sovereignty as autolimitation." 47 -A Under Article 2 of the UN Charter, "(a)ll members shall give the United Nations every assistance in any action it takes in accordance with the present Charter, and shall refrain from giving assistance to any state against which the United Nations is taking preventive or enforcement action." Such assistance includes payment of its corresponding share not merely in administrative expenses but also in expenditures for the peace-keeping operations of the organization. In its advisory opinion of July 20, 1961, the International Court of Justice held that money used by the United Nations Emergency Force in the Middle East and in the Congo were "expenses of the United Nations" under Article 17, paragraph 2, of the UN Charter. Hence, all its members must bear their corresponding share in such expenses. In this sense, the Philippine Congress is restricted in its power to appropriate. It is compelled to appropriate funds whether it agrees with such peace-keeping expenses or not. So too, under Article 105 of the said Charter, the UN and its representatives enjoy diplomatic privileges and immunities, thereby limiting again the exercise of sovereignty of members within their own territory. Another example: although "sovereign equality" and "domestic jurisdiction" of all members are set forth as underlying principles in the UN Charter, such provisos are however subject to enforcement measures decided by the Security Council for the maintenance of international peace and security under Chapter VII of the Charter. A final example: under Article 103, "(i)n the event of a conflict between the obligations of the Members of the United Nations under the present Charter and their obligations under any other international agreement, their obligation under the present charter shall prevail," thus unquestionably denying the Philippines as a member the sovereign power to make a choice as to which of conflicting obligations, if any, to honor. Apart from the UN Treaty, the Philippines has entered into many other international pacts both bilateral and multilateral that involve limitations on Philippine sovereignty. These are enumerated by the Solicitor General in his Compliance dated October 24, 1996, as follows: (a) Bilateral convention with the United States regarding taxes on income, where the Philippines agreed, among others, to exempt from tax, income received in the Philippines by, among others, the Federal Reserve Bank of the United States, the Export/Import Bank of the United States, the Overseas Private Investment Corporation of the United States. Likewise, in said convention, wages, salaries and similar remunerations paid by the United States to its citizens for labor and personal services performed by them as employees or officials of the United States are exempt from income tax by the Philippines. (b) Bilateral agreement with Belgium, providing, among others, for the avoidance of double taxation with respect to taxes on income.

(c) Bilateral convention with the Kingdom of Sweden for the avoidance of double taxation. (d) Bilateral convention with the French Republic for the avoidance of double taxation. (e) Bilateral air transport agreement with Korea where the Philippines agreed to exempt from all customs duties, inspection fees and other duties or taxes aircrafts of South Korea and the regular equipment, spare parts and supplies arriving with said aircrafts. (f) Bilateral air service agreement with Japan, where the Philippines agreed to exempt from customs duties, excise taxes, inspection fees and other similar duties, taxes or charges fuel, lubricating oils, spare parts, regular equipment, stores on board Japanese aircrafts while on Philippine soil. (g) Bilateral air service agreement with Belgium where the Philippines granted Belgian air carriers the same privileges as those granted to Japanese and Korean air carriers under separate air service agreements. (h) Bilateral notes with Israel for the abolition of transit and visitor visas where the Philippines exempted Israeli nationals from the requirement of obtaining transit or visitor visas for a sojourn in the Philippines not exceeding 59 days. (i) Bilateral agreement with France exempting French nationals from the requirement of obtaining transit and visitor visa for a sojourn not exceeding 59 days. (j) Multilateral Convention on Special Missions, where the Philippines agreed that premises of Special Missions in the Philippines are inviolable and its agents can not enter said premises without consent of the Head of Mission concerned. Special Missions are also exempted from customs duties, taxes and related charges. (k) Multilateral convention on the Law of Treaties. In this convention, the Philippines agreed to be governed by the Vienna Convention on the Law of Treaties. (l) Declaration of the President of the Philippines accepting compulsory jurisdiction of the International Court of Justice. The International Court of Justice has jurisdiction in all legal disputes

concerning the interpretation of a treaty, any question of international law, the existence of any fact which, if established, would constitute a breach "of international obligation." In the foregoing treaties, the Philippines has effectively agreed to limit the exercise of its sovereign powers of taxation, eminent domain and police power. The underlying consideration in this partial surrender of sovereignty is the reciprocal commitment of the other contracting states in granting the same privilege and immunities to the Philippines, its officials and its citizens. The same reciprocity characterizes the Philippine commitments under WTO-GATT. International treaties, whether relating to nuclear disarmament, human rights, the environment, the law of the sea, or trade, constrain domestic political sovereignty through the assumption of external obligations. But unless anarchy in international relations is preferred as an alternative, in most cases we accept that the benefits of the reciprocal obligations involved outweigh the costs associated with any loss of political sovereignty. (T)rade treaties that structure relations by reference to durable, well-defined substantive norms and objective dispute resolution procedures reduce the risks of larger countries exploiting raw economic power to bully smaller countries, by subjecting power relations to some form of legal ordering. In addition, smaller countries typically stand to gain disproportionately from trade liberalization. This is due to the simple fact that liberalization will provide access to a larger set of potential new trading relationship than in case of the larger country gaining enhanced success to the smaller country's market. 48 The point is that, as shown by the foregoing treaties, a portion of sovereignty may be waived without violating the Constitution, based on the rationale that the Philippines "adopts the generally accepted principles of international law as part of the law of the land and adheres to the policy of . . . cooperation and amity with all nations." Fourth Issue: The WTO Agreement and Judicial Power Petitioners aver that paragraph 1, Article 34 of the General Provisions and Basic Principles of the Agreement on TradeRelated Aspects of Intellectual Property Rights (TRIPS) 49 intrudes on the power of the Supreme Court to promulgate rules concerning pleading, practice and procedures. 50 To understand the scope and meaning of Article 34, TRIPS, 51 it will be fruitful to restate its full text as follows: Article 34

Process Patents: Burden of Proof 1. For the purposes of civil proceedings in respect of the infringement of the rights of the owner referred to in paragraph 1 (b) of Article 28, if the subject matter of a patent is a process for obtaining a product, the judicial authorities shall have the authority to order the defendant to prove that the process to obtain an identical product is different from the patented process. Therefore, Members shall provide, in at least one of the following circumstances, that any identical product when produced without the consent of the patent owner shall, in the absence of proof to the contrary, be deemed to have been obtained by the patented process: (a) if the product obtained by the patented process is new; (b) if there is a substantial likelihood that the identical product was made by the process and the owner of the patent has been unable through reasonable efforts to determine the process actually used. 2. Any Member shall be free to provide that the burden of proof indicated in paragraph 1 shall be on the alleged infringer only if the condition referred to in subparagraph (a) is fulfilled or only if the condition referred to in subparagraph (b) is fulfilled. 3. In the adduction of proof to the contrary, the legitimate interests of defendants in protecting their manufacturing and business secrets shall be taken into account. From the above, a WTO Member is required to provide a rule of disputable (not the words "in the absence of proof to the contrary") presumption that a product shown to be identical to one produced with the use of a patented process shall be deemed to have been obtained by the (illegal) use of the said patented process, (1) where such product obtained by the patented product is new, or (2) where there is "substantial likelihood" that the identical product was made with the use of the said patented process but the owner of the patent could not determine the exact process used in obtaining such identical product. Hence, the "burden of proof" contemplated by Article 34 should actually be understood as the duty of the alleged patent infringer to overthrow such presumption. Such burden, properly understood, actually refers to the "burden of evidence" (burden of going forward) placed on the producer of the identical (or fake) product to show that his product was produced without the use of the patented process. The foregoing notwithstanding, the patent owner still has the "burden of proof" since, regardless of the presumption

provided under paragraph 1 of Article 34, such owner still has to introduce evidence of the existence of the alleged identical product, the fact that it is "identical" to the genuine one produced by the patented process and the fact of "newness" of the genuine product or the fact of "substantial likelihood" that the identical product was made by the patented process. The foregoing should really present no problem in changing the rules of evidence as the present law on the subject, Republic Act No. 165, as amended, otherwise known as the Patent Law, provides a similar presumption in cases of infringement of patented design or utility model, thus: Sec. 60. Infringement. Infringement of a design patent or of a patent for utility model shall consist in unauthorized copying of the patented design or utility model for the purpose of trade or industry in the article or product and in the making, using or selling of the article or product copying the patented design or utility model. Identity or substantial identity with the patented design or utility model shall constitute evidence of copying. (emphasis supplied) Moreover, it should be noted that the requirement of Article 34 to provide a disputable presumption applies only if (1) the product obtained by the patented process in NEW or (2) there is a substantial likelihood that the identical product was made by the process and the process owner has not been able through reasonable effort to determine the process used. Where either of these two provisos does not obtain, members shall be free to determine the appropriate method of implementing the provisions of TRIPS within their own internal systems and processes. By and large, the arguments adduced in connection with our disposition of the third issue derogation of legislative power will apply to this fourth issue also. Suffice it to say that the reciprocity clause more than justifies such intrusion, if any actually exists. Besides, Article 34 does not contain an unreasonable burden, consistent as it is with due process and the concept of adversarial dispute settlement inherent in our judicial system. So too, since the Philippine is a signatory to most international conventions on patents, trademarks and copyrights, the adjustment in legislation and rules of procedure will not be substantial. 52 Fifth Issue: Concurrence Only in the WTO Agreement and Not in Other Documents Contained in the Final Act Petitioners allege that the Senate concurrence in the WTO Agreement and its annexes but not in the other documents referred to in the Final Act, namely the Ministerial Declaration and Decisions and the Understanding on Commitments in Financial Services is defective and insufficient and thus constitutes abuse of discretion. They submit that such concurrence in the WTO Agreement alone is flawed because it is in effect a rejection of the Final Act, which in turn was the document signed by Secretary Navarro, in representation of the Republic upon

authority of the President. They contend that the second letter of the President to the Senate 53 which enumerated what constitutes the Final Act should have been the subject of concurrence of the Senate. "A final act, sometimes called protocol de cloture, is an instrument which records the winding up of the proceedings of a diplomatic conference and usually includes a reproduction of the texts of treaties, conventions, recommendations and other acts agreed upon and signed by the plenipotentiaries attending the conference." 54 It is not the treaty itself. It is rather a summary of the proceedings of a protracted conference which may have taken place over several years. The text of the "Final Act Embodying the Results of the Uruguay Round of Multilateral Trade Negotiations" is contained in just one page 55 in Vol. I of the 36-volume Uruguay Round of Multilateral Trade Negotiations. By signing said Final Act, Secretary Navarro as representative of the Republic of the Philippines undertook: (a) to submit, as appropriate, the WTO Agreement for the consideration of their respective competent authorities with a view to seeking approval of the Agreement in accordance with their procedures; and (b) to adopt the Ministerial Declarations and Decisions. The assailed Senate Resolution No. 97 expressed concurrence in exactly what the Final Act required from its signatories, namely, concurrence of the Senate in the WTO Agreement. The Ministerial Declarations and Decisions were deemed adopted without need for ratification. They were approved by the ministers by virtue of Article XXV: 1 of GATT which provides that representatives of the members can meet "to give effect to those provisions of this Agreement which invoke joint action, and generally with a view to facilitating the operation and furthering the objectives of this Agreement." 56 The Understanding on Commitments in Financial Services also approved in Marrakesh does not apply to the Philippines. It applies only to those 27 Members which "have indicated in their respective schedules of commitments on standstill, elimination of monopoly, expansion of operation of existing financial service suppliers, temporary entry of personnel, free transfer and processing of information, and national treatment with respect to access to payment, clearing systems and refinancing available in the normal course of business." 57 On the other hand, the WTO Agreement itself expresses what multilateral agreements are deemed included as its integral parts, 58 as follows: Article II Scope of the WTO

1. The WTO shall provide the common institutional frame-work for the conduct of trade relations among its Members in matters to the agreements and associated legal instruments included in the Annexes to this Agreement. 2. The Agreements and associated legal instruments included in Annexes 1, 2, and 3, (hereinafter referred to as "Multilateral Agreements") are integral parts of this Agreement, binding on all Members. 3. The Agreements and associated legal instruments included in Annex 4 (hereinafter referred to as "Plurilateral Trade Agreements") are also part of this Agreement for those Members that have accepted them, and are binding on those Members. The Plurilateral Trade Agreements do not create either obligation or rights for Members that have not accepted them. 4. The General Agreement on Tariffs and Trade 1994 as specified in annex 1A (hereinafter referred to as "GATT 1994") is legally distinct from the General Agreement on Tariffs and Trade, dated 30 October 1947, annexed to the Final Act adopted at the conclusion of the Second Session of the Preparatory Committee of the United Nations Conference on Trade and Employment, as subsequently rectified, amended or modified (hereinafter referred to as "GATT 1947"). It should be added that the Senate was well-aware of what it was concurring in as shown by the members' deliberation on August 25, 1994. After reading the letter of President Ramos 59 dated August 11, 1994, the senators of the Republic minutely dissected what the Senate was concurring in, as follows: 60 THE CHAIRMAN: Yes. Now, the question of the validity of the submission came up in the first day hearing of this Committee yesterday. Was the observation made by Senator Taada that what was submitted to the Senate was not the agreement on establishing the World Trade Organization by the final act of the Uruguay Round which is not the same as the agreement establishing the World Trade Organization? And on that basis, Senator Tolentino raised a point of order which, however, he agreed to withdraw upon understanding that his suggestion for an alternative solution at that time was acceptable. That suggestion was to treat the proceedings of the Committee as being in the nature of briefings for Senators until the question of the submission could be clarified.

And so, Secretary Romulo, in effect, is the President submitting a new . . . is he making a new submission which improves on the clarity of the first submission? MR. ROMULO: Mr. Chairman, to make sure that it is clear cut and there should be no misunderstanding, it was his intention to clarify all matters by giving this letter. THE CHAIRMAN: Thank you. Can this Committee hear from Senator Taada and later on Senator Tolentino since they were the ones that raised this question yesterday? Senator Taada, please. SEN. TAADA: Chairman. Thank you, Mr.

approval of the Agreement in accordance with their procedures. In other words, it is not the Final Act that was agreed to be submitted to the governments for ratification or acceptance as whatever their constitutional procedures may provide but it is the World Trade Organization Agreement. And if that is the one that is being submitted now, I think it satisfies both the Constitution and the Final Act itself . Thank you, Mr. Chairman. THE CHAIRMAN. Thank you, Senator Tolentino, May I call on Senator Gonzales. SEN. GONZALES. Mr. Chairman, my views on this matter are already a matter of record. And they had been adequately reflected in the journal of yesterday's session and I don't see any need for repeating the same. Now, I would consider the new submission as an act ex abudante cautela. THE CHAIRMAN. Thank you, Senator Gonzales. Senator Lina, do you want to make any comment on this? SEN. LINA. Mr. President, I agree with the observation just made by Senator Gonzales out of the abundance of question. Then the new submission is, I believe, stating the obvious and therefore I have no further comment to make. Epilogue In praying for the nullification of the Philippine ratification of the WTO Agreement, petitioners are invoking this Court's constitutionally imposed duty "to determine whether or not there has been grave abuse of discretion amounting to lack or excess of jurisdiction" on the part of the Senate in giving its concurrence therein via Senate Resolution No. 97. Procedurally, a writ of certiorari grounded on grave abuse of discretion may be issued by the Court under Rule 65 of the Rules of Court when it is amply shown that petitioners have no other plain, speedy and adequate remedy in the ordinary course of law. By grave abuse of discretion is meant such capricious and whimsical exercise of judgment as is equivalent to lack of jurisdiction. 61 Mere abuse of discretion is not enough. It must be grave abuse of discretion as when the power is exercised in an arbitrary or despotic manner by reason of passion or personal hostility, and must be so patent and so gross as to amount to an evasion of a positive duty or to a virtual refusal to perform the duty enjoined or to act at all in contemplation of law. 62 Failure on the part of the petitioner

Based on what Secretary Romulo has read, it would now clearly appear that what is being submitted to the Senate for ratification is not the Final Act of the Uruguay Round, but rather the Agreement on the World Trade Organization as well as the Ministerial Declarations and Decisions, and the Understanding and Commitments in Financial Services. I am now satisfied with the wording of the new submission of President Ramos. SEN. TAADA. . . . of President Ramos, Mr. Chairman. THE CHAIRMAN. Thank you, Senator Taada. Can we hear from Senator Tolentino? And after him Senator Neptali Gonzales and Senator Lina. SEN. TOLENTINO, Mr. Chairman, I have not seen the new submission actually transmitted to us but I saw the draft of his earlier, and I think it now complies with the provisions of the Constitution, and with the Final Act itself . The Constitution does not require us to ratify the Final Act. It requires us to ratify the Agreement which is now being submitted. The Final Act itself specifies what is going to be submitted to with the governments of the participants. In paragraph 2 of the Final Act, we read and I quote: By signing the present Final Act, the representatives agree: (a) to submit as appropriate the WTO Agreement for the consideration of the respective competent authorities with a view to seeking

to show grave abuse of discretion will result in the dismissal of the petition. 63 In rendering this Decision, this Court never forgets that the Senate, whose act is under review, is one of two sovereign houses of Congress and is thus entitled to great respect in its actions. It is itself a constitutional body independent and coordinate, and thus its actions are presumed regular and done in good faith. Unless convincing proof and persuasive arguments are presented to overthrow such presumptions, this Court will resolve every doubt in its favor. Using the foregoing well-accepted definition of grave abuse of discretion and the presumption of regularity in the Senate's processes, this Court cannot find any cogent reason to impute grave abuse of discretion to the Senate's exercise of its power of concurrence in the WTO Agreement granted it by Sec. 21 of Article VII of the Constitution. 64 It is true, as alleged by petitioners, that broad constitutional principles require the State to develop an independent national economy effectively controlled by Filipinos; and to protect and/or prefer Filipino labor, products, domestic materials and locally produced goods. But it is equally true that such principles while serving as judicial and legislative guides are not in themselves sources of causes of action. Moreover, there are other equally fundamental constitutional principles relied upon by the Senate which mandate the pursuit of a "trade policy that serves the general welfare and utilizes all forms and arrangements of exchange on the basis of equality and reciprocity" and the promotion of industries "which are competitive in both domestic and foreign markets," thereby justifying its acceptance of said treaty. So too, the alleged impairment of sovereignty in the exercise of legislative and judicial powers is balanced by the adoption of the generally accepted principles of international law as part of the law of the land and the adherence of the Constitution to the policy of cooperation and amity with all nations. That the Senate, after deliberation and voting, voluntarily and overwhelmingly gave its consent to the WTO Agreement thereby making it "a part of the law of the land" is a legitimate exercise of its sovereign duty and power. We find no "patent and gross" arbitrariness or despotism "by reason of passion or personal hostility" in such exercise. It is not impossible to surmise that this Court, or at least some of its members, may even agree with petitioners that it is more advantageous to the national interest to strike down Senate

Resolution No. 97. But that is not a legal reason to attribute grave abuse of discretion to the Senate and to nullify its decision. To do so would constitute grave abuse in the exercise of our own judicial power and duty. Ineludably, what the Senate did was a valid exercise of its authority. As to whether such exercise was wise, beneficial or viable is outside the realm of judicial inquiry and review. That is a matter between the elected policy makers and the people. As to whether the nation should join the worldwide march toward trade liberalization and economic globalization is a matter that our people should determine in electing their policy makers. After all, the WTO Agreement allows withdrawal of membership, should this be the political desire of a member. The eminent futurist John Naisbitt, author of the best seller Megatrends, predicts an Asian Renaissance 65 where "the East will become the dominant region of the world economically, politically and culturally in the next century." He refers to the "free market" espoused by WTO as the "catalyst" in this coming Asian ascendancy. There are at present about 31 countries including China, Russia and Saudi Arabia negotiating for membership in the WTO. Notwithstanding objections against possible limitations on national sovereignty, the WTO remains as the only viable structure for multilateral trading and the veritable forum for the development of international trade law. The alternative to WTO is isolation, stagnation, if not economic selfdestruction. Duly enriched with original membership, keenly aware of the advantages and disadvantages of globalization with its on-line experience, and endowed with a vision of the future, the Philippines now straddles the crossroads of an international strategy for economic prosperity and stability in the new millennium. Let the people, through their duly authorized elected officers, make their free choice. WHEREFORE, the petition is DISMISSED for lack of merit. SO ORDERED. Narvasa, C.J., Regalado, Davide, Jr., Romero, Bellosillo, Melo, Puno, Kapunan, Mendoza, Francisco, Hermosisima, Jr. and Torres, Jr., JJ., concur.

Padilla and Vitug, JJ., concur in the result. G.R. No. 114508 November 19, 1999 PRIBHDAS J. MIRPURI, petitioner, vs. COURT OF APPEALS, DIRECTOR OF PATENTS and the BARBIZON CORPORATION, respondents. with the Bureau of Patents for the registration of the trademark "Barbizon" for use in brassieres and ladies undergarments. Escobar alleged that she had been manufacturing and selling these products under the firm name "L & BM Commercial" since March 3, 1970. Private respondent Barbizon Corporation, a corporation organized and doing business under the laws of New York, U.S.A., opposed the application. It claimed that:

PUNO, J.: The Convention of Paris for the Protection of Industrial Property is a multi-lateral treaty which the Philippines bound itself to honor and enforce in this country. As to whether or not the treaty affords protection to a foreign corporation against a Philippine applicant for the registration of a similar trademark is the principal issue in this case. On June 15, 1970, one Lolita Escobar, the predecessor-ininterest of petitioner Pribhdas J. Mirpuri, filed an application

The mark BARBIZON of respondentapplicant is confusingly similar to the trademark BARBIZON which opposer owns and has not abandoned. That opposer will be damaged by the registration of the mark BARBIZON and its business reputation and goodwill will suffer great and irreparable injury. That the respondent-applicant's use of the said mark BARBIZON which resembles the trademark used and owned by opposer, constitutes an unlawful appropriation of a mark previously used in the Philippines and not abandoned and therefore a statutory violation of Section 4 (d) of Republic Act No. 166, as amended. 1 This was docketed as Inter Partes Case No. 686 (IPC No. 686). After filing of the pleadings, the parties submitted the case for decision. On June 18, 1974, the Director of Patents rendered judgment dismissing the opposition and giving due course to Escobar's application, thus: WHEREFORE, the opposition should be, as it is hereby, DISMISSED. Accordingly, Application Serial No. 19010 for the registration of the trademark BARBIZON, of respondent Lolita R. Escobar, is given due course. IT IS SO ORDERED. 2 This decision became final and on September 11, 1974, Lolita Escobar was issued a certificate of registration for the trademark "Barbizon." The trademark was "for use in "brassieres and lady's underwear garments like panties." 3 Escobar later assigned all her rights and interest over the trademark to petitioner Pribhdas J. Mirpuri who, under his firm name then, the "Bonito Enterprises," was the sole and exclusive distributor of Escobar's "Barbizon" products. In 1979, however, Escobar failed to file with the Bureau of Patents the Affidavit of Use of the trademark required under Section 12 of Republic Act (R.A.) No. 166, the Philippine Trademark Law. Due to this failure, the Bureau of Patents cancelled Escobar's certificate of registration. On May 27, 1981, Escobar reapplied for registration of the cancelled trademark. Mirpuri filed his own application for registration of Escobar's trademark. Escobar later assigned her application to herein petitioner and this application was opposed by private respondent. The case was docketed as Inter Partes Case No. 2049 (IPC No. 2049). In its opposition, private respondent alleged that: (a) The Opposer has adopted the trademark BARBIZON (word), sometime

in June 1933 and has then used it on various kinds of wearing apparel. On August 14, 1934, Opposer obtained from the United States Patent Office a more recent registration of the said mark under Certificate of Registration No. 316,161. On March 1, 1949, Opposer obtained from the United States Patent Office a more recent registration for the said trademark under Certificate of Registration No. 507,214, a copy of which is herewith attached as Annex "A." Said Certificate of Registration covers the following goods wearing apparel: robes, pajamas, lingerie, nightgowns and slips; (b) Sometime in March 1976, Opposer further adopted the trademark BARBIZON and Bee design and used the said mark in various kinds of wearing apparel. On March 15, 1977, Opposer secured from the United States Patent Office a registration of the said mark under Certificate of Registration No. 1,061,277, a copy of which is herein enclosed as Annex "B." The said Certificate of Registration covers the following goods: robes, pajamas, lingerie, nightgowns and slips; (c) Still further, sometime in 1961, Opposer adopted the trademark BARBIZON and a Representation of a Woman and thereafter used the said trademark on various kinds of wearing apparel. Opposer obtained from the United States Patent Office registration of the said mark on April 5, 1983 under Certificate of Registration No. 1,233,666 for the following goods: wearing apparel: robes, pajamas, nightgowns and lingerie. A copy of the said certificate of registration is herewith enclosed as Annex "C." (d) All the above registrations are subsisting and in force and Opposer has not abandoned the use of the said trademarks. In fact, Opposer, through a wholly-owned Philippine subsidiary, the Philippine Lingerie Corporation, has been manufacturing the goods covered by said registrations and selling them to various countries, thereby earning valuable foreign exchange for the country. As a result of respondent-applicant's misappropriation of Opposer's BARBIZON trademark, Philippine Lingerie Corporation is prevented from selling its goods in the local market, to the damage and prejudice of Opposer and its wholly-owned subsidiary. (e) The Opposer's goods bearing the trademark BARBIZON have been used in many countries, including the Philippines, for at least 40 years and has enjoyed

international reputation and good will for their quality. To protect its registrations in countries where the goods covered by the registrations are being sold, Opposer has procured the registration of the trademark BARBIZON in the following countries: Australia, Austria, Abu Dhabi, Argentina, Belgium, Bolivia, Bahrain, Canada, Chile, Colombia, Denmark, Ecuador, France, West Germany, Greece, Guatemala, Hongkong, Honduras, Italy, Japan, Jordan, Lebanon, Mexico, Morocco, Panama, New Zealand, Norway, Sweden, Switzerland, Syria, El Salvador, South Africa, Zambia, Egypt, and Iran, among others; (f) To enhance its international reputation for quality goods and to further promote goodwill over its name, marks and products, Opposer has extensively advertised its products, trademarks and name in various publications which are circulated in the United States and many countries around the world, including the Philippines; (g) The trademark BARBIZON was fraudulently registered in the Philippines by one Lolita R. Escobar under Registration No. 21920, issued on September 11, 1974, in violation of Article 189 (3) of the Revised Penal Code and Section 4 (d) of the Trademark Law. Herein respondent applicant acquired by assignment the "rights" to the said mark previously registered by Lolita Escobar, hence respondent-applicant's title is vitiated by the same fraud and criminal act. Besides, Certificate of Registration No. 21920 has been cancelled for failure of either Lolita Escobar or herein respondent-applicant, to seasonably file the statutory affidavit of use. By applying for a re-registration of the mark BARBIZON subject of this opposition, respondent-applicant seeks to perpetuate the fraud and criminal act committed by Lolita Escobar. (h) Opposer's BARBIZON as well as its BARBIZON and Bee Design and BARBIZON and Representation of a Woman trademarks qualify as well-known trademarks entitled to protection under Article 6bis of the Convention of Paris for the Protection of Industrial Property and further amplified by the Memorandum of the Minister of Trade to the Honorable Director of Patents dated October 25, 1983 [sic], 4 Executive Order No. 913 dated October 7, 1963 and the Memorandum of the Minister of Trade and Industry to the Honorable Director of Patents dated October 25, 1983.

(i) The trademark applied for by respondent applicant is identical to Opposer's BARBIZON trademark and constitutes the dominant part of Opposer's two other marks namely, BARBIZON and Bee design and BARBIZON and a Representation of a Woman. The continued use by respondent-applicant of Opposer's trademark BARBIZON on goods belonging to Class 25 constitutes a clear case of commercial and criminal piracy and if allowed registration will violate not only the Trademark Law but also Article 189 of the Revised Penal Code and the commitment of the Philippines to an international treaty. 5 Replying to private respondent's opposition, petitioner raised the defense of res judicata. On March 2, 1982, Escobar assigned to petitioner the use of the business name "Barbizon International." Petitioner registered the name with the Department of Trade and Industry (DTI) for which a certificate of registration was issued in 1987. Forthwith, private respondent filed before the Office of Legal Affairs of the DTI a petition for cancellation of petitioner's business name. On November 26, 1991, the DTI, Office of Legal Affairs, cancelled petitioner's certificate of registration, and declared private respondent the owner and prior user of the business name "Barbizon International." Thus: WHEREFORE, the petition is hereby GRANTED and petitioner is declared the owner and prior user of the business name "BARBIZON INTERNATIONAL" under Certificate of Registration No. 87-09000 dated March 10, 1987 and issued in the name of respondent, is [sic] hereby ordered revoked and cancelled. . . . . 6 Meanwhile, in IPC No. 2049, the evidence of both parties were received by the Director of Patents. On June 18, 1992, the Director rendered a decision declaring private respondent's opposition barred by res judicata and giving due course to petitioner's application for registration, to wit: WHEREFORE, the present Opposition in Inter Partes Case No. 2049 is hereby DECLARED BARRED by res judicata and is hereby DISMISSED. Accordingly, Application Serial No. 45011 for trademark BARBIZON filed by Pribhdas J. Mirpuri is GIVEN DUE COURSE. SO ORDERED. 7 Private respondent questioned this decision before the Court of Appeals in CA-G.R. SP No. 28415. On April 30, 1993, the Court of Appeals reversed the Director of Patents finding that IPC No. 686 was not barred by judgment in IPC

No. 2049 and ordered that the case be remanded to the Bureau of Patents for further proceedings, viz: WHEREFORE, the appealed Decision No. 92-13 dated June 18, 1992 of the Director of Patents in Inter Partes Case No. 2049 is hereby SET ASIDE; and the case is hereby remanded to the Bureau of Patents for further proceedings, in accordance with this pronouncement. No costs. 8 In a Resolution dated March 16, 1994, the Court of Appeals denied reconsideration of its decision. 9 Hence, this recourse. Before us, petitioner raises the following issues: 1. WHETHER OR NOT THE DECISION OF THE DIRECTOR OF PATENTS IN INTER PARTES CASE NO. 686 RENDERED ON JUNE 18, 1974, ANNEX C HEREOF, CONSTITUTED RES JUDICATA IN SO FAR AS THE CASE BEFORE THE DIRECTOR OF PATENTS IS CONCERNED; 2. WHETHER OR NOT THE DIRECTOR OF PATENTS CORRECTLY APPLIED THE PRINCIPLE OF RES JUDICATA IN DISMISSING PRIVATE RESPONDENT BARBIZON'S OPPOSITION TO PETITIONER'S APPLICATION FOR REGISTRATION FOR THE TRADEMARK BARBIZON, WHICH HAS SINCE RIPENED TO CERTIFICATE OF REGISTRATION NO. 53920 ON NOVEMBER 16, 1992; 3. WHETHER OR NOT THE REQUISITE THAT A "JUDGMENT ON THE MERITS" REQUIRED A "HEARING WHERE BOTH PARTIES ARE SUPPOSED TO ADDUCE EVIDENCE" AND WHETHER THE JOINT SUBMISSION OF THE PARTIES TO A CASE ON THE BASIS OF THEIR RESPECTIVE PLEADINGS WITHOUT PRESENTING TESTIMONIAL OR DOCUMENTARY EVIDENCE FALLS WITHIN THE MEANING OF "JUDGMENT ON THE MERITS" AS ONE OF THE REQUISITES TO CONSTITUTE RES JUDICATA; 4. WHETHER A DECISION OF THE DEPARTMENT OF TRADE AND INDUSTRY CANCELLING PETITIONER'S FIRM NAME "BARBIZON INTERNATIONAL" AND WHICH DECISION IS STILL PENDING RECONSIDERATION NEVER OFFERED IN EVIDENCE BEFORE THE DIRECTOR OF PATENTS IN INTER PARTES CASE NO. 2049 HAS

THE RIGHT TO DECIDE SUCH CANCELLATION NOT ON THE BASIS OF THE BUSINESS NAME LAW (AS IMPLEMENTED BY THE BUREAU OF DOMESTIC TRADE) BUT ON THE BASIS OF THE PARIS CONVENTION AND THE TRADEMARK LAW (R.A. 166) WHICH IS WITHIN THE ORIGINAL AND EXCLUSIVE JURISDICTION OF THE DIRECTOR OF PATENTS. 10 Before ruling on the issues of the case, there is need for a brief background on the function and historical development of trademarks and trademark law. A "trademark" is defined under R.A. 166, the Trademark Law, as including "any word, name, symbol, emblem, sign or device or any combination thereof adopted and used by a manufacturer or merchant to identify his goods and distinguish them from those manufactured, sold or dealt in by others. 11 This definition has been simplified in R.A. No. 8293, the Intellectual Property Code of the Philippines, which defines a "trademark" as "any visible sign capable of distinguishing goods." 12 In Philippine jurisprudence, the function of a trademark is to point out distinctly the origin or ownership of the goods to which it is affixed; to secure to him, who has been instrumental in bringing into the market a superior article of merchandise, the fruit of his industry and skill; to assure the public that they are procuring the genuine article; to prevent fraud and imposition; and to protect the manufacturer against substitution and sale of an inferior and different article as his product. 13 Modern authorities on trademark law view trademarks as performing three distinct functions: (1) they indicate origin or ownership of the articles to which they are attached; (2) they guarantee that those articles come up to a certain standard of quality; and (3) they advertise the articles they symbolize. 14 Symbols have been used to identify the ownership or origin of articles for several centuries. 15 As early as 5,000 B.C., markings on pottery have been found by archaeologists. Cave drawings in southwestern Europe show bison with symbols on their flanks. 16 Archaeological discoveries of ancient Greek and Roman inscriptions on sculptural works, paintings, vases, precious stones, glassworks, bricks, etc. reveal some features which are thought to be marks or symbols. These marks were affixed by the creator or maker of the article, or by public authorities as indicators for the payment of tax, for disclosing state monopoly, or devices for the settlement of accounts between an entrepreneur and his workmen. 17 In the Middle Ages, the use of many kinds of marks on a variety of goods was commonplace. Fifteenth century England saw the compulsory use of identifying marks in certain trades. There were the baker's mark on bread, bottlemaker's marks, smith's marks, tanner's marks, watermarks on paper, etc. 18 Every guild had its own mark and every master belonging to it had a special mark of his own. The marks were not trademarks but police marks compulsorily imposed by the sovereign to let the public know that the goods were not "foreign" goods smuggled into

an area where the guild had a monopoly, as well as to aid in tracing defective work or poor craftsmanship to the artisan. 19 For a similar reason, merchants also used merchants' marks. Merchants dealt in goods acquired from many sources and the marks enabled them to identify and reclaim their goods upon recovery after shipwreck or piracy. 20 With constant use, the mark acquired popularity and became voluntarily adopted. It was not intended to create or continue monopoly but to give the customer an index or guarantee of quality. 21 It was in the late 18th century when the industrial revolution gave rise to mass production and distribution of consumer goods that the mark became an important instrumentality of trade and commerce. 22 By this time, trademarks did not merely identify the goods; they also indicated the goods to be of satisfactory quality, and thereby stimulated further purchases by the consuming public. 23 Eventually, they came to symbolize the goodwill and business reputation of the owner of the product and became a property right protected by law. 24 The common law developed the doctrine of trademarks and tradenames "to prevent a person from palming off his goods as another's, from getting another's business or injuring his reputation by unfair means, and, from defrauding the public." 25 Subsequently, England and the United States enacted national legislation on trademarks as part of the law regulating unfair trade. 26 It became the right of the trademark owner to exclude others from the use of his mark, or of a confusingly similar mark where confusion resulted in diversion of trade or financial injury. At the same time, the trademark served as a warning against the imitation or faking of products to prevent the imposition of fraud upon the public. 27 Today, the trademark is not merely a symbol of origin and goodwill; it is often the most effective agent for the actual creation and protection of goodwill. It imprints upon the public mind an anonymous and impersonal guaranty of satisfaction, creating a desire for further satisfaction. In other words, the mark actually sells the goods. 28 The mark has become the "silent salesman," the conduit through which direct contact between the trademark owner and the consumer is assured. It has invaded popular culture in ways never anticipated that it has become a more convincing selling point than even the quality of the article to which it refers. 29 In the last half century, the unparalleled growth of industry and the rapid development of communications technology have enabled trademarks, tradenames and other distinctive signs of a product to penetrate regions where the owner does not actually manufacture or sell the product itself. Goodwill is no longer confined to the territory of actual market penetration; it extends to zones where the marked article has been fixed in the public mind through advertising. 30 Whether in the print, broadcast or electronic communications medium, particularly on the Internet, 31 advertising has paved the way for growth and expansion of the product by creating and earning a reputation that crosses over borders, virtually turning the whole world into one vast marketplace. This is the mise-en-scene of the present controversy. Petitioner brings this action claiming that "Barbizon" products have been sold in the Philippines since 1970. Petitioner developed this market by working long hours and spending considerable sums of money on advertisements and promotion of the trademark and its products. Now,

almost thirty years later, private respondent, a foreign corporation, "swaggers into the country like a conquering hero," usurps the trademark and invades petitioner's market. 32 Justice and fairness dictate that private respondent be prevented from appropriating what is not its own. Legally, at the same time, private respondent is barred from questioning petitioner's ownership of the trademark because of res judicata. 33 Literally, res judicata means a matter adjudged, a thing judicially acted upon or decided; a thing or matter settled by judgment. 34 In res judicata, the judgment in the first action is considered conclusive as to every matter offered and received therein, as to any other admissible matter which might have been offered for that purpose, and all other matters that could have been adjudged therein. 35 Res judicata is an absolute bar to a subsequent action for the same cause; and its requisites are: (a) the former judgment or order must be final; (b) the judgment or order must be one on the merits; (c) it must have been rendered by a court having jurisdiction over the subject matter and parties; (d) there must be between the first and second actions, identity of parties, of subject matter and of causes of action. 36 The Solicitor General, on behalf of respondent Director of Patents, has joined cause with petitioner. Both claim that all the four elements of res judicata have been complied with: that the judgment in IPC No. 686 was final and was rendered by the Director of Patents who had jurisdiction over the subject matter and parties; that the judgment in IPC No. 686 was on the merits; and that the lack of a hearing was immaterial because substantial issues were raised by the parties and passed upon by the Director of Patents. 37 The decision in IPC No. 686 reads as follows: xxx xxx xxx. Neither party took testimony nor adduced documentary evidence. They submitted the case for decision based on the pleadings which, together with the pertinent records, have all been carefully considered. Accordingly, the only issue for my disposition is whether or not the herein opposer would probably be damaged by the registration of the trademark BARBIZON sought by the respondentapplicant on the ground that it so resembles the trademark BARBIZON allegedly used and owned by the former to be "likely to cause confusion, mistake or to deceive purchasers." On record, there can be no doubt that respondent-applicant's sought-to-beregistered trademark BARBIZON is similar, in fact obviously identical, to opposer's alleged trademark BARBIZON, in spelling and pronunciation. The only appreciable but very negligible difference lies in their respective appearances or manner of presentation. Respondent-

applicant's trademark is in bold letters (set against a black background), while that of the opposer is offered in stylish script letters. It is opposer's assertion that its trademark BARBIZON has been used in trade or commerce in the Philippines prior to the date of application for the registration of the identical mark BARBIZON by the respondent-applicant. However, the allegation of facts in opposer's verified notice of opposition is devoid of such material information. In fact, a reading of the text of said verified opposition reveals an apparent, if not deliberate, omission of the date (or year) when opposer's alleged trademark BARBIZON was first used in trade in the Philippines (see par. No. 1, p. 2, Verified Notice of Opposition, Rec.). Thus, it cannot here and now be ascertained whether opposer's alleged use of the trademark BARBIZON could be prior to the use of the identical mark by the herein respondent-applicant, since the opposer attempted neither to substantiate its claim of use in local commerce with any proof or evidence. Instead, the opposer submitted the case for decision based merely on the pleadings. On the other hand, respondent-applicant asserted in her amended application for registration that she first used the trademark BARBIZON for brassiere (or "brasseire") and ladies underwear garments and panties as early as March 3, 1970. Be that as it may, there being no testimony taken as to said date of first use, respondent-applicant will be limited to the filing date, June 15, 1970, of her application as the date of first use (Rule 173, Rules of Practice in Trademark Cases). From the foregoing, I conclude that the opposer has not made out a case of probable damage by the registration of the respondent-applicant's mark BARBIZON. WHEREFORE, the opposition should be, as it is hereby, DISMISSED. Accordingly, Application Serial No. 19010, for the registration of the trademark BARBIZON of respondent Lolita R. Escobar, is given due course. 38 The decision in IPC No. 686 was a judgment on the merits and it was error for the Court of Appeals to rule that it was not. A judgment is on the merits when it determines the rights and liabilities of the parties based on the disclosed facts, irrespective of formal, technical or dilatory objections. 39 It is not necessary that a trial should have been conducted. If the court's judgment is general, and not based on any technical defect or objection, and the parties had a full legal

opportunity to be heard on their respective claims and contentions, it is on the merits although there was no actual hearing or arguments on the facts of the case. 40 In the case at bar, the Director of Patents did not dismiss private respondent's opposition on a sheer technicality. Although no hearing was conducted, both parties filed their respective pleadings and were given opportunity to present evidence. They, however, waived their right to do so and submitted the case for decision based on their pleadings. The lack of evidence did not deter the Director of Patents from ruling on the case, particularly on the issue of prior use, which goes into the very substance of the relief sought by the parties. Since private respondent failed to prove prior use of its trademark, Escobar's claim of first use was upheld. The judgment in IPC No. 686 being on the merits, petitioner and the Solicitor General allege that IPC No. 686 and IPC No. 2049 also comply with the fourth requisite of res judicata, i.e., they involve the same parties and the same subject matter, and have identical causes of action. Undisputedly, IPC No. 686 and IPC No. 2049 involve the same parties and the same subject matter. Petitioner herein is the assignee of Escobar while private respondent is the same American corporation in the first case. The subject matter of both cases is the trademark "Barbizon." Private respondent counter-argues, however, that the two cases do not have identical causes of action. New causes of action were allegedly introduced in IPC No. 2049, such as the prior use and registration of the trademark in the United States and other countries worldwide, prior use in the Philippines, and the fraudulent registration of the mark in violation of Article 189 of the Revised Penal Code. Private respondent also cited protection of the trademark under the Convention of Paris for the Protection of Industrial Property, specifically Article 6bis thereof, and the implementation of Article 6bis by two Memoranda dated November 20, 1980 and October 25, 1983 of the Minister of Trade and Industry to the Director of Patents, as well as Executive Order (E.O.) No. 913. The Convention of Paris for the Protection of Industrial Property, otherwise known as the Paris Convention, is a multilateral treaty that seeks to protect industrial property consisting of patents, utility models, industrial designs, trademarks, service marks, trade names and indications of source or appellations of origin, and at the same time aims to repress unfair competition. 41 The Convention is essentially a compact among various countries which, as members of the Union, have pledged to accord to citizens of the other member countries trademark and other rights comparable to those accorded their own citizens by their domestic laws for an effective protection against unfair competition. 42 In short, foreign nationals are to be given the same treatment in each of the member countries as that country makes available to its own citizens. 43 Nationals of the various member nations are thus assured of a certain minimum of international protection of their industrial property. 44 The Convention was first signed by eleven countries in Paris on March 20, 1883. 45 It underwent several revisions at Brussels in 1900, at Washington in 1911, at The Hague in 1925, at London in 1934, at Lisbon in 1958, 46 and at Stockholm in 1967. Both the Philippines and the United States of America, herein private respondent's country, are

signatories to the Convention. The United States acceded on May 30, 1887 while the Philippines, through its Senate, concurred on May 10, 1965. 47 The Philippines' adhesion became effective on September 27, 1965, 48 and from this date, the country obligated itself to honor and enforce the provisions of the Convention. 49 In the case at bar, private respondent anchors its cause of action on the first paragraph of Article 6bis of the Paris Convention which reads as follows: Article 6bis (1) The countries of the Union undertake, either administratively if their legislation so permits, or at the request of an interested party, to refuse or to cancel the registration and to prohibit the use, of a trademark which constitutes a reproduction, an imitation, or a translation, liable to create confusion, of a mark considered by the competent authority of the country of registration or use to be well-known in that country as being already the mark of a person entitled to the benefits of this Convention and used for identical or similar goods. These provisions shall also apply when the essential part of the mark constitutes a reproduction of any such well-known mark or an imitation liable to create confusion therewith. (2) A period of at least five years from the date of registration shall be allowed for seeking the cancellation of such a mark. The countries of the Union may provide for a period within which the prohibition of use must be sought. (3) No time limit shall be fixed for seeking the cancellation or the prohibition of the use of marks registered or used in bad faith. 50 This Article governs protection of well-known trademarks. Under the first paragraph, each country of the Union bound itself to undertake to refuse or cancel the registration, and prohibit the use of a trademark which is a reproduction, imitation or translation, or any essential part of which trademark constitutes a reproduction, liable to create confusion, of a mark considered by the competent authority of the country where protection is sought, to be well-known in the country as being already the mark of a person entitled to the benefits of the Convention, and used for identical or similar goods. Art. 6bis was first introduced at The Hague in 1925 and amended in Lisbon in 1952. 51 It is a self-executing provision and does not require legislative enactment to give it effect in the member country. 52 It may be applied directly by the tribunals and officials of each member country by the mere publication or proclamation of the Convention, after its

ratification according to the public law of each state and the order for its execution. 53 The essential requirement under Article 6bis is that the trademark to be protected must be "well-known" in the country where protection is sought. The power to determine whether a trademark is well-known lies in the "competent authority of the country of registration or use." This competent authority would be either the registering authority if it has the power to decide this, or the courts of the country in question if the issue comes before a court. 54 Pursuant to Article 6bis, on November 20, 1980, then Minister Luis Villafuerte of the Ministry of Trade issued a Memorandum to the Director of Patents. The Minister ordered the Director that: Pursuant to the Paris Convention for the Protection of Industrial Property to which the Philippines is a signatory, you are hereby directed to reject all pending applications for Philippine registration of signature and other world-famous trademarks by applicants other than its original owners or users. The conflicting claims over internationally known trademarks involve such name brands as Lacoste, Jordache, Vanderbilt, Sasson, Fila, Pierre Cardin, Gucci, Christian Dior, Oscar de la Renta, Calvin Klein, Givenchy, Ralph Lauren, Geoffrey Beene, Lanvin and Ted Lapidus. It is further directed that, in cases where warranted, Philippine registrants of such trademarks should be asked to surrender their certificates of registration, if any, to avoid suits for damages and other legal action by the trademarks' foreign or local owners or original users. You are also required to submit to the undersigned a progress report on the matter. For immediate compliance. 55 Three years later, on October 25, 1983, then Minister Roberto Ongpin issued another Memorandum to the Director of Patents, viz: Pursuant to Executive Order No. 913 dated 7 October 1983 which strengthens the rule-making and adjudicatory powers of the Minister of Trade and Industry and provides inter alia, that "such rule-making and adjudicatory powers should be revitalized in order that the Minister of Trade and Industry can . . . apply more swift and effective solutions and remedies to old and new problems . . . such as infringement of internationally-known tradenames and trademarks . . ." and in view of the decision of the Intermediate

Appellate Court in the case of LA CHEMISE LACOSTE, S.A., versus RAM SADWHANI [AC-G.R. SP NO. 13359 (17) June 1983] 56 which affirms the validity of the MEMORANDUM of then Minister Luis R. Villafuerte dated 20 November 1980 confirming our obligations under the PARIS CONVENTION FOR THE PROTECTION OF INDUSTRIAL PROPERTY to which the Republic of the Philippines is a signatory, you are hereby directed to implement measures necessary to effect compliance with our obligations under said Convention in general, and, more specifically, to honor our commitment under Section 6bis 57 thereof, as follows: 1. Whether the trademark under consideration is well-known in the Philippines or is a mark already belonging to a person entitled to the benefits of the CONVENTION, this should be established, pursuant to Philippine Patent Office procedures in inter partes and ex parte cases, according to any of the following criteria or any combination thereof: (a) a declaration by the Minister of Trade and Industry that the trademark being considered is already well-known in the Philippines such that permission for its use by other than its original owner will constitute a reproduction, imitation, translation or other infringement; (b) that the trademark is used in commerce internationally, supported by proof that goods bearing the trademark are sold on an international scale, advertisements, the establishment of factories, sales offices, distributorships, and the like, in different countries, including volume or other measure of international trade and commerce; (c) that the trademark is duly registered in the industrial property

office(s) of another country or countries, taking into consideration the date of such registration; (d) that the trademark has long been established and obtained goodwill and international consumer recognition as belonging to one owner or source; (e) that the trademark actually belongs to a party claiming ownership and has the right to registration under the provisions of the aforestated PARIS CONVENTION. 2. The word trademark, as used in this MEMORANDUM, shall include tradenames, service marks, logos, signs, emblems, insignia or other similar devices used for identification and recognition by consumers. 3. The Philippine Patent Office shall refuse all applications for, or cancel the registration of, trademarks which constitute a reproduction, translation or imitation of a trademark owned by a person, natural or corporate, who is a citizen of a country signatory to the PARIS CONVENTION FOR THE PROTECTION OF INDUSTRIAL PROPERTY. 4. The Philippine Patent Office shall give due course to the Opposition in cases already or hereafter filed against the registration of trademarks entitled to protection of Section 6bis of said PARIS CONVENTION as outlined above, by remanding applications filed by one not entitled to such protection for final disallowance by the Examination Division. 5. All pending applications for Philippine registration of signature and other world-famous trademarks filed by applicants other than their original owners or users shall be rejected forthwith. Where such applicants have already obtained

registration contrary to the abovementioned PARIS CONVENTION and/or Philippine Law, they shall be directed to surrender their Certificates of Registration to the Philippine Patent Office for immediate cancellation proceedings. xxx xxx xxx. 58 In the Villafuerte Memorandum, the Minister of Trade instructed the Director of Patents to reject all pending applications for Philippine registration of signature and other world-famous trademarks by applicants other than their original owners or users. The Minister enumerated several internationally-known trademarks and ordered the Director of Patents to require Philippine registrants of such marks to surrender their certificates of registration. In the Ongpin Memorandum, the Minister of Trade and Industry did not enumerate well-known trademarks but laid down guidelines for the Director of Patents to observe in determining whether a trademark is entitled to protection as a well-known mark in the Philippines under Article 6bis of the Paris Convention. This was to be established through Philippine Patent Office procedures in inter partes and ex parte cases pursuant to the criteria enumerated therein. The Philippine Patent Office was ordered to refuse applications for, or cancel the registration of, trademarks which constitute a reproduction, translation or imitation of a trademark owned by a person who is a citizen of a member of the Union. All pending applications for registration of world-famous trademarks by persons other than their original owners were to be rejected forthwith. The Ongpin Memorandum was issued pursuant to Executive Order No. 913 dated October 7, 1983 of then President Marcos which strengthened the rule-making and adjudicatory powers of the Minister of Trade and Industry for the effective protection of consumers and the application of swift solutions to problems in trade and industry. 59 Both the Villafuerte and Ongpin Memoranda were sustained by the Supreme Court in the 1984 landmark case of La Chemise Lacoste, S.A. v. Fernandez. 60 This court ruled therein that under the provisions of Article 6bis of the Paris Convention, the Minister of Trade and Industry was the "competent authority" to determine whether a trademark is well-known in this country. 61 The Villafuerte Memorandum was issued in 1980, i.e., fifteen (15) years after the adoption of the Paris Convention in 1965. In the case at bar, the first inter partes case, IPC No. 686, was filed in 1970, before the Villafuerte Memorandum but five (5) years after the effectivity of the Paris Convention. Article 6bis was already in effect five years before the first case was instituted. Private respondent, however, did not cite the protection of Article 6bis, neither did it mention the Paris Convention at all. It was only in 1981 when IPC No. 2049 was instituted that the Paris Convention and the Villafuerte Memorandum, and, during the pendency of the case, the 1983 Ongpin Memorandum were invoked by private respondent.

The Solicitor General argues that the issue of whether the protection of Article 6bis of the Convention and the two Memoranda is barred by res judicata has already been answered in Wolverine Worldwide, Inc. v. Court of Appeals. 62 In this case, petitioner Wolverine, a foreign corporation, filed with the Philippine Patent Office a petition for cancellation of the registration certificate of private respondent, a Filipino citizen, for the trademark "Hush Puppies" and "Dog Device." Petitioner alleged that it was the registrant of the internationally-known trademark in the United States and other countries, and cited protection under the Paris Convention and the Ongpin Memorandum. The petition was dismissed by the Patent Office on the ground of res judicata. It was found that in 1973 petitioner's predecessor-in-interest filed two petitions for cancellation of the same trademark against respondent's predecessor-ininterest. The Patent Office dismissed the petitions, ordered the cancellation of registration of petitioner's trademark, and gave due course to respondent's application for registration. This decision was sustained by the Court of Appeals, which decision was not elevated to us and became final and executory. 63 Wolverine claimed that while its previous petitions were filed under R.A. No. 166, the Trademark Law, its subsequent petition was based on a new cause of action, i.e., the Ongpin Memorandum and E.O. No. 913 issued in 1983, after finality of the previous decision. We held that the said Memorandum and E.O. did not grant a new cause of action because it did "not amend the Trademark Law," . . . "nor did it indicate a new policy with respect to the registration in the Philippines of world-famous trademarks." 64 This conclusion was based on the finding that Wolverine's two previous petitions and subsequent petition dealt with the same issue of ownership of the trademark. 65 In other words, since the first and second cases involved the same issue of ownership, then the first case was a bar to the second case. In the instant case, the issue of ownership of the trademark "Barbizon" was not raised in IPC No. 686. Private respondent's opposition therein was merely anchored on: (a) "confusing similarity" of its trademark with that of Escobar's; (b) that the registration of Escobar's similar trademark will cause damage to private respondent's business reputation and goodwill; and (c) that Escobar's use of the trademark amounts to an unlawful appropriation of a mark previously used in the Philippines which act is penalized under Section 4 (d) of the Trademark Law. In IPC No. 2049, private respondent's opposition set forth several issues summarized as follows: (a) as early as 1933, it adopted the word "BARBIZON" as trademark on its products such as robes, pajamas, lingerie, nightgowns and slips;

(b) that the trademark "BARBIZON" was registered with the United States Patent Office in 1934 and 1949; and that variations of the same trademark, i.e., "BARBIZON" with Bee design and "BARBIZON" with the representation of a woman were also registered with the U.S. Patent Office in 1961 and 1976; (c) that these marks have been in use in the Philippines and in many countries all over the world for over forty years. "Barbizon" products have been advertised in international publications and the marks registered in 36 countries worldwide; (d) Escobar's registration of the similar trademark "BARBIZON" in 1974 was based on fraud; and this fraudulent registration was cancelled in 1979, stripping Escobar of whatsoever right she had to the said mark; (e) Private respondent's trademark is entitled to protection as a well-known mark under Article 6bis of the Paris Convention, Executive Order No. 913, and the two Memoranda dated November 20, 1980 and October 25, 1983 of the Minister of Trade and Industry to the Director of Patents; (f) Escobar's trademark is identical to private respondent's and its use on the same class of goods as the latter's amounts to a violation of the Trademark Law and Article 189 of the Revised Penal Code. IPC No. 2049 raised the issue of ownership of the trademark, the first registration and use of the trademark in the United States and other countries, and the international recognition and reputation of the trademark established by extensive use and advertisement of private respondent's products for over forty years here and abroad. These are different from the issues of confusing similarity and damage in IPC No. 686. The issue of prior use may have been raised in IPC No. 686 but this claim was limited to prior use in the Philippines only. Prior use in IPC No. 2049 stems from private respondent's claim as originator of the word and symbol "Barbizon," 66 as the first and registered user of the mark attached to its products which have been sold and advertised worldwide for a considerable number of years prior to petitioner's first application for registration of her trademark in the Philippines. Indeed, these are substantial allegations that raised new issues and necessarily gave private respondent a new cause of action. Res judicata does not apply to rights, claims or demands, although growing out of the same subject matter, which constitute separate or distinct causes of action and were not put in issue in the former action. 67

Respondent corporation also introduced in the second case a fact that did not exist at the time the first case was filed and terminated. The cancellation of petitioner's certificate of registration for failure to file the affidavit of use arose only after IPC No. 686. It did not and could not have occurred in the first case, and this gave respondent another cause to oppose the second application. Res judicata extends only to facts and conditions as they existed at the time judgment was rendered and to the legal rights and relations of the parties fixed by the facts so determined. 68 When new facts or conditions intervene before the second suit, furnishing a new basis for the claims and defenses of the parties, the issues are no longer the same, and the former judgment cannot be pleaded as a bar to the subsequent action. 69 It is also noted that the oppositions in the first and second cases are based on different laws. The opposition in IPC No. 686 was based on specific provisions of the Trademark Law, i.e., Section 4 (d) 70 on confusing similarity of trademarks and Section 8 71 on the requisite damage to file an opposition to a petition for registration. The opposition in IPC No. 2049 invoked the Paris Convention, particularly Article 6bis thereof, E.O. No. 913 and the two Memoranda of the Minister of Trade and Industry. This opposition also invoked Article 189 of the Revised Penal Code which is a statute totally different from the Trademark Law. 72 Causes of action which are distinct and independent from each other, although arising out of the same contract, transaction, or state of facts, may be sued on separately, recovery on one being no bar to subsequent actions on others. 73 The mere fact that the same relief is sought in the subsequent action will not render the judgment in the prior action operative as res judicata, such as where the two actions are based on different statutes. 74 Res judicata therefore does not apply to the instant case and respondent Court of Appeals did not err in so ruling. Intellectual and industrial property rights cases are not simple property cases. Trademarks deal with the psychological function of symbols and the effect of these symbols on the public at large. 75 Trademarks play a significant role in communication, commerce and trade, and serve valuable and interrelated business functions, both nationally and internationally. For this reason, all agreements concerning industrial property, like those on trademarks and tradenames, are intimately connected with economic development. 76 Industrial property encourages investments in new ideas and inventions and stimulates creative efforts for the satisfaction of human needs. They speed up transfer of technology and industrialization, and thereby bring about social and economic progress. 77 These advantages have been acknowledged by the Philippine government itself. The Intellectual Property Code of the Philippines declares that "an effective intellectual and industrial property system is vital to the development of domestic and creative activity, facilitates transfer of technology, it attracts foreign investments, and ensures market access for our products." 78 The Intellectual Property Code took effect on January 1, 1998 and by its express provision, 79 repealed the Trademark Law, 80 the Patent Law, 81 Articles 188 and 189 of the Revised Penal Code, the Decree on Intellectual Property, 82 and the Decree on Compulsory Reprinting of Foreign Textbooks. 83 The Code was enacted to strengthen the intellectual and industrial property system in the Philippines as mandated by the

country's accession to the Agreement Establishing the World Trade Organization (WTO). 84 The WTO is a common institutional framework for the conduct of trade relations among its members in matters related to the multilateral and plurilateral trade agreements annexed to the WTO Agreement. 85 The WTO framework ensures a "single undertaking approach" to the administration and operation of all agreements and arrangements attached to the WTO Agreement. Among those annexed is the Agreement on Trade-Related Aspects of Intellectual Property Rights or TRIPs. 86 Members to this Agreement "desire to reduce distortions and impediments to international trade, taking into account the need to promote effective and adequate protection of intellectual property rights, and to ensure that measures and procedures to enforce intellectual property rights do not themselves become barriers to legitimate trade." To fulfill these objectives, the members have agreed to adhere to minimum standards of protection set by several Conventions. 87 These Conventions are: the Berne Convention for the Protection of Literary and Artistic Works (1971), the Rome Convention or the International Convention for the Protection of Performers, Producers of Phonograms and Broadcasting Organisations, the Treaty on Intellectual Property in Respect of Integrated Circuits, and the Paris Convention (1967), as revised in Stockholm on July 14, 1967. 88 A major proportion of international trade depends on the protection of intellectual property rights. 89 Since the late 1970's, the unauthorized counterfeiting of industrial property and trademarked products has had a considerable

adverse impact on domestic and international trade revenues. 90 The TRIPs Agreement seeks to grant adequate protection of intellectual property rights by creating a favorable economic environment to encourage the inflow of foreign investments, and strengthening the multi-lateral trading system to bring about economic, cultural and technological independence. 91 The Philippines and the United States of America have acceded to the WTO Agreement. This Agreement has revolutionized international business and economic relations among states, and has propelled the world towards trade liberalization and economic globalization. 92 Protectionism and isolationism belong to the past. Trade is no longer confined to a bilateral system. There is now "a new era of global economic cooperation, reflecting the widespread desire to operate in a fairer and more open multilateral trading system." 93 Conformably, the State must reaffirm its commitment to the global community and take part in evolving a new international economic order at the dawn of the new millenium. IN VIEW WHEREOF, the petition is denied and the Decision and Resolution of the Court of Appeals in CAG.R. SP No. 28415 are affirmed. SO ORDERED. Davide, Jr., C.J., Kapunan, Pardo and Ynares-Santiago, JJ., concu

G.R. Nos. 160054-55 July 21, 2004 MANOLO P. SAMSON, petitioner, vs. HON. REYNALDO B. DAWAY, in his capacity as Presiding Judge, Regional Trial Court of Quezon City, Branch 90, PEOPLE OF THE PHILIPPINES and CATERPILLAR, INC., respondents. D EC ISIO N YNARES-SANTIAGO, J.: Assailed in this petition for certiorari is the March 26, 2003 Order1 of the Regional Trial Court of Quezon City, Branch 90, which denied petitioners (1) motion to quash the information; and (2) motion for reconsideration of the August 9, 2002 Order denying his motion to suspend the arraignment and other proceedings in Criminal Case Nos. Q02-108043-44. Petitioner also questioned its August 5, 2003 Order2 which denied his motion for reconsideration. The undisputed facts show that on March 7, 2002, two informations for unfair competition under Section 168.3 (a), in relation to Section 170, of the Intellectual Property Code (Republic Act No. 8293), similarly worded save for the dates and places of commission, were filed against petitioner Manolo P. Samson, the registered owner of ITTI Shoes. The accusatory portion of said informations read: That on or about the first week of November 1999 and sometime prior or subsequent thereto, in Quezon City, Philippines, and within the jurisdiction of this Honorable Court, above-named accused, owner/proprietor of ITTI Shoes/Mano Shoes Manufactuirng Corporation located at Robinsons Galleria, EDSA corner Ortigas Avenue, Quezon City, did then and there willfully, unlawfully and feloniously distribute, sell and/or offer for sale CATERPILLAR products such as footwear, garments, clothing, bags, accessories and paraphernalia which are closely identical to and/or colorable imitations of the authentic Caterpillar products and likewise using trademarks, symbols and/or designs as would cause confusion, mistake or deception on the part of the buying public to the damage and prejudice of CATERPILLAR, INC., the prior adopter, user and owner of the following internationally: "CATERPILLAR", "CAT", "CATERPILLAR & DESIGN", "CAT AND DESIGN", "WALKING MACHINES" and "TRACK-TYPE TRACTOR & DESIGN."

CONTRARY TO LAW. 3 On April 19, 2002, petitioner filed a motion to suspend arraignment and other proceedings in view of the existence of an alleged prejudicial question involved in Civil Case No. Q-00-41446 for unfair competition pending with the same branch; and also in view of the pendency of a petition for review filed with the Secretary of Justice assailing the Chief State Prosecutors resolution finding probable cause to charge petitioner with unfair competition. In an Order dated August 9, 2002, the trial court denied the motion to suspend arraignment and other proceedings. On August 20, 2002, petitioner filed a twin motion to quash the informations and motion for reconsideration of the order denying motion to suspend, this time challenging the jurisdiction of the trial court over the offense charged. He contended that since under Section 170 of R.A. No. 8293, the penalty4 of imprisonment for unfair competition does not exceed six years, the offense is cognizable by the Municipal Trial Courts and not by the Regional Trial Court, per R.A. No. 7691. In its assailed March 26, 2003 Order, the trial court denied petitioners twin motions.6 A motion for reconsideration thereof was likewise denied on August 5, 2003. Hence, the instant petition alleging that respondent Judge gravely abused its discretion in issuing the assailed orders. The issues posed for resolution are (1) Which court has jurisdiction over criminal and civil cases for violation of intellectual property rights? (2) Did the respondent Judge gravely abuse his discretion in refusing to suspend the arraignment and other proceedings in Criminal Case Nos. Q02-108043-44 on the ground of (a) the existence of a prejudicial question; and (b) the pendency of a petition for review with the Secretary of Justice on the finding of probable cause for unfair competition? Under Section 170 of R.A. No. 8293, which took effect on January 1, 1998, the criminal penalty for infringement of registered marks, unfair competition, false designation of origin and false description or representation, is imprisonment from 2 to 5 years and a fine ranging from Fifty Thousand Pesos to Two Hundred Thousand Pesos, to wit: SEC. 170. Penalties. Independent of the civil and administrative sanctions imposed by law, a criminal penalty of imprisonment from two (2) years to five (5) years and a fine ranging from Fifty thousand pesos (P50,000.00) to Two hundred thousand pesos (P200,000.00), shall be imposed on any person who is found guilty of committing any of the acts mentioned in Section 155 [Infringement], Section 168 [Unfair Competition] and Section 169.1 [False Designation of Origin and False Description or Representation]. Corollarily, Section 163 of the same Code states that actions (including criminal and civil) under Sections 150, 155, 164,

166, 167, 168 and 169 shall be brought before the proper courts with appropriate jurisdiction under existing laws, thus SEC. 163. Jurisdiction of Court. All actions under Sections 150, 155, 164 and 166 to 169 shall be brought before the proper courts with appropriate jurisdiction under existing laws. (Emphasis supplied) The existing law referred to in the foregoing provision is Section 27 of R.A. No. 166 (The Trademark Law) which provides that jurisdiction over cases for infringement of registered marks, unfair competition, false designation of origin and false description or representation, is lodged with the Court of First Instance (now Regional Trial Court) SEC. 27. Jurisdiction of Court of First Instance. All actions under this Chapter [V Infringement] and Chapters VI [Unfair Competition] and VII [False Designation of Origin and False Description or Representation], hereof shall be brought before the Court of First Instance. We find no merit in the claim of petitioner that R.A. No. 166 was expressly repealed by R.A. No. 8293. The repealing clause of R.A. No. 8293, reads SEC. 239. Repeals. 239.1. All Acts and parts of Acts inconsistent herewith, more particularly Republic Act No. 165, as amended; Republic Act No. 166, as amended; and Articles 188 and 189 of the Revised Penal Code; Presidential Decree No. 49, including Presidential Decree No. 285, as amended, are hereby repealed. (Emphasis added) Notably, the aforequoted clause did not expressly repeal R.A. No. 166 in its entirety, otherwise, it would not have used the phrases "parts of Acts" and "inconsistent herewith;" and it would have simply stated "Republic Act No. 165, as amended; Republic Act No. 166, as amended; and Articles 188 and 189 of the Revised Penal Code; Presidential Decree No. 49, including Presidential Decree No. 285, as amended are hereby repealed." It would have removed all doubts that said specific laws had been rendered without force and effect. The use of the phrases "parts of Acts" and "inconsistent herewith" only means that the repeal pertains only to provisions which are repugnant or not susceptible of harmonization with R.A. No. 8293.6 Section 27 of R.A. No. 166, however, is consistent and in harmony with Section 163 of R.A. No. 8293. Had R.A. No. 8293 intended to vest jurisdiction over violations of intellectual property rights with the Metropolitan Trial Courts, it would have expressly stated so under Section 163 thereof. Moreover, the settled rule in statutory construction is that in case of conflict between a general law and a special law, the latter must prevail. Jurisdiction conferred by a special law to Regional Trial Courts must prevail over that granted by a general law to Municipal Trial Courts.7

In the case at bar, R.A. No. 8293 and R.A. No. 166 are special laws8 conferring jurisdiction over violations of intellectual property rights to the Regional Trial Court. They should therefore prevail over R.A. No. 7691, which is a general law.9 Hence, jurisdiction over the instant criminal case for unfair competition is properly lodged with the Regional Trial Court even if the penalty therefor is imprisonment of less than 6 years, or from 2 to 5 years and a fine ranging from P50,000.00 to P200,000.00. In fact, to implement and ensure the speedy disposition of cases involving violations of intellectual property rights under R.A. No. 8293, the Court issued A.M. No. 02-1-11SC dated February 19, 2002 designating certain Regional Trial Courts as Intellectual Property Courts. On June 17, 2003, the Court further issued a Resolution consolidating jurisdiction to hear and decide Intellectual Property Code and Securities and Exchange Commission cases in specific Regional Trial Courts designated as Special Commercial Courts. The case of Mirpuri v. Court of Appeals,10 invoked by petitioner finds no application in the present case. Nowhere in Mirpuri did we state that Section 27 of R.A. No. 166 was repealed by R.A. No. 8293. Neither did we make a categorical ruling therein that jurisdiction over cases for violation of intellectual property rights is lodged with the Municipal Trial Courts. The passing remark in Mirpuri on the repeal of R.A. No. 166 by R.A. No. 8293 was merely a backgrounder to the enactment of the present Intellectual Property Code and cannot thus be construed as a jurisdictional pronouncement in cases for violation of intellectual property rights. Anent the second issue, petitioner failed to substantiate his claim that there was a prejudicial question. In his petition, he prayed for the reversal of the March 26, 2003 order which sustained the denial of his motion to suspend arraignment and other proceedings in Criminal Case Nos. Q02-108043-44. For unknown reasons, however, he made no discussion in support of said prayer in his petition and reply to comment. Neither did he attach a copy of the complaint in Civil Case No. Q-00-41446 nor quote the pertinent portion thereof to prove the existence of a prejudicial question. At any rate, there is no prejudicial question if the civil and the criminal action can, according to law, proceed independently of each other.11 Under Rule 111, Section 3 of the Revised Rules on Criminal Procedure, in the cases provided in Articles 32, 33, 34 and 2176 of the Civil Code, the independent civil action may be brought by the offended party. It shall proceed independently of the criminal action and shall require only a preponderance of evidence. In the case at bar, the common element in the acts constituting unfair competition under Section 168 of R.A. No. 8293 is fraud.12 Pursuant to Article 33 of the Civil Code, in cases of defamation, fraud, and physical injuries, a civil action for damages, entirely separate and distinct from the criminal action, may be brought by the injured party. Hence, Civil Case No. Q-00-41446, which as admitted13 by private respondent also relate to unfair competition, is an independent civil action under Article 33 of the Civil Code. As such, it will not operate as a prejudicial question that will justify the suspension of the criminal cases at bar.

Section 11 (c), Rule 116 of the Revised Rules on Criminal Procedure provides SEC. 11. Suspension of arraignment. Upon motion by the proper party, the arraignment shall be suspended in the following cases xxxxxxxxx (c) A petition for review of the resolution of the prosecutor is pending at either the Department of Justice, or the Office of the President; Provided, that the period of suspension shall not exceed sixty (60) days counted from the filing of the petition with the reviewing office. While the pendency of a petition for review is a ground for suspension of the arraignment, the aforecited provision limits the deferment of the arraignment to a period of 60 days reckoned from the filing of the petition with the reviewing office. It follows, therefore, that after the expiration of said period, the trial court is bound to arraign the accused or to deny the motion to defer arraignment. In the instant case, petitioner failed to establish that respondent Judge abused his discretion in denying his motion to suspend. His pleadings and annexes submitted before the Court do not show the date of filing of the petition for review with the Secretary of Justice.14 Moreover, the Order dated August 9, 2002 denying his motion to suspend was not appended to the petition. He thus failed to discharge the burden of proving that he was entitled to a suspension of his arraignment and that the questioned orders are contrary to Section 11 (c), Rule 116 of the Revised Rules on Criminal Procedure. Indeed, the age-old but familiar rule is that he who alleges must prove his allegations. In sum, the dismissal of the petition is proper considering that petitioner has not established that the trial court committed grave abuse of discretion. So also, his failure to attach documents relevant to his allegations warrants the dismissal of the petition, pursuant to Section 3, Rule 46 of the Rules of Civil Procedure, which states: SEC. 3. Contents and filing of petition; effect of non-compliance with requirements. The petition shall contain the full names and actual addresses of all the petitioners and respondents, a concise statement of the matters involved, the factual background of the case, and the grounds relied upon for the relief prayed for. It shall be filed in seven (7) clearly legible copies together with proof of service thereof on the respondent with the original copy intended for the court indicated as such by the petitioner, and shall be accompanied by a clearly legible duplicate original or certified true copy of the judgment, order, resolution, or

ruling subject thereof, such material portions of the record as are referred to therein, and other documents relevant or pertinent thereto. xxxxxxxxx

dismissal of the petition. (Emphasis added) WHEREFORE, in view of all the foregoing, the petition is dismissed. SO ORDERED.

The failure of the petitioner to comply with any of the foregoing requirements shall be sufficient ground for the

Davide, Jr., C.J., (Chairman), Quisumbing, Carpio, and Azcuna, JJ., concur.

G.R. No. 115758 March 19, 2002 ELIDAD C. KHO, doing business under the name and style of KEC COSMETICS LABORATORY, petitioner, vs. HON. COURT OF APPEALS, SUMMERVILLE GENERAL MERCHANDISING and COMPANY, and ANG TIAM CHAY, respondents. DE LEON, JR., J.: Before us is a petition for review on certiorari of the Decision 1 dated May 24, 1993 of the Court of Appeals setting aside and declaring as null and void the Orders2 dated February 10, 1992 and March 19, 1992 of the Regional Trial Court, Branch 90, of Quezon City granting the issuance of a writ of preliminary injunction. The facts of the case are as follows: On December 20, 1991, petitioner Elidad C. Kho filed a complaint for injunction and damages with a prayer for the issuance of a writ of preliminary injunction, docketed as Civil Case No. Q-91-10926, against the respondents Summerville General Merchandising and Company (Summerville, for brevity) and Ang Tiam Chay. The petitioner's complaint alleges that petitioner, doing business under the name and style of KEC Cosmetics Laboratory, is the registered owner of the copyrights Chin Chun Su and Oval Facial Cream Container/Case, as shown by Certificates of Copyright Registration No. 0-1358 and No. 0-3678; that she also has patent rights on Chin Chun Su & Device and Chin Chun Su for medicated cream after purchasing the same from Quintin Cheng, the registered owner thereof in the Supplemental Register of the Philippine Patent Office on February 7, 1980 under Registration Certificate No. 4529; that respondent Summerville advertised and sold petitioner's cream products under the brand name Chin Chun Su, in similar containers that petitioner uses, thereby misleading the public, and resulting in the decline in the petitioner's business sales and income; and, that the respondents should be enjoined from allegedly infringing on the copyrights and patents of the petitioner. The respondents, on the other hand, alleged as their defense that Summerville is the exclusive and authorized importer, re-packer and distributor of Chin Chun Su products manufactured by Shun Yi Factory of Taiwan; that the said Taiwanese manufacturing company authorized Summerville to register its trade name Chin Chun Su Medicated Cream with the Philippine Patent Office and other appropriate governmental agencies; that KEC Cosmetics Laboratory of the petitioner obtained the copyrights through ACCORDINGLY, the application of plaintiff Elidad C. Kho, doing business under the style of KEC Cosmetic Laboratory, for preliminary injunction, is hereby granted. Consequentially, plaintiff is required to file with the Court a bond executed to defendants in the amount of five hundred thousand pesos (P500,000.00) to the effect that plaintiff will pay to defendants all damages which defendants may sustain by reason of the injunction if the Court should finally decide that plaintiff is not entitled thereto. SO ORDERED.3 The respondents moved for reconsideration but their motion for reconsideration was denied by the trial court in an Order dated March 19, 1992. 4 On April 24, 1992, the respondents filed a petition for certiorari with the Court of Appeals, docketed as CA-G.R. SP No. 27803, praying for the nullification of the said writ of preliminary injunction issued by the trial court. After the respondents filed their reply and almost a month after petitioner submitted her comment, or on August 14 1992, the latter moved to dismiss the petition for violation of Supreme Court Circular No. 28-91, a circular prohibiting forum shopping. According to the petitioner, the respondents did not state the docket number of the civil case in the caption of their petition and, more significantly, they did not include therein a certificate of non-forum shopping. The respondents opposed the petition and submitted to the appellate court a certificate of non-forum shopping for their petition. misrepresentation and falsification; and, that the authority of Quintin Cheng, assignee of the patent registration certificate, to distribute and market Chin Chun Su products in the Philippines had already been terminated by the said Taiwanese Manufacturing Company. After due hearing on the application for preliminary injunction, the trial court granted the same in an Order dated February 10, 1992, the dispositive portion of which reads:

On May 24, 1993, the appellate court rendered a Decision in CA-G.R. SP No. 27803 ruling in favor of the respondents, the dispositive portion of which reads: WHEREFORE, the petition is hereby given due course and the orders of respondent court dated February 10, 1992 and March 19, 1992 granting the writ of preliminary injunction and denying petitioners' motion for reconsideration are hereby set aside and declared null and void. Respondent court is directed to forthwith proceed with the trial of Civil Case No. Q-91-10926 and resolve the issue raised by the parties on the merits. SO ORDERED. 5 In granting the petition, the appellate court ruled that: The registration of the trademark or brandname "Chin Chun Su" by KEC with the supplemental register of the Bureau of Patents, Trademarks and Technology Transfer cannot be equated with registration in the principal register, which is duly protected by the Trademark Law.1wphi1.nt xxx xxx xxx

embodied in Rule 124 of the Revised Rules of Practice before the Philippine Patent Office in Trademark Cases but considering all the facts ventilated before us in the four interrelated petitions involving the petitioner and the respondent, it is devoid of factual basis. As even in cases where presumption and precept may factually be reconciled, we have held that the presumption is rebuttable, not conclusive, (People v. Lim Hoa, G.R. No. L10612, May 30, 1958, Unreported). One may be declared an unfair competitor even if his competing trademark is registered (Parke, Davis & Co. v. Kiu Foo & Co., et al., 60 Phil 928; La Yebana Co. v. chua Seco & Co., 14 Phil 534)."6 The petitioner filed a motion for reconsideration. This she followed with several motions to declare respondents in contempt of court for publishing advertisements notifying the public of the promulgation of the assailed decision of the appellate court and stating that genuine Chin Chun Su products could be obtained only from Summerville General Merchandising and Co. In the meantime, the trial court went on to hear petitioner's complaint for final injunction and damages. On October 22, 1993, the trial court rendered a Decision7 barring the petitioner from using the trademark Chin Chun Su and upholding the right of the respondents to use the same, but recognizing the copyright of the petitioner over the oval shaped container of her beauty cream. The trial court did not award damages and costs to any of the parties but to their respective counsels were awarded Seventy-Five Thousand Pesos (P75,000.00) each as attorney's fees. The petitioner duly appealed the said decision to the Court of Appeals. On June 3, 1994, the Court of Appeals promulgated a Resolution8 denying the petitioner's motions for reconsideration and for contempt of court in CA-G.R. SP No. 27803. Hence, this petition anchored on the following assignment of errors: I RESPONDENT HONORABLE COURT OF APPEALS COMMITTED GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OF JURISDICTION IN FAILING TO RULE ON PETITIONER'S MOTION TO DISMISS. II RESPONDENT HONORABLE COURT OF APPEALS COMMITTED GRAVE

As ratiocinated in La Chemise Lacoste, S.S. vs. Fernandez, 129 SCRA 373, 393: "Registration in the Supplemental Register, therefore, serves as notice that the registrant is using or has appropriated the trademark. By the very fact that the trademark cannot as yet be on guard and there are certain defects, some obstacles which the use must still overcome before he can claim legal ownership of the mark or ask the courts to vindicate his claims of an exclusive right to the use of the same. It would be deceptive for a party with nothing more than a registration in the Supplemental Register to posture before courts of justice as if the registration is in the Principal Register. The reliance of the private respondent on the last sentence of the Patent office action on application Serial No. 30954 that 'registrants is presumed to be the owner of the mark until after the registration is declared cancelled' is, therefore, misplaced and grounded on shaky foundation. The supposed presumption not only runs counter to the precept

ABUSE OF DISCRETION AMOUNTING TO LACK OF JURISDICTION IN REFUSING TO PROMPTLY RESOLVE PETITIONER'S MOTION FOR RECONSIDERATION. III IN DELAYING THE RESOLUTION OF PETITIONER'S MOTION FOR RECONSIDERATION, THE HONORABLE COURT OF APPEALS DENIED PETITIONER'S RIGHT TO SEEK TIMELY APPELLATE RELIEF AND VIOLATED PETITIONER'S RIGHT TO DUE PROCESS. IV RESPONDENT HONORABLE COURT OF APPEALS COMMITTED GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OF JURISDICTION IN FAILING TO CITE THE PRIVATE RESPONDENTS IN CONTEMPT.9 The petitioner faults the appellate court for not dismissing the petition on the ground of violation of Supreme Court Circular No. 28-91. Also, the petitioner contends that the appellate court violated Section 6, Rule 9 of the Revised Internal Rules of the Court of Appeals when it failed to rule on her motion for reconsideration within ninety (90) days from the time it is submitted for resolution. The appellate court ruled only after the lapse of three hundred fifty-four (354) days, or on June 3, 1994. In delaying the resolution thereof, the appellate court denied the petitioner's right to seek the timely appellate relief. Finally, petitioner describes as arbitrary the denial of her motions for contempt of court against the respondents. We rule in favor of the respondents. Pursuant to Section 1, Rule 58 of the Revised Rules of Civil Procedure, one of the grounds for the issuance of a writ of preliminary injunction is a proof that the applicant is entitled to the relief demanded, and the whole or part of such relief consists in restraining the commission or continuance of the act or acts complained of, either for a limited period or perpetually. Thus, a preliminary injunction order may be granted only when the application for the issuance of the same shows facts entitling the applicant to the relief demanded. 10 This is the reason why we have ruled that it must be shown that the invasion of the right sought to be protected is material and substantial, that the right of complainant is clear and unmistakable, and, that there is an urgent and paramount necessity for the writ to prevent serious damage.11 In the case at bar, the petitioner applied for the issuance of a preliminary injunctive order on the ground that she is entitled to the use of the trademark on Chin Chun Su and its container based on her copyright and patent over the same. We first find it appropriate to rule on whether the copyright and patent over the name and container of a beauty cream

product would entitle the registrant to the use and ownership over the same to the exclusion of others. Trademark, copyright and patents are different intellectual property rights that cannot be interchanged with one another. A trademark is any visible sign capable of distinguishing the goods (trademark) or services (service mark) of an enterprise and shall include a stamped or marked container of goods.12 In relation thereto, a trade name means the name or designation identifying or distinguishing an enterprise.13 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.14 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.15 Petitioner has no right to support her claim for the exclusive use of the subject trade name and its container. The name and container of a beauty cream product are proper subjects of a trademark inasmuch as the same falls squarely within its definition. In order to be entitled to exclusively use the same in the sale of the beauty cream product, the user must sufficiently prove that she registered or used it before anybody else did. The petitioner's copyright and patent registration of the name and container would not guarantee her the right to the exclusive use of the same for the reason that they are not appropriate subjects of the said intellectual rights. Consequently, a preliminary injunction order cannot be issued for the reason that the petitioner has not proven that she has a clear right over the said name and container to the exclusion of others, not having proven that she has registered a trademark thereto or used the same before anyone did. We cannot likewise overlook the decision of the trial court in the case for final injunction and damages. The dispositive portion of said decision held that the petitioner does not have trademark rights on the name and container of the beauty cream product. The said decision on the merits of the trial court rendered the issuance of the writ of a preliminary injunction moot and academic notwithstanding the fact that the same has been appealed in the Court of Appeals. This is supported by our ruling in La Vista Association, Inc. v. Court of Appeals16, to wit: Considering that preliminary injunction is a provisional remedy which may be granted at any time after the commencement of the action and before judgment when it is established that the plaintiff is entitled to the relief demanded and only when his complaint shows facts entitling such reliefs xxx and it appearing that the trial court had already granted the issuance of a final injunction in favor of petitioner in its decision rendered after trial on the merits xxx the Court resolved to Dismiss the instant petition having been rendered moot and academic. An injunction issued by the trial court after it has already made a clear pronouncement as to the plaintiff's right thereto, that is, after the same issue has been decided on

the merits, the trial court having appreciated the evidence presented, is proper, notwithstanding the fact that the decision rendered is not yet final xxx. Being an ancillary remedy, the proceedings for preliminary injunction cannot stand separately or proceed independently of the decision rendered on the merit of the main case for injunction. The merit of the main case having been already determined in favor of the applicant, the preliminary determination of its non-existence ceases to have any force and effect. (italics supplied) La Vista categorically pronounced that the issuance of a final injunction renders any question on the preliminary injunctive order moot and academic despite the fact that the decision granting a final injunction is pending appeal. Conversely, a decision denying the applicant-plaintiff's right to a final injunction, although appealed, renders moot and academic any objection to the prior dissolution of a writ of preliminary injunction. The petitioner argues that the appellate court erred in not dismissing the petition for certiorari for non-compliance with the rule on forum shopping. We disagree. First, the petitioner improperly raised the technical objection of noncompliance with Supreme Court Circular No. 28-91 by filing a motion to dismiss the petition for certiorari filed in the appellate court. This is prohibited by Section 6, Rule 66 of the Revised Rules of Civil Procedure which provides that "(I)n petitions for certiorari before the Supreme Court and the Court of Appeals, the provisions of Section 2, Rule 56, shall be observed. Before giving due course thereto, the court may require the respondents to file their comment to, and not a motion to dismiss, the petition xxx (italics supplied)". Secondly, the issue was raised one month after petitioner had filed her answer/comment and after private respondent had replied thereto. Under Section 1, Rule 16 of the Revised Rules of Civil Procedure, a motion to dismiss shall be filed within the time for but before filing the answer to the complaint or pleading asserting a claim. She therefore could no longer submit a motion to dismiss nor raise defenses and objections not included in the answer/comment she had earlier tendered. Thirdly, substantial justice and

equity require this Court not to revive a dissolved writ of injunction in favor of a party without any legal right thereto merely on a technical infirmity. The granting of an injunctive writ based on a technical ground rather than compliance with the requisites for the issuance of the same is contrary to the primary objective of legal procedure which is to serve as a means to dispense justice to the deserving party. The petitioner likewise contends that the appellate court unduly delayed the resolution of her motion for reconsideration. But we find that petitioner contributed to this delay when she filed successive contentious motions in the same proceeding, the last of which was on October 27, 1993, necessitating counter-manifestations from private respondents with the last one being filed on November 9, 1993. Nonetheless, it is well-settled that non-observance of the period for deciding cases or their incidents does not render such judgments ineffective or void.17 With respect to the purported damages she suffered due to the alleged delay in resolving her motion for reconsideration, we find that the said issue has likewise been rendered moot and academic by our ruling that she has no right over the trademark and, consequently, to the issuance of a writ of preliminary injunction.1wphi1.nt Finally, we rule that the Court of Appeals correctly denied the petitioner's several motions for contempt of court. There is nothing contemptuous about the advertisements complained of which, as regards the proceedings in CAG.R. SP No. 27803 merely announced in plain and straightforward language the promulgation of the assailed Decision of the appellate court. Moreover, pursuant to Section 4 of Rule 39 of the Revised Rules of Civil Procedure, the said decision nullifying the injunctive writ was immediately executory. WHEREFORE, the petition is DENIED. The Decision and Resolution of the Court of Appeals dated May 24, 1993 and June 3, 1994, respectively, are hereby AFFIRMED. With costs against the petitioner. SO ORDERED. Bellosillo, Mendoza, Quisumbing, and Buena, JJ., concur.

G.R. NO. 156041 February 21, 2007 PEST MANAGEMENT ASSOCIATION OF THE PHILIPPINES (PMAP), represented by its President, MANUEL J. CHAVEZ, Petitioner, vs. FERTILIZER AND PESTICIDE AUTHORITY (FPA), SECRETARY OF THE DEPARTMENT OF AGRICULTURE, FPA OFFICER- IN-CHARGE CESAR M. DRILON, AND FPA DEPUTY DIRECTOR DARIO C. SALUBARSE, Respondents. D EC ISIO N AUSTRIA-MARTINEZ, J.: This resolves the Petition for Review on Certiorari seeking to set aside the Decision1 of the Regional Trial Court of Quezon City, Branch 90 (RTC) dated November 5, 2002. The case commenced upon petitioners filing of a Petition For Declaratory Relief With Prayer For Issuance Of A Writ Of Preliminary Injunction And/Or Temporary Restraining Order with the RTC on January 4, 2002. Petitioner, a nonstock corporation duly organized and existing under the laws of the Philippines, is an association of pesticide handlers duly licensed by respondent Fertilizer and Pesticide Authority (FPA). It questioned the validity of Section 3.12 of the 1987 Pesticide Regulatory Policies and Implementing Guidelines, which provides thus: 3.12 Protection of Proprietary Data

Data submitted to support the first full or conditional registration of a pesticide active ingredient in the Philippines will be granted proprietary protection for a period of seven years from the date of such registration. During this period subsequent registrants may rely on these data only with third party authorization or otherwise must submit their own data. After this period, all data may be freely cited in support of registration by any applicant, provided convincing proof is submitted that the product being registered is identical or substantially similar to any current registered pesticide, or differs only in ways that would not significantly increase the risk of unreasonable adverse effects. Pesticides granted provisional registration under P.D. 1144 will be considered first registered in 1977, the date of the Decree. Pesticide products in which data is still under protection shall be referred to as proprietary pesticides, and all others as commodity pesticides. (Emphasis supplied) Petitioner argued that the specific provision on the protection of the proprietary data in FPAs Pesticide Regulatory Policies and Implementing Guidelines is unlawful for going counter to the objectives of Presidential Decree No. 1144 (P.D. No. 1144); for exceeding the limits of delegated authority; and for encroaching on the exclusive jurisdiction of the Intellectual Property Office. On November 5, 2002, the RTC dismissed the petition for declaratory relief for lack of merit. The RTC held that "the FPA did not exceed the limits of its delegated authority in issuing the aforecited Section 3.12 of the Guidelines granting protection to proprietary data x x x because the issuance of the aforecited Section was a valid exercise of its power to regulate, control and develop the pesticide industry under P.D. 1144"2 and the assailed provision does "not encroach on one of the functions of the Intellectual Properly Office (IPO)."3 Dissatisfied with the RTC Decision, petitioner resorted to filing this petition for review on certiorari where the following issues are raised: I WHETHER OR NOT RESPONDENT FPA HAS ACTED BEYOND THE SCOPE OF ITS DELEGATED POWER WHEN IT GRANTED A SEVEN-YEAR PROPRIETARY PROTECTION TO DATA SUBMITTED TO SUPPORT THE FIRST FULL OR CONDITIONAL REGISTRATION OF A PESTICIDE INGREDIENT IN THE PHILIPPINES; II WHETHER OR NOT RESPONDENT FPA IS ENCROACHING ON THE EXCLUSIVE JURISDICTION OF THE INTELLECTUAL PROPERTY OFFICE (IPO) WHEN IT INCLUDED IN ITS PESTICIDE REGULATORY POLICIES AND IMPLEMENTING GUIDELINES THE SUBJECT SEVEN-YEAR PROPRIETARY DATA PROTECTION;

III WHETHER OR NOT SAID PROPRIETARY DATA PROTECTION IS AN UNLAWFUL RESTRAINT OF FREE TRADE; IV WHETHER OR NOT SAID PROPRIETARY DATA PROTECTION RUNS COUNTER TO THE OBJECTIVES OF P.D. NO. 1144; V WHETHER OR NOT THE REGIONAL TRIAL COURT OF QUEZON CITY, BRANCH 90, COMMITTED A REVERSIBLE ERROR WHEN IT UPHELD THE VALIDITY OF SECTION 3.12 OF THE PESTICIDE REGULATORY POLICIES AND IMPLEMENTING GUIDELINES ISSUED BY RESPONDENT FPA. Respondents, on the other hand, maintain that the provision on the protection of proprietary data in the FPA's Pesticide Regulatory Policies and Implementing Guidelines is valid and legal as it does not violate the objectives of P.D. No. 1144; the proprietary data are a substantial asset which must be protected; the protection for a limited number of years does not constitute unlawful restraint of free trade; and such provision does not encroach upon the jurisdiction of the Intellectual Property Office. Respondents expound that since under P.D. No. 1144, the FPA is mandated to regulate, control and develop the pesticide industry, it was necessary to provide for such protection of proprietary data, otherwise, pesticide handlers will proliferate to the the detriment of the industry and the public since the inherent toxicity of pesticides are hazardous and are potential environmental contaminants. They also pointed out that the protection under the assailed Pesticide Regulatory Policies and Implementing Guidelines is warranted, considering that the development of proprietary data involves an investment of many years and large sums of money, thus, the data generated by an applicant in support of his application for registration are owned and proprietary to him. Moreover, since the protection accorded to the proprietary data is limited in time, then such protection is reasonable and does not constitute unlawful restraint of trade. Lastly, respondents emphasize that the provision on protection of proprietary data does not usurp the functions of the Intellectual Property Office (IPO) since a patent and data protection are two different matters. A patent prohibits all unlicensed making, using and selling of a particular product, while data protection accorded by the FPA merely prevents copying or unauthorized use of an applicant's data, but any other party may independently generate and use his own data. It is further argued that under Republic Act No. 8293 (R.A. No. 8293), the grant of power to the IPO to administer and implement State policies on intellectual property is not exclusionary as the IPO is even allowed to coordinate with other government agencies to formulate and implement plans and policies to strengthen the protection of intellectual property rights.

The petition is devoid of merit. The law being implemented by the assailed Pesticide Regulatory Policies and Implementing Guidelines is P.D. No. 1144, entitled Creating the Fertilizer and Pesticide Authority and Abolishing the Fertilizer Industry Authority. As stated in the Preamble of said decree, "there is an urgent need to create a technically-oriented government authority equipped with the required expertise to regulate, control and develop both the fertilizer and the pesticide industries." (Underscoring supplied) The decree further provided as follows: Section 6. Powers and Functions. The FPA shall have jurisdiction, over all existing handlers of pesticides, fertilizers and other agricultural chemical inputs. The FPA shall have the following powers and functions: I. Common to Fertilizers, Pesticides and other Agricultural Chemicals xxx 4. To promulgate rules and regulations for the registration and licensing of handlers of these products, collect fees pertaining thereto, as well as the renewal, suspension, revocation, or cancellation of such registration or licenses and such other rules and regulations as may be necessary to implement this Decree; xxx Section 7. Power to Issue Rules and Regulations to Implement Decree. The FPA is hereby authorized to issue or promulgate rules and regulations to implement, and carry out the purposes and provisions of this Decree. Did the FPA go beyond its delegated power and undermine the objectives of P.D. No. 1144 by issuing regulations that provide for protection of proprietary data? The answer is in the negative. Under P.D. No. 1144, the FPA is given the broad power to issue rules and regulations to implement and carry out the purposes and provisions of said decree, i.e., to regulate, control and develop the pesticide industry. In furtherance of such ends, the FPA sees the protection of proprietary data as one way of fulfilling its mandate. In Republic v. Sandiganbayan,4 the Court emphasized that: x x x [t]he interpretation of an administrative government agency, which is tasked to implement a statute is generally accorded great respect and ordinarily controls the construction of the courts. The reason behind this rule was explained in Nestle Philippines, Inc. vs. Court of Appeals in this wise: The rationale for this rule relates not only to the emergence of the multifarious needs of a modern or modernizing society and the establishment of diverse administrative agencies for addressing and satisfying those needs; it also relates to the accumulation of experience and growth of specialized capabilities by the administrative agency charged with implementing a particular statute. In Asturias

Sugar Central, Inc. vs. Commissioner of Customs, the Court stressed that executive officials are presumed to have familiarized themselves with all the considerations pertinent to the meaning and purpose of the law, and to have formed an independent, conscientious and competent expert opinion thereon. The courts give much weight to the government agency officials charged with the implementation of the law, their competence, expertness, experience and informed judgment, and the fact that they frequently are the drafters of the law they interpret." x x x.5 [Emphasis supplied] Verily, in this case, the Court acknowledges the experience and expertise of FPA officials who are best qualified to formulate ways and means of ensuring the quality and quantity of pesticides and handlers thereof that should enter the Philippine market, such as giving limited protection to proprietary data submitted by applicants for registration. The Court ascribes great value and will not disturb the FPA's determination that one way of attaining the purposes of its charter is by granting such protection, specially where there is nothing on record which shows that said administrative agency went beyond its delegated powers. Moreover, petitioner has not succeeded in convincing the Court that the provision in question has legal infirmities.1awphi1.net There is no encroachment upon the powers of the IPO granted under R.A. No. 8293, otherwise known as the Intellectual Property Code of the Philippines. Section 5 thereof enumerates the functions of the IPO. Nowhere in said provision does it state nor can it be inferred that the law intended the IPO to have the exclusive authority to protect or promote intellectual property rights in the Philippines. On the contrary, paragraph (g) of said Section even provides that the IPO shall "[c]oordinate with other government agencies and the private sector efforts to formulate and implement plans and policies to strengthen the protection of intellectual property rights in the country." Clearly, R.A. No. 8293 recognizes that efforts to fully protect intellectual property rights cannot be undertaken by the IPO alone. Other agencies dealing with intellectual property rights are, therefore, not precluded from issuing policies, guidelines and regulations to give protection to such rights. There is also no evidence whatsoever to support petitioner's allegation that the grant of protection to proprietary data would result in restraining free trade. Petitioner did not adduce any reliable data to prove its bare allegation that the protection of proprietary data would unduly restrict trade on pesticides. Furthermore, as held in Association of Philippine Coconut Desiccators v. Philippine Coconut Authority,6 despite the fact that "our present Constitution enshrines free enterprise as a policy, it nonetheless reserves to the government the power to intervene whenever necessary to promote the general welfare." There can be no question that the unregulated use or proliferation of pesticides would be hazardous to our environment. Thus, in the aforecited case, the Court declared that "free enterprise does not call for removal of protective regulations."7 More recently, in Coconut Oil Refiners Association, Inc. v. Torres, 8 the Court held that "[t]he mere fact that incentives and privileges are

granted to certain enterprises to the exclusion of others does not render the issuance unconstitutional for espousing unfair competition." It must be clearly explained and proven by competent evidence just exactly how such protective regulation would result in the restraint of trade. In sum, the assailed provision in the 1987 Pesticide Regulatory Policies and Implementing Guidelines granting protection to proprietary data is well within the authority of the FPA to issue so as to carry out its purpose of controlling, regulating and developing the pesticide industry. WHEREFORE, the petition is DENIED. The Decision of the Regional Trial Court of Quezon City, Branch 90, in SP. Civil Case No. Q-01-42790 is AFFIRMED. SO ORDERED. MA. ALICIA AUSTRIA-MARTINEZ Associate Justice WE CONCUR: CONSUELO YNARES-SANTIAGO Associate Justice Chairperson

ROMEO J. CALLEJO, MINITA V. CHICOSR. NAZARIO Associate Justice Asscociate Justice ANTONIO EDUARDO B. NACHURA Associate Justice ATTESTATION I attest that the conclusions in the above Decision had been reached in consultation before the case was assigned to the writer of the opinion of the Courts Division. CONSUELO YNARES-SANTIAGO Associate Justice Chairperson, Third Division C ERTIF IC ATION Pursuant to Section 13, Article VIII of the Constitution, and the Division Chairpersons attestation, it is hereby certified that the conclusions in the above Decision had been reached in consultation before the case was assigned to the writer of the opinion of the Courts Division. REYNATO S. PUNO Chief Justice

G.R. No. 110318 August 28, 1996 COLUMBIA PICTURES, INC., ORION PICTURES CORPORATION, PARAMOUNT PICTURES CORPORATION, TWENTIETH CENTURY FOX FILM CORPORATION, UNITED ARTISTS CORPORATION, UNIVERSAL CITY STUDIOS, INC., THE WALT DISNEY COMPANY, and WARNER BROTHERS, INC., petitioners, vs. COURT OF APPEALS, SUNSHINE HOME VIDEO, INC. and DANILO A. PELINDARIO, respondents. REGALADO, J.:p Before us is a petition for review on certiorari of the decision of the Court of Appeals 1 promulgated on July 22, 1992 and its resolution 2 of May 10, 1993 denying petitioners' motion for reconsideration, both of which sustained the order 3 of the Regional Trial Court, Branch 133, Makati, Metro Manila, dated November 22, 1988 for the quashal of Search Warrant No. 87-053 earlier issued per its own order 4 on September 5, 1988 for violation of Section 56 of Presidential Decree No. 49, as amended, otherwise known as the "Decree on the Protection of Intellectual Property." The material facts found by respondent appellate court are as follows: Complainants thru counsel lodged a formal complaint with the National Bureau of Investigation for violation of PD No. 49, as amended, and sought its assistance in their anti-film piracy drive. Agents of the NBI and private researchers made discreet surveillance on various video establishments in Metro Manila including Sunshine Home Video Inc. (Sunshine for brevity), owned and operated by Danilo A. Pelindario with address at No. 6 Mayfair Center, Magallanes, Makati, Metro Manila. On November 14, 1987, NBI Senior Agent Lauro C. Reyes applied for a search warrant with the court a quo against Sunshine seeking the seizure, among others, of pirated video tapes of copyrighted films all of which were enumerated in a list attached to the application; and, television sets, video cassettes and/or laser disc recordings equipment and other machines and paraphernalia used or intended to be used in the unlawful exhibition, showing, reproduction, sale, lease or disposition of videograms tapes in the premises above described. In the hearing of the application, NBI Senior Agent Lauro C. Reyes, upon questions by the court a quo, reiterated in substance his averments in his affidavit. His testimony was corroborated by another witness, Mr. Rene C. Baltazar.

Atty. Rico V. Domingo's deposition was also taken. On the basis of the affidavits and depositions of NBI Senior Agent Lauro C. Reyes, Rene C. Baltazar and Atty. Rico V. Domingo, Search Warrant No. 87-053 for violation of Section 56 of PD No. 49, as amended, was issued by the court a quo. The search warrant was served at about 1:45 p.m. on December 14, 1987 to Sunshine and/or their representatives. In the course of the search of the premises indicated in the search warrant, the NBI Agents found and seized various video tapes of duly copyrighted motion pictures/films owned or exclusively distributed by private complainants, and machines, equipment, television sets, paraphernalia, materials, accessories all of which were included in the receipt for properties accomplished by the raiding team. Copy of the receipt was furnished and/or tendered to Mr. Danilo A. Pelindario, registered owner-proprietor of Sunshine Home Video. On December 16, 1987, a "Return of Search Warrant" was filed with the Court. A "Motion To Lift the Order of Search Warrant" was filed but was later denied for lack of merit (p. 280, Records). A Motion for reconsideration of the Order of denial was filed. The court a quo granted the said motion for reconsideration and justified it in this manner: It is undisputed that the master tapes of the copyrighted films from which the pirated films were allegedly copies (sic), were never presented in the proceedings for the issuance of the search warrants in question. The orders of the Court granting the search warrants and denying the urgent motion to lift order of search warrants were, therefore, issued in error. Consequently, they must be set aside. (p. 13, Appellant's Brief)

application of the ruling in 20th Century Fox Film Corporation vs. Court of Appeals, et al., 6 in dismissing petitioners' appeal and upholding the quashal of the search warrant by the trial court. I Inceptively, we shall settle the procedural considerations on the matter of and the challenge to petitioners' legal standing in our courts, they being foreign corporations not licensed to do business in the Philippines. Private respondents aver that being foreign corporations, petitioners should have such license to be able to maintain an action in Philippine courts. In so challenging petitioners' personality to sue, private respondents point to the fact that petitioners are the copyright owners or owners of exclusive rights of distribution in the Philippines of copyrighted motion pictures or films, and also to the appointment of Atty. Rico V. Domingo as their attorney-in-fact, as being constitutive of "doing business in the Philippines" under Section 1 (f)(1) and (2), Rule 1 of the Rules of the Board of Investments. As foreign corporations doing business in the Philippines, Section 133 of Batas Pambansa Blg. 68, or the Corporation Code of the Philippines, denies them the right to maintain a suit in Philippine courts in the absence of a license to do business. Consequently, they have no right to ask for the issuance of a search warrant. 7 In refutation, petitioners flatly deny that they are doing business in the Philippines, 8 and contend that private respondents have not adduced evidence to prove that petitioners are doing such business here, as would require them to be licensed by the Securities and Exchange Commission, other than averments in the quoted portions of petitioners' "Opposition to Urgent Motion to Lift Order of Search Warrant" dated April 28, 1988 and Atty. Rico V. Domingo's affidavit of December 14, 1987. Moreover, an exclusive right to distribute a product or the ownership of such exclusive right does not conclusively prove the act of doing business nor establish the presumption of doing business. 9 The Corporation Code provides: Sec. 133. Doing business without a license. No foreign corporation transacting business in the Philippines without a license, or its successors or assigns, shall be permitted to maintain or intervene in any action, suit or proceeding in any court or administrative agency of the Philippines; but such corporation may be sued or proceeded against before Philippine courts or administrative tribunals on any valid cause of action recognized under Philippine laws.

Petitioners thereafter appealed the order of the trial court granting private respondents' motion for reconsideration, thus lifting the search warrant which it had theretofore issued, to the Court of Appeals. As stated at the outset, said appeal was dismissed and the motion for reconsideration thereof was denied. Hence, this petition was brought to this Court particularly challenging the validity of respondent court's retroactive

The obtainment of a license prescribed by Section 125 of the Corporation Code is not a condition precedent to the maintenance of any kind of action in Philippine courts by a foreign corporation. However, under the aforequoted provision, no foreign corporation shall be permitted to transact business in the Philippines, as this phrase is understood under the Corporation Code, unless it shall have the license required by law, and until it complies with the law intransacting business here, it shall not be permitted to maintain any suit in local courts. 10 As thus interpreted, any foreign corporation not doing business in the Philippines may maintain an action in our courts upon any cause of action, provided that the subject matter and the defendant are within the jurisdiction of the court. It is not the absence of the prescribed license but "doing business" in the Philippines without such license which debars the foreign corporation from access to our courts. In other words, although a foreign corporation is without license to transact business in the Philippines, it does not follow that it has no capacity to bring an action. Such license is not necessary if it is not engaged in business in the Philippines. 11 Statutory provisions in many jurisdictions are determinative of what constitutes "doing business" or "transacting business" within that forum, in which case said provisions are controlling there. In others where no such definition or qualification is laid down regarding acts or transactions failing within its purview, the question rests primarily on facts and intent. It is thus held that all the combined acts of a foreign corporation in the State must be considered, and every circumstance is material which indicates a purpose on the part of the corporation to engage in some part of its regular business in the State. 12 No general rule or governing principles can be laid down as to what constitutes "doing" or "engaging in" or "transacting" business. Each case must be judged in the light of its own peculiar environmental circumstances. 13 The true tests, however, seem to be whether the foreign corporation is continuing the body or substance of the business or enterprise for which it was organized or whether it has substantially retired from it and turned it over to another. 14 As a general proposition upon which many authorities agree in principle, subject to such modifications as may be necessary in view of the particular issue or of the terms of the statute involved, it is recognized that a foreign corporation is "doing," "transacting," "engaging in," or "carrying on" business in the State when, and ordinarily only when, it has entered the State by its agents and is there engaged in carrying on and transacting through them some substantial part of its ordinary or customary business, usually continuous in the sense that it may be distinguished from merely casual, sporadic, or occasional transactions and isolated acts. 15

The Corporation Code does not itself define or categorize what acts constitute doing or transacting business in the Philippines. Jurisprudence has, however, held that the term implies a continuity of commercial dealings and arrangements, and contemplates, to that extent, the performance of acts or works or the exercise of some of the functions normally incident to or in progressive prosecution of the purpose and subject of its organization. 16 This traditional case law definition has evolved into a statutory definition, having been adopted with some qualifications in various pieces of legislation in our jurisdiction. For instance, Republic Act No. 5455 17 provides: Sec. 1. Definitions and scope of this Act. (1) . . . ; and the phrase "doing business" shall include soliciting orders, purchases, service contracts, opening offices, whether called "liaison" offices or branches; appointing representatives or distributors who are domiciled in the Philippines or who in any calendar year stay in the Philippines for a period or periods totalling one hundred eighty days or more; participating in the management, supervision or control of any domestic business firm, entity or corporation in the Philippines; and any other act or acts that imply a continuity of commercial dealings or arrangements, and contemplate to that extent the performance of acts or works, or the exercise of some of the functions normally incident to, and in progressive prosecution of, commercial gain or of the purpose and object of the business organization. Presidential Decree No. 1789, 18 in Article 65 thereof, defines "doing business" to include soliciting orders, purchases, service contracts, opening offices, whether called "liaison" offices or branches; appointing representatives or distributors who are domiciled in the Philippines or who in any calendar year stay in the Philippines for a period or periods totalling one hundred eighty days or more; participating in the management, supervision or control of any domestic business firm, entity or corporation in the Philippines, and any other act or acts that imply a continuity of commercial dealings or arrangements and contemplate to that extent the performance of acts or works, or the exercise of some of the functions normally incident to, and in progressive prosecution of, commercial gain or of the purpose and object of the business organization. The implementing rules and regulations of said presidential decree conclude the enumeration of acts constituting "doing business" with a catch-all definition, thus:

Sec. 1(g). "Doing Business" shall be any act or combination of acts enumerated in Article 65 of the Code. In particular "doing business" includes: xxx xxx xxx (10) Any other act or acts which imply a continuity of commercial dealings or arrangements, and contemplate to that extent the performance of acts or works, or the exercise of some of the functions normally incident to, or in the progressive prosecution of, commercial gain or of the purpose and object of the business organization. Finally, Republic Act No. 7042 concept in this wise:
19

have performed any of the enumerated acts or any other specific act indicative of an intention to conduct or transact business in the Philippines. Accordingly, the certification issued by the Securities and Exchange Commission 20 stating that its records do not show the registration of petitioner film companies either as corporations or partnerships or that they have been licensed to transact business in the Philippines, while undeniably true, is of no consequence to petitioners' right to bring action in the Philippines. Verily, no record of such registration by petitioners can be expected to be found for, as aforestated, said foreign film corporations do not transact or do business in the Philippines and, therefore, do not need to be licensed in order to take recourse to our courts. Although Section 1(g) of the Implementing Rules and Regulations of the Omnibus Investments Code lists, among others (1) Soliciting orders, purchases (sales) or service contracts. Concrete and specific solicitations by a foreign firm, or by an agent of such foreign firm, not acting independently of the foreign firm amounting to negotiations or fixing of the terms and conditions of sales or service contracts, regardless of where the contracts are actually reduced to writing, shall constitute doing business even if the enterprise has no office or fixed place of business in the Philippines. The arrangements agreed upon as to manner, time and terms of delivery of the goods or the transfer of title thereto is immaterial. A foreign firm which does business through the middlemen acting in their own names, such as indentors, commercial brokers or commission merchants, shall not be deemed doing business in the Philippines. But such indentors, commercial brokers or commission merchants shall be the ones deemed to be doing business in the Philippines. (2) Appointing a representative or distributor who is domiciled in the Philippines, unless said representative or distributor has an independent status, i.e., it transacts business in its name and for its own account, and not in the name or for the account of a principal. Thus, where a foreign firm is represented in the Philippines by a person or local company which does not act in its name but in the name of the foreign firm, the latter is doing business in the Philippines. as acts constitutive of "doing business," the fact that petitioners are admittedly copyright owners or owners of exclusive distribution rights in the Philippines of motion pictures or films does not

embodies such

Sec. 3. Definitions. As used in this Act: xxx xxx xxx (d) the phrase "doing business shall include soliciting orders, service contracts, opening offices, whether called "liaison" offices or branches; appointing representatives or distributors domiciled in the Philippines or who in any calendar year stay in the country for a period or periods totalling one hundred eight(y) (180) days or more; participating in the management, supervision or control of any domestic business, firm, entity or corporation in the Philippines; and any other act or acts that imply a continuity of commercial dealings or arrangements, and contemplate to that extent the performance of acts or works, or the exercise of some of the functions normally incident to, and in progressive prosecution of, commercial gain or of the purpose and object of the business organization: Provided, however, That the phrase "doing business" shall not be deemed to include mere investment as a shareholder by a foreign entity in domestic corporations duly registered to do business, and/or the exercise of rights as such investor; nor having a nominee director or officer to represent its interests in such corporation; nor appointing a representative or distributor domiciled in the Philippines which transacts business in its own name and for its own account. Based on Article 133 of the Corporation Code and gauged by such statutory standards, petitioners are not barred from maintaining the present action. There is no showing that, under our statutory or case law, petitioners are doing, transacting, engaging in or carrying on business in the Philippines as would require obtention of a license before they can seek redress from our courts. No evidence has been offered to show that petitioners

convert such ownership into an indicium of doing business which would require them to obtain a license before they can sue upon a cause of action in local courts. Neither is the appointment of Atty. Rico V. Domingo as attorney-in-fact of petitioners, with express authority pursuant to a special power of attorney, inter alia To lay criminal complaints with the appropriate authorities and to provide evidence in support of both civil and criminal proceedings against any person or persons involved in the criminal infringement of copyright or concerning the unauthorized importation, duplication, exhibition or distribution of any cinematographic work(s) films or video cassettes of which . . . is the owner of copyright or the owner of exclusive rights of distribution in the Philippines pursuant to any agreement(s) between . . . and the respective owners of copyright in such cinematographic work(s), to initiate and prosecute on behalf of . . . criminal or civil actions in the Philippines against any person or persons unlawfully distributing, exhibiting, selling or offering for sale any films or video cassettes of which . . . is the owner of copyright or the owner of exclusive rights of distribution in the Philippines pursuant to any agreement(s) between . . . and the respective owners of copyright in such works. 21 tantamount to doing business in the Philippines. We fail to see how exercising one's legal and property rights and taking steps for the vigilant protection of said rights, particularly the appointment of an attorney-in-fact, can be deemed by and of themselves to be doing business here. As a general rule, a foreign corporation will not be regarded as doing business in the State simply because it enters into contracts with residents of the State, where such contracts are consummated outside the State. 22 In fact, a view is taken that a foreign corporation is not doing business in the State merely because sales of its product are made there or other business furthering its interests is transacted there by an alleged agent, whether a corporation or a natural person, where such activities are not under the direction and control of the foreign corporation but are engaged in by the alleged agent as an independent business. 23 It is generally held that sales made to customers in the State by an independent dealer who has purchased and obtained title from the corporation to the products sold are not a doing of business by the corporation. 24 Likewise, a foreign corporation which sells its products to persons styled "distributing agents" in the State, for distribution by them, is not doing business in the State so as to

render it subject to service of process therein, where the contract with these purchasers is that they shall buy exclusively from the foreign corporation such goods as it manufactures and shall sell them at trade prices established by it. 25 It has moreover been held that the act of a foreign corporation in engaging an attorney to represent it in a Federal court sitting in a particular State is not doing business within the scope of the minimum contact test. 26 With much more reason should this doctrine apply to the mere retainer of Atty. Domingo for legal protection against contingent acts of intellectual piracy. In accordance with the rule that "doing business" imports only acts in furtherance of the purposes for which a foreign corporation was organized, it is held that the mere institution and prosecution or defense of a suit, particularly if the transaction which is the basis of the suit took place out of the State, do not amount to the doing of business in the State. The institution of a suit or the removal thereof is neither the making of a contract nor the doing of business within a constitutional provision placing foreign corporations licensed to do business in the State under the same regulations, limitations and liabilities with respect to such acts as domestic corporations. Merely engaging in litigation has been considered as not a sufficient minimum contact to warrant the exercise of jurisdiction over a foreign corporation. 2 7 As a consideration aside, we have perforce to comment on private respondents' basis for arguing that petitioners are barred from maintaining suit in the Philippines. For allegedly being foreign corporations doing business in the Philippines without a license, private respondents repeatedly maintain in all their pleadings that petitioners have thereby no legal personality to bring an action before Philippine Courts. 28 Among the grounds for a motion to dismiss under the Rules of Court are lack of legal capacity to sue 29 and that the complaint states no cause of action. 30 Lack of legal capacity to sue means that the plaintiff is not in the exercise of his civil rights, or does not have the necessary qualification to appear in the case, or does not have the character or representation he claims. 31 On the other hand, a case is dismissible for lack of personality to sue upon proof that the plaintiff is not the real party in interest, hence grounded on failure to state a cause of action. 32 The term "lack of capacity to sue" should not be confused with the term "lack of personality to sue." While the former refers to a plaintiff's general disability to sue, such as on account of minority, insanity, incompetence, lack of juridical personality or any other general disqualifications of a party, the latter refers to the fact that the plaintiff is not the real party in interest. Correspondingly, the first can be a ground for a motion to dismiss based on the ground of lack of legal capacity to sue; 33 whereas the second can be used as a ground for a motion to

dismiss based on the fact that the complaint, on the face thereof, evidently states no cause of action. 34 Applying the above discussion to the instant petition, the ground available for barring recourse to our courts by an unlicensed foreign corporation doing or transacting business in the Philippines should properly be "lack of capacity to sue," not "lack of personality to sue." Certainly, a corporation whose legal rights have been violated is undeniably such, if not the only, real party in interest to bring suit thereon although, for failure to comply with the licensing requirement, it is not capacitated to maintain any suit before our courts. Lastly, on this point, we reiterate this Court's rejection of the common procedural tactics of erring local companies which, when sued by unlicensed foreign corporations not engaged in business in the Philippines, invoke the latter's supposed lack of capacity to sue. The doctrine of lack of capacity to sue based on failure to first acquire a local license is based on considerations of public policy. It was never intended to favor nor insulate from suit unscrupulous establishments or nationals in case of breach of valid obligations or violation of legal rights of unsuspecting foreign firms or entities simply because they are not licensed to do business in the country. 35 II We now proceed to the main issue of the retroactive application to the present controversy of the ruling in 20th Century Fox Film Corporation vs. Court of Appeals, et al., promulgated on August 19, 1988, 36 that for the determination of probable cause to support the issuance of a search warrant in copyright infringement cases involving videograms, the production of the master tape for comparison with the allegedly pirate copies is necessary. Petitioners assert that the issuance of a search warrant is addressed to the discretion of the court subject to the determination of probable cause in accordance with the procedure prescribed therefore under Sections 3 and 4 of Rule 126. As of the time of the application for the search warrant in question, the controlling criterion for the finding of probable cause was that enunciated in Burgos vs. Chief of Staff 37 stating that: Probable cause for a search warrant is defined as such facts and circumstances which would lead a reasonably discreet and prudent man to believe that an offense has been committed and that the objects sought in connection with the offense are in the place sought to be searched. According to petitioners, after complying with what the law then required, the lower court determined that there was probable cause for the issuance of a search warrant, and which

determination in fact led to the issuance and service on December 14, 1987 of Search Warrant No. 87053. It is further argued that any search warrant so issued in accordance with all applicable legal requirements is valid, for the lower court could not possibly have been expected to apply, as the basis for a finding of probable cause for the issuance of a search warrant in copyright infringement cases involving videograms, a pronouncement which was not existent at the time of such determination, on December 14, 1987, that is, the doctrine in the 20th Century Fox case that was promulgated only on August 19, 1988, or over eight months later. Private respondents predictably argue in support of the ruling of the Court of Appeals sustaining the quashal of the search warrant by the lower court on the strength of that 20th Century Fox ruling which, they claim, goes into the very essence of probable cause. At the time of the issuance of the search warrant involved here, although the 20th Century Fox case had not yet been decided, Section 2, Article III of the Constitution and Section 3, Rule 126 of the 1985 Rules on Criminal Procedure embodied the prevailing and governing law on the matter. The ruling in 20th Century Fox was merely an application of the law on probable cause. Hence, they posit that there was no law that was retrospectively applied, since the law had been there all along. To refrain from applying the 20th Century Fox ruling, which had supervened as a doctrine promulgated at the time of the resolution of private respondents' motion for reconsideration seeking the quashal of the search warrant for failure of the trial court to require presentation of the master tapes prior to the issuance of the search warrant, would have constituted grave abuse of discretion. 38 Respondent court upheld the retroactive application of the 20th Century Fox ruling by the trial court in resolving petitioners' motion for reconsideration in favor of the quashal of the search warrant, on this renovated thesis: And whether this doctrine should apply retroactively, it must be noted that in the 20th Century Fox case, the lower court quashed the earlier search warrant it issued. On certiorari, the Supreme Court affirmed the quashal on the ground among others that the master tapes or copyrighted films were not presented for comparison with the purchased evidence of the video tapes to determine whether the latter is an unauthorized reproduction of the former. If the lower court in the Century Fox case did not quash the warrant, it is Our view that the Supreme Court would have invalidated the warrant just the same considering the very strict requirement set by the Supreme Court for the determination of "probable cause" in copyright infringement cases as enunciated in this 20th Century Fox case.

This is so because, as was stated by the Supreme Court in the said case, the master tapes and the pirated tapes must be presented for comparison to satisfy the requirement of "probable cause." So it goes back to the very existence of probable cause. . . . 39 Mindful as we are of the ramifications of the doctrine of stare decisis and the rudiments of fair play, it is our considered view that the 20th Century Fox ruling cannot be retroactively applied to the instant case to justify the quashal of Search Warrant No. 87-053. Herein petitioners' consistent position that the order of the lower court of September 5, 1988 denying therein defendants' motion to lift the order of search warrant was properly issued, there having been satisfactory compliance with the then prevailing standards under the law for determination of probable cause, is indeed well taken. The lower court could not possibly have expected more evidence from petitioners in their application for a search warrant other than what the law and jurisprudence, then existing and judicially accepted, required with respect to the finding of probable cause. Article 4 of the Civil Code provides that "(l)aws shall have no retroactive effect, unless the contrary is provided. Correlatively, Article 8 of the same Code declares that "(j)udicial decisions applying the laws or the Constitution shall form part of the legal system of the Philippines." Jurisprudence, in our system of government, cannot be considered as an independent source of law; it cannot create law. 40 While it is true that judicial decisions which apply or interpret the Constitution or the laws are part of the legal system of the Philippines, still they are not laws. Judicial decisions, though not laws, are nonetheless evidence of what the laws mean, and it is for this reason that they are part of the legal system of the Philippines. 41 Judicial decisions of the Supreme Court assume the same authority as the statute itself. 42 Interpreting the aforequoted correlated provisions of the Civil Code and in light of the above disquisition, this Court emphatically declared in Co vs. Court of Appeals, et al. 43 that the principle of prospectivity applies not only to original or amendatory statutes and administrative rulings and circulars, but also, and properly so, to judicial decisions. Our holding in the earlier case of People vs. Jabinal 44 echoes the rationale for this judicial declaration, viz.: Decisions of this Court, although in themselves not laws, are nevertheless evidence of what the laws mean, and this is the reason why under Article 8 of the New Civil Code, "Judicial decisions applying or interpreting the laws or the Constitution shall form part of the legal

system." The interpretation upon a law by this Court constitutes, in a way, a part of the law as of the date that the law was originally passed, since this Court's construction merely establishes the contemporaneous legislative intent that the law thus construed intends to effectuate. The settled rule supported by numerous authorities is a restatement of the legal maxim "legis interpretatio legis vim obtinet" the interpretation placed upon the written law by a competent court has the force of law. . . . , but when a doctrine of this Court is overruled and a different view is adopted, the new doctrine should be applied prospectively, and should not apply to parties who had relied on the old doctrine and acted on the faith thereof . . . . (Emphasis supplied). This was forcefully reiterated in Spouses Benzonan vs. Court of Appeals, et al., 45 where the Court expounded: . . . . But while our decisions form part of the law of the land, they are also subject to Article 4 of the Civil Code which provides that "laws shall have no retroactive effect unless the contrary is provided." This is expressed in the familiar legal maxim lex prospicit, non respicit, the law looks forward not backward. The rationale against retroactivity is easy to perceive. The retroactive application of a law usually divests rights that have already become vested or impairs the obligations of contract and hence, is unconstitutional (Francisco v. Certeza, 3 SCRA 565 [1961]). The same consideration underlies our rulings giving only prospective effect to decisions enunciating new doctrines. . . .. The reasoning behind Senarillos vs. Hermosisima 46 that judicial interpretation of a statute constitutes part of the law as of the date it was originally passed, since the Court's construction merely establishes the contemporaneous legislative intent that the interpreted law carried into effect, is all too familiar. Such judicial doctrine does not amount to the passage of a new law but consists merely of a construction or interpretation of a pre-existing one, and that is precisely the situation obtaining in this case. It is consequently clear that a judicial interpretation becomes a part of the law as of the date that law was originally passed, subject only to the qualification that when a doctrine of this Court is overruled and a different view is adopted, and more so when there is a reversal thereof, the new doctrine should be applied prospectively and should not apply to parties who relied on the old doctrine and acted in good faith. 4 7 To hold otherwise would be to deprive the law of its quality of fairness and justice then, if there is no

recognition of what had transpired prior to such adjudication. 48 There is merit in petitioners' impassioned and wellfounded argumentation: The case of 20th Century Fox Film Corporation vs. Court of Appeals, et al., 164 SCRA 655 (August 19, 1988) (hereinafter 20th Century Fox) was inexistent in December of 1987 when Search Warrant 87-053 was issued by the lower court. Hence, it boggles the imagination how the lower court could be expected to apply the formulation of 20th Century Fox in finding probable cause when the formulation was yet nonexistent. xxx xxx xxx In short, the lower court was convinced at that time after conducting searching examination questions of the applicant and his witnesses that "an offense had been committed and that the objects sought in connection with the offense (were) in the place sought to be searched" (Burgos v. Chief of Staff, et al., 133 SCRA 800). It is indisputable, therefore, that at the time of the application, or on December 14, 1987, the lower court did not commit any error nor did it fail to comply with any legal requirement for the valid issuance of search warrant. . . . (W)e believe that the lower court should be considered as having followed the requirements of the law in issuing Search Warrant No. 87-053. The search warrant is therefore valid and binding. It must be noted that nowhere is it found in the allegations of the Respondents that the lower court failed to apply the law as then interpreted in 1987. Hence, we find it absurd that it is (sic) should be seen otherwise, because it is simply impossible to have required the lower court to apply a formulation which will only be defined six months later. Furthermore, it is unjust and unfair to require compliance with legal and/or doctrinal requirements which are inexistent at the time they were supposed to have been complied with. xxx xxx xxx . . . If the lower court's reversal will be sustained, what encouragement can be given to courts and litigants to respect the law and rules if they can expect with reasonable certainty that upon the passage of a new rule, their conduct can still be

open to question? This certainly breeds instability in our system of dispensing justice. For Petitioners who took special effort to redress their grievances and to protect their property rights by resorting to the remedies provided by the law, it is most unfair that fealty to the rules and procedures then obtaining would bear but fruits of injustice. 49 Withal, even the proposition that the prospectivity of judicial decisions imports application thereof not only to future cases but also to cases still ongoing or not yet final when the decision was promulgated, should not be countenanced in the jural sphere on account of its inevitably unsettling repercussions. More to the point, it is felt that the reasonableness of the added requirement in 20th Century Fox calling for the production of the master tapes of the copyrighted films for determination of probable cause in copyright infringement cases needs revisiting and clarification. It will be recalled that the 20th Century Fox case arose from search warrant proceedings in anticipation of the filing of a case for the unauthorized sale or renting out of copyrighted films in videotape format in violation of Presidential Decree No. 49. It revolved around the meaning of probable cause within the context of the constitutional provision against illegal searches and seizures, as applied to copyright infringement cases involving videotapes. Therein it was ruled that The presentation of master tapes of the copyrighted films from which the pirated films were allegedly copied, was necessary for the validity of search warrants against those who have in their possession the pirated films. The petitioner's argument to the effect that the presentation of the master tapes at the time of application may not be necessary as these would be merely evidentiary in nature and not determinative of whether or not a probable cause exists to justify the issuance of the search warrants is not meritorious. The court cannot presume that duplicate or copied tapes were necessarily reproduced from master tapes that it owns. The application for search warrants was directed against video tape outlets which allegedly were engaged in the unauthorized sale and renting out of copyrighted films belonging to the petitioner pursuant to P.D. 49. The essence of a copyright infringement is the similarity or at least substantial similarity of the purported pirated works

to the copyrighted work. Hence, the applicant must present to the court the copyrighted films to compare them with the purchased evidence of the video tapes allegedly pirated to determine whether the latter is an unauthorized reproduction of the former. This linkage of the copyrighted films to the pirated films must be established to satisfy the requirements of probable cause. Mere allegations as to the existence of the copyrighted films cannot serve as basis for the issuance of a search warrant. For a closer and more perspicuous appreciation of the factual antecedents of 20th Century Fox, the pertinent portions of the decision therein are quoted hereunder, to wit: In the instant case, the lower court lifted the three questioned search warrants against the private respondents on the ground that it acted on the application for the issuance of the said search warrants and granted it on the misrepresentations of applicant NBI and its witnesses that infringement of copyright or a piracy of a particular film have been committed. Thus the lower court stated in its questioned order dated January 2, 1986: According to the movant, all three witnesses during the proceedings in the application for the three search warrants testified of their own personal knowledge. Yet, Atty. Albino Reyes of the NBI stated that the counsel or representative of the Twentieth Century Fox Corporation will testify on the video cassettes that were pirated, so that he did not have personal knowledge of the alleged piracy. The witness Bacani also said that the video cassettes were pirated without stating the manner it was pirated and that it was Atty. Domingo that has knowledge of that fact. On the part of Atty. Domingo, he said that the re-taping of the allegedly pirated tapes was from master tapes allegedly belonging to the Twentieth Century Fox, because, according to him it is of his personal knowledge. At the hearing of the Motion for Reconsideration, Senior NBI Agent Atty. Albino Reyes testified that when the

complaint for infringement was brought to the NBI, the master tapes of the allegedly pirated tapes were shown to him and he made comparisons of the tapes with those purchased by their man Bacani. Why the master tapes or at least the film reels of the allegedly pirated tapes were not shown to the Court during the application gives some misgivings as to the truth of that bare statement of the NBI agent on the witness stand. Again as the application and search proceedings is a prelude to the filing of criminal cases under PD 49, the copyright infringement law, and although what is required for the issuance thereof is merely the presence of probable cause, that probable cause must be satisfactory to the Court, for it is a time-honored precept that proceedings to put a man to task as an offender under our laws should be interpreted in strictissimi juris against the government and liberally in favor of the alleged offender. xxx xxx xxx This doctrine has never been overturned, and as a matter of fact it had been enshrined in the Bill of Rights in our 1973 Constitution. So that lacking in persuasive effect, the allegation that master tapes were viewed by the NBI and were compared to the purchased and seized video tapes from the respondents' establishments, it should be dismissed as not supported by competent evidence and for that matter the probable cause hovers in that grey debatable twilight zone between black and white resolvable in favor of respondents herein. But the glaring fact is that "Cocoon," the first video tape mentioned in the search warrant, was not even duly registered or copyrighted in the Philippines. (Annex C of Opposition p. 152 record.) So, that lacking in the requisite

presentation to the Court of an alleged master tape for purposes of comparison with the purchased evidence of the video tapes allegedly pirated and those seized from respondents, there was no way to determine whether there really was piracy, or copying of the film of the complainant Twentieth Century Fox. xxx xxx xxx The lower court, therefore, lifted the three (3) questioned search warrants in the absence of probable cause that the private respondents violated P.D. 49. As found out by the court, the NBI agents who acted as witnesses did not have personal knowledge of the subject matter of their testimony which was the alleged commission of the offense by the private respondents. Only the petitioner's counsel who was also a witness during the application for the issuance of the search warrants stated that he had personal knowledge that the confiscated tapes owned by the private respondents were pirated tapes taken from master tapes belonging to the petitioner. However, the lower court did not give much credence to his testimony in view of the fact that the master tapes of the allegedly pirated tapes were not shown to the court during the application (Emphasis ours). The italicized passages readily expose the reason why the trial court therein required the presentation of the master tapes of the allegedly pirated films in order to convince itself of the existence of probable cause under the factual milieu peculiar to that case. In the case at bar, respondent appellate court itself observed: We feel that the rationale behind the aforequoted doctrine is that the pirated copies as well as the master tapes, unlike the other types of personal properties which may be seized, were available for presentation to the court at the time of the application for a search warrant to determine the existence of the linkage of the copyrighted films with the pirated ones. Thus, there is no reason not the present them (Emphasis supplied ). 50 In fine, the supposed pronunciamento in said case regarding the necessity for the presentation of the master tapes of the copyrighted films for the validity of search warrants should at most be understood to merely serve as a guidepost in determining the existence of probable cause in copyright infringement cases where there is doubt as to the true nexus between the master tape and

the pirated copies. An objective and careful reading of the decision in said case could lead to no other conclusion than that said directive was hardly intended to be a sweeping and inflexible requirement in all or similar copyright infringement cases. Judicial dicta should always be construed within the factual matrix of their parturition, otherwise a careless interpretation thereof could unfairly fault the writer with the vice of overstatement and the reader with the fallacy of undue generalization. In the case at bar, NBI Senior Agent Lauro C. Reyes who filed the application for search warrant with the lower court following a formal complaint lodged by petitioners, judging from his affidavit 51 and his deposition, 52 did testify on matters within his personal knowledge based on said complaint of petitioners as well as his own investigation and surveillance of the private respondents' video rental shop. Likewise, Atty. Rico V. Domingo, in his capacity as attorney-in-fact, stated in his affidavit 53 and further expounded in his deposition 54 that he personally knew of the fact that private respondents had never been authorized by his clients to reproduce, lease and possess for the purpose of selling any of the copyrighted films. Both testimonies of Agent Reyes and Atty. Domingo were corroborated by Rene C. Baltazar, a private researcher retained by Motion Pictures Association of America, Inc. (MPAA, Inc.), who was likewise presented as a witness during the search warrant proceedings. 55 The records clearly reflect that the testimonies of the abovenamed witnesses were straightforward and stemmed from matters within their personal knowledge. They displayed none of the ambivalence and uncertainty that the witnesses in the 20th Century Fox case exhibited. This categorical forthrightness in their statements, among others, was what initially and correctly convinced the trial court to make a finding of the existence of probable cause. There is no originality in the argument of private respondents against the validity of the search warrant, obviously borrowed from 20th Century Fox, that petitioners' witnesses NBI Agent Lauro C. Reyes, Atty. Rico V. Domingo and Rene C. Baltazar did not have personal knowledge of the subject matter of their respective testimonies and that said witnesses' claim that the video tapes were pirated, without stating the manner by which these were pirated, is a conclusion of fact without basis. 56 The difference, it must be pointed out, is that the records in the present case reveal that (1) there is no allegation of misrepresentation, much less a finding thereof by the lower court, on the part of petitioners' witnesses; (2) there is no denial on the part of private respondents that the tapes seized were illegitimate copies of the copyrighted ones not have they shown that they were given any authority by petitioners to copy, sell, lease, distribute or circulate, or at least, to offer for sale, lease, distribution or circulation the said video tapes; and (3) a discreet but extensive surveillance of the

suspected area was undertaken by petitioners' witnesses sufficient to enable them to execute trustworthy affidavits and depositions regarding matters discovered in the course thereof and of which they have personal knowledge. It is evidently incorrect to suggest, as the ruling in 20th Century Fox may appear to do, that in copyright infringement cases, the presentation of master tapes of the copyrighted films is always necessary to meet the requirement of probable cause and that, in the absence thereof, there can be no finding of probable cause for the issuance of a search warrant. It is true that such master tapes are object evidence, with the merit that in this class of evidence the ascertainment of the controverted fact is made through demonstrations involving the direct use of the senses of the presiding magistrate. 5 7 Such auxiliary procedure, however, does not rule out the use of testimonial or documentary evidence, depositions, admissions or other classes of evidence tending to prove the factum probandum, 58 especially where the production in court of object evidence would result in delay, inconvenience or expenses out of proportion to its evidentiary value.
59

in writing and under oath the complainant and any witnesses he may produce on facts personally known to them and attach to the record their sworn statements together with any affidavits submitted. Sec. 5. Issuance and form of search warrant. If the judge is thereupon satisfied of the existence of facts upon which the application is based, or that there is probable cause to believe that they exist, he must issue the warrant, which must be substantially in the form prescribed by these Rules. The constitutional and statutory provisions of various jurisdictions requiring a showing of probable cause before a search warrant can be issued are mandatory and must be complied with, and such a showing has been held to be an unqualified condition precedent to the issuance of a warrant. A search warrant not based on probable cause is a nullity, or is void, and the issuance thereof is, in legal contemplation, arbitrary. 61 It behooves us, then, to review the concept of probable cause, firstly, from representative holdings in the American jurisdiction from which we patterned our doctrines on the matter. Although the term "probable cause" has been said to have a well-defined meaning in the law, the term is exceedingly difficult to define, in this case, with any degree of precision; indeed, no definition of it which would justify the issuance of a search warrant can be formulated which would cover every state of facts which might arise, and no formula or standard, or hard and fast rule, may be laid down which may be applied to the facts of every situation. 62 As to what acts constitute probable cause seem incapable of definition. 63 There is, of necessity, no exact test. 64 At best, the term "probable cause" has been understood to mean a reasonable ground of suspicion, supported by circumstances sufficiently strong in themselves to warrant a cautious man in the belief that the person accused is guilty of the offense with which he is charged; 65 or the existence of such facts and circumstances as would excite an honest belief in a reasonable mind acting on all the facts and circumstances within the knowledge of the magistrate that the charge made by the applicant for the warrant is true. 66 Probable cause does not mean actual and positive cause, nor does it import absolute certainty. The determination of the existence of probable cause is not concerned with the question of whether the offense charged has been or is being committed in fact, or whether the accused is guilty or innocent, but only whether the affiant has reasonable grounds for his belief. 67 The requirement is less than certainty or proof , but more than suspicion or possibility. 68

Of course, as a general rule, constitutional and statutory provisions relating to search warrants prohibit their issuance except on a showing of probable cause, supported by oath or affirmation. These provisions prevent the issuance of warrants on loose, vague, or doubtful bases of fact, and emphasize the purpose to protect against all general searches. 60 Indeed, Article III of our Constitution mandates in Sec. 2 thereof that no search warrant shall issue except upon probable cause to be determined personally by the judge after examination under oath or affirmation of the complainant and the witnesses he may produce, and particularly describing the place to be searched and the things to be seized; and Sec. 3 thereof provides that any evidence obtained in violation of the preceding section shall be inadmissible for any purpose in any proceeding. These constitutional strictures are implemented by the following provisions of Rule 126 of the Rules of Court: Sec. 3. Requisites for issuing search warrant. A search warrant shall not issue but upon probable cause in connection with one specific offense to be determined personally by the judge after examination under oath or affirmation of the complainant and the witnesses he may produce, and particularly describing the place to be searched and the things to be seized. Sec. 4. Examination of complainant; record. The judge must, before issuing the warrant, personally examine in the form of searching questions and answers,

In Philippine jurisprudence, probable cause has been uniformly defined as such facts and circumstances which would lead a reasonable, discreet and prudent man to believe that an offense has been committed, and that the objects sought in connection with the offense are in the place sought to be searched. 69 It being the duty of the issuing officer to issue, or refuse to issue, the warrant as soon as practicable after the application therefor is filed, 70 the facts warranting the conclusion of probable cause must be assessed at the time of such judicial determination by necessarily using legal standards then set forth in law and jurisprudence, and not those that have yet to be crafted thereafter. As already stated, the definition of probable cause enunciated in Burgos, Sr. vs. Chief of Staff, et al., supra, vis-a-vis the provisions of Sections 3 and 4 of Rule 126, were the prevailing and controlling legal standards, as they continue to be, by which a finding of probable cause is tested. Since the propriety of the issuance of a search warrant is to be determined at the time of the application therefor, which in turn must not be too remote in time from the occurrence of the offense alleged to have been committed, the issuing judge, in determining the existence of probable cause, can and should logically look to the touchstones in the laws theretofore enacted and the decisions already promulgated at the time, and not to those which had not yet even been conceived or formulated. It is worth noting that neither the Constitution nor the Rules of Court attempt to define probable cause, obviously for the purpose of leaving such matter to the court's discretion within the particular facts of each case. Although the Constitution prohibits the issuance of a search warrant in the absence of probable cause, such constitutional inhibition does not command the legislature to establish a definition or formula for determining what shall constitute probable cause. 71 Thus, Congress, despite its broad authority to fashion standards of reasonableness for searches and seizures, 72 does not venture to make such a definition or standard formulation of probable cause, nor categorize what facts and circumstances make up the same, much less limit the determination thereof to and within the circumscription of a particular class of evidence, all in deference to judicial discretion and probity. 73 Accordingly, to restrict the exercise of discretion by a judge by adding a particular requirement (the presentation of master tapes, as intimated by 20th Century Fox) not provided nor implied in the law for a finding of probable cause is beyond the realm of judicial competence or statesmanship. It serves no purpose but to stultify and constrict the judicious exercise of a court's prerogatives and to denigrate the judicial duty of determining the existence of probable cause to a mere ministerial or mechanical function. There is, to repeat, no law or rule which requires that the existence of probable cause is or should be determined solely by a specific kind of evidence. Surely, this could not

have been contemplated by the framers of the Constitution, and we do not believe that the Court intended the statement in 20th Century Fox regarding master tapes as the dictum for all seasons and reasons in infringement cases. Turning now to the case at bar, it can be gleaned from the records that the lower court followed the prescribed procedure for the issuance of a search warrant: (1) the examination under oath or affirmation of the complainant and his witnesses, with them particularly describing the place to be searched and the things to be seized; (2) an examination personally conducted by the judge in the form of searching questions and answers, in writing and under oath of the complainant and witnesses on facts personally known to them; and, (3) the taking of sworn statements, together with the affidavits submitted, which were duly attached to the records. Thereafter, the court a quo made the following factual findings leading to the issuance of the search warrant now subject of this controversy: In the instant case, the following facts have been established: (1) copyrighted video tapes bearing titles enumerated in Search Warrant No. 87-053 were being sold, leased, distributed or circulated, or offered for sale, lease, distribution, or transferred or caused to be transferred by defendants at their video outlets, without the written consent of the private complainants or their assignee; (2) recovered or confiscated from defendants' possession were video tapes containing copyrighted motion picture films without the authority of the complainant; (3) the video tapes originated from spurious or unauthorized persons; and (4) said video tapes were exact reproductions of the films listed in the search warrant whose copyrights or distribution rights were owned by complainants. The basis of these facts are the affidavits and depositions of NBI Senior Agent Lauro C. Reyes, Atty. Rico V. Domingo, and Rene C. Baltazar. Motion Pictures Association of America, Inc. (MPAA) thru their counsel, Atty. Rico V. Domingo, filed a complaint with the National Bureau of Investigation against certain video establishments one of which is defendant, for violation of PD No. 49 as amended by PD No. 1988. Atty. Lauro C. Reyes led a team to conduct discreet surveillance operations on said video establishments. Per information earlier gathered by Atty. Domingo, defendants were engaged in the illegal sale, rental, distribution, circulation or public exhibition of copyrighted films of MPAA without its written authority or its members. Knowing that defendant Sunshine Home Video and its proprietor,

Mr. Danilo Pelindario, were not authorized by MPAA to reproduce, lease, and possess for the purpose of selling any of its copyrighted motion pictures, instructed his researcher, Mr. Rene Baltazar to rent two video cassettes from said defendants on October 21, 1987. Rene C. Baltazar proceeded to Sunshine Home Video and rented tapes containing Little Shop of Horror. He was issued rental slip No. 26362 dated October 21, 1987 for P10.00 with a deposit of P100.00. Again, on December 11, 1987, the returned to Sunshine Home Video and rented Robocop with rental slip No. 25271 also for P10.00: On the basis of the complaint of MPAA thru counsel, Atty. Lauro C. Reyes personally went to Sunshine Home Video at No. 6 Mayfair Center, Magallanes Commercial Center, Makati. His last visit was on December 7, 1987. There, he found the video outlet renting, leasing, distributing video cassette tapes whose titles were copyrighted and without the authority of MPAA. Given these facts, a probable cause exists. . . . 74 The lower court subsequently executed a volteface, despite its prior detailed and substantiated findings, by stating in its order of November 22, 1988 denying petitioners' motion for reconsideration and quashing the search warrant that . . . The two (2) cases have a common factual milieu; both involve alleged pirated copyrighted films of private complainants which were found in the possession or control of the defendants. Hence, the necessity of the presentation of the master tapes from which the pirated films were allegedly copied is necessary in the instant case, to establish the existence of probable cause. 75 Being based solely on an unjustifiable and improper retroactive application of the master tape requirement generated by 20th Century Fox upon a factual situation completely different from that in the case at bar, and without anything more, this later order clearly defies elemental fair play and is a gross reversible error. In fact, this observation of the Court in La Chemise Lacoste, S.A. vs. Fernandez, et al., supra, may just as easily apply to the present case: A review of the grounds invoked . . . in his motion to quash the search warrants reveals the fact that they are not appropriate for quashing a warrant. They are matters of defense which should be ventilated during the trial on the merits of the case. . . .

As correctly pointed out by petitioners, a blind espousal of the requisite of presentation of the master tapes in copyright infringement cases, as the prime determinant of probable cause, is too exacting and impracticable a requirement to be complied with in a search warrant application which, it must not be overlooked, is only an ancillary proceeding. Further, on realistic considerations, a strict application of said requirement militates against the elements of secrecy and speed which underlie covert investigative and surveillance operations in police enforcement campaigns against all forms of criminality, considering that the master tapes of a motion picture required to be presented before the court consists of several reels contained in circular steel casings which, because of their bulk, will definitely draw attention, unlike diminutive objects like video tapes which can be easily concealed. 76 With hundreds of titles being pirated, this onerous and tedious imposition would be multiplied a hundredfold by judicial fiat, discouraging and preventing legal recourses in foreign jurisdictions. Given the present international awareness and furor over violations in large scale of intellectual property rights, calling for transnational sanctions, it bears calling to mind the Court's admonition also in La Chemise Lacoste, supra, that . . . . Judges all over the country are well advised to remember that court processes should not be used as instruments to, unwittingly or otherwise, aid counterfeiters and intellectual pirates, tie the hands of the law as it seeks to protect the Filipino consuming public and frustrate executive and administrative implementation of solemn commitments pursuant to international conventions and treaties. III The amendment to Section 56 of Presidential Decree No. 49 by Presidential Decree No. 1987, 77 which should here be publicized judicially, brought about the revision of its penalty structure and enumerated additional acts considered violative of said decree on intellectual property, namely, (1) directly or indirectly transferring or causing to be transferred any sound recording or motion picture or other audio-visual works so recorded with intent to sell, lease, publicly exhibit or cause to be sold, leased or publicly exhibited, or to use or cause to be used for profit such articles on which sounds, motion pictures, or other audio-visual works are so transferred without the written consent of the owner or his assignee; (2) selling, leasing, distributing, circulating, publicly exhibiting, or offering for sale, lease, distribution, or possessing for the purpose of sale, lease, distribution, circulation or public exhibition any of the abovementioned articles, without the written consent of the owner or his assignee; and, (3) directly or indirectly offering or making available

for a fee, rental, or any other form of compensation any equipment, machinery, paraphernalia or any material with the knowledge that such equipment, machinery, paraphernalia or material will be used by another to reproduce, without the consent of the owner, any phonograph record, disc, wire, tape, film or other article on which sounds, motion pictures or other audio-visual recordings may be transferred, and which provide distinct bases for criminal prosecution, being crimes independently punishable under Presidential Decree No. 49, as amended, aside from the act of infringing or aiding or abetting such infringement under Section 29. The trial court's finding that private respondents committed acts in blatant transgression of Presidential Decree No. 49 all the more bolsters its findings of probable cause, which determination can be reached even in the absence of master tapes by the judge in the exercise of sound discretion. The executive concern and resolve expressed in the foregoing amendments to the decree for the protection of intellectual property rights should be matched by corresponding judicial vigilance and activism, instead of the apathy of submitting to technicalities in the face of ample evidence of guilt. The essence of intellectual piracy should be essayed in conceptual terms in order to underscore its gravity by an appropriate understanding thereof. Infringement of a copyright is a trespass on a private domain owned and occupied by the owner of the copyright, and, therefore, protected by law, and infringement of copyright, or piracy, which is a synonymous term in this connection, consists in the doing by any person, without the consent of the owner of the copyright, of anything the sole right to do which is conferred by statute on the owner of the copyright. 78 A copy of a piracy is an infringement of the original, and it is no defense that the pirate, in such cases, did not know what works he was indirectly copying, or did not know whether or not he was infringing any copyright; he at least knew that what he was copying was not his, and he copied at his peril. In determining the question of infringement, the amount of matter copied from the copyrighted work is an important consideration. To constitute infringement, it is not necessary that the whole or even a large portion of the work shall have been copied. If so much is taken that the value of the original is sensibly diminished, or the labors of the original author are substantially and to an injurious extent appropriated by another, that is sufficient in point of law to constitute a piracy. 79 The question of whether there has been an actionable infringement of a literary, musical, or artistic work in motion pictures, radio or television being one of fact, 80 it should properly be determined during the trial. That is the stage calling for conclusive or preponderating evidence, and not the summary proceeding for the issuance of a search warrant wherein both lower courts erroneously require the master tapes.

In disregarding private respondent's argument that Search Warrant No. 87-053 is a general warrant, the lower court observed that "it was worded in a manner that the enumerated seizable items bear direct relation to the offense of violation of Sec. 56 of PD 49 as amended. It authorized only the seizur(e) of articles used or intended to be used in the unlawful sale, lease and other unconcerted acts in violation of PD 49 as amended. . . . 81 On this point, Bache and Co., (Phil.), Inc., et al. vs. Ruiz, et al., 82 instructs and enlightens: A search warrant may be said to particularly describe the things to be seized when the description therein is as specific as the circumstances will ordinarily allow (People vs. Rubio, 57 Phil. 384); or when the description expresses a conclusion of fact not of law by which the warrant officer may be guided in making the search and seizure (idem., dissent of Abad Santos, J.,); or when the things described are limited to those which bear direct relation to the offense for which the warrant is being issued (Sec 2, Rule 126, Revised Rules of Court). . . . If the articles desired to be seized have any direct relation to an offense committed, the applicant must necessarily have some evidence, other than those articles, to prove the said offense; and the articles subject of search and seizure should come in handy merely to strengthen such evidence. . . . On private respondents' averment that the search warrant was made applicable to more than one specific offense on the ground that there are as many offenses of infringement as there are rights protected and, therefore, to issue one search warrant for all the movie titles allegedly pirated violates the rule that a search warrant must be issued only in connection with one specific offense, the lower court said: . . . . As the face of the search warrant itself indicates, it was issued for violation of Section 56, PD 49 as amended only. The specifications therein (in Annex A) merely refer to the titles of the copyrighted motion pictures/films belonging to private complainants which defendants were in control/possession for sale, lease, distribution or public exhibition in contravention of Sec. 56, PD 49 as amended. 83 That there were several counts of the offense of copyright infringement and the search warrant uncovered several contraband items in the form of pirated video tapes is not to be confused with the number of offenses charged. The search warrant herein issued does not violate the one-specificoffense rule.

It is pointless for private respondents to insist on compliance with the registration and deposit requirements under Presidential Decree No. 49 as prerequisites for invoking the court's protective mantle in copyright infringement cases. As explained by the court below: Defendants-movants contend that PD 49 as amended covers only producers who have complied with the requirements of deposit and notice (in other words registration) under Sections 49 and 50 thereof. Absent such registration, as in this case, there was no right created, hence, no infringement under PD 49 as amended. This is not well-taken. As correctly pointed out by private complainants-oppositors, the Department of Justice has resolved this legal question as far back as December 12, 1978 in its Opinion No. 191 of the then Secretary of Justice Vicente Abad Santos which stated that Sections 26 and 50 do not apply to cinematographic works and PD No. 49 "had done away with the registration and deposit of cinematographic works" and that "even without prior registration and deposit of a work which may be entitled to protection under the Decree, the creator can file action for infringement of its rights". He cannot demand, however, payment of damages arising from infringement. The same opinion stressed that "the requirements of registration and deposit are thus retained under the Decree, not as conditions for the acquisition of copyright and other rights, but as prerequisites to a suit for damages". The statutory interpretation of the Executive Branch being correct, is entitled (to) weight and respect. xxx xxx xxx Defendants-movants maintain that complainant and his witnesses led the Court to believe that a crime existed when in fact there was none. This is wrong. As earlier discussed, PD 49 as amended, does not require registration and deposit for a creator to be able to file an action for infringement of his rights. These conditions are merely pre-requisites to an action for damages. So, as long as the proscribed acts are shown to exist, an action for infringement may be initiated. 84 Accordingly, the certifications 85 from the Copyright Section of the National Library, presented as evidence by private respondents to show non-registration of some of the films of petitioners, assume no evidentiary weight or significance whatsoever.

Furthermore, a closer review of Presidential Decree No. 49 reveals that even with respect to works which are required under Section 26 thereof to be registered and with copies to deposited with the National Library, such as books, including composite and cyclopedic works, manuscripts, directories and gazetteers; and periodicals, including pamphlets and newspapers; lectures, sermons, addresses, dissertations prepared for oral delivery; and letters, the failure to comply with said requirements does not deprive the copyright owner of the right to sue for infringement. Such noncompliance merely limits the remedies available to him and subjects him to the corresponding sanction. The reason for this is expressed in Section 2 of the decree which prefaces its enumeration of copyrightable works with the explicit statement that "the rights granted under this Decree shall, from the moment of creation, subsist with respect to any of the following classes of works." This means that under the present state of the law, the copyright for a work is acquired by an intellectual creator from the moment of creation even in the absence of registration and deposit. As has been authoritatively clarified: The registration and deposit of two complete copies or reproductions of the work with the National Library within three weeks after the first public dissemination or performance of the work, as provided for in Section 26 (P.D. No. 49, as amended), is not for the purpose of securing a copyright of the work, but rather to avoid the penalty for noncompliance of the deposit of said two copies and in order to recover damages in an infringement suit. 86 One distressing observation. This case has been fought on the basis of, and its resolution long delayed by resort to, technicalities to a virtually abusive extent by private respondents, without so much as an attempt to adduce any credible evidence showing that they conduct their business legitimately and fairly. The fact that private respondents could not show proof of their authority or that there was consent from the copyright owners for them to sell, lease, distribute or circulate petitioners' copyrighted films immeasurably bolsters the lower court's initial finding of probable cause. That private respondents are licensed by the Videogram Regulatory Board does not insulate them from criminal and civil liability for their unlawful business practices. What is more deplorable is that the reprehensible acts of some unscrupulous characters have stigmatized the Philippines with an unsavory reputation as a hub for intellectual piracy in this part of the globe, formerly in the records of the General Agreement on Tariffs and Trade and, now, of the World Trade Organization. Such acts must not be glossed over but should be denounced and repressed lest the

Philippines become an international pariah in the global intellectual community. WHEREFORE, the assailed judgment and resolution of respondent Court of Appeals, and necessarily inclusive of the order of the lower court dated November 22, 1988, are hereby REVERSED and SET ASIDE. The order of the court a quo of September 5, 1988 upholding the validity of Search Warrant No. 87-053 is hereby REINSTATED, and said court is DIRECTED to take and expeditiously

proceed with such appropriate proceedings as may be called for in this case. Treble costs are further assessed against private respondents. SO ORDERED. Narvasa, C.J., Padilla, Davide, Jr., Romero, Melo, Puno, Vitug, Kapunan, Mendoza, Francisco, Hermosisima, Jr., Panganiban and Torres, Jr., JJ., concur. Bellosillo, J., took no part.

G.R. No. 161295 June 29, 2005 JESSIE G. CHING, petitioner, vs. WILLIAM M. SALINAS, SR., WILLIAM M. SALINAS, JR., JOSEPHINE L. SALINAS, JENNIFER Y. SALINAS, ALONTO SOLAIMAN SALLE, JOHN ERIC I. SALINAS, NOEL M. YABUT (Board of Directors and Officers of WILAWARE PRODUCT CORPORATION), respondents. D EC ISIO N CALLEJO, SR., J.: This petition for review on certiorari assails the Decision1 and Resolution2 of the Court of Appeals (CA) in CA-G.R. SP No. 70411 affirming the January 3, 2002 and February 14, 2002 Orders3 of the Regional Trial Court (RTC) of Manila, Branch 1, which quashed and set aside Search Warrant Nos. 01-2401 and 01-2402 granted in favor of petitioner Jessie G. Ching. Jessie G. Ching is the owner and general manager of Jeshicris Manufacturing Co., the maker and manufacturer of a Utility Model, described as "Leaf Spring Eye Bushing for Automobile" made up of plastic. On September 4, 2001, Ching and Joseph Yu were issued by the National Library Certificates of Copyright Registration and Deposit of the said work described therein as "Leaf Spring Eye Bushing for Automobile."4 On September 20, 2001, Ching requested the National Bureau of Investigation (NBI) for police/investigative assistance for the apprehension and prosecution of illegal manufacturers, producers and/or distributors of the works.5 After due investigation, the NBI filed applications for search warrants in the RTC of Manila against William Salinas, Sr. and the officers and members of the Board of Directors of Wilaware Product Corporation. It was alleged that the respondents therein reproduced and distributed the said models penalized under Sections 177.1 and 177.3 of Republic Act (R.A.) No. 8293. The applications sought the seizure of the following: a.) Undetermined quantity of Leaf spring eye bushing for automobile that are made up of plastic polypropylene; b.) Undetermined quantity of Leaf spring eye bushing for automobile that are made up of polyvinyl chloride plastic; c.) Undetermined quantity of Vehicle bearing cushion that is made up of polyvinyl chloride plastic; d.) Undetermined quantity of Dies and jigs, patterns and flasks used in the manufacture/fabrication of items a to d; e.) Evidences of sale which include delivery receipts, invoices and official receipts.6 The RTC granted the application and issued Search Warrant Nos. 01-2401 and 01-2402 for the seizure of the aforecited articles.7 In the inventory submitted by the NBI agent, it appears that the following articles/items were seized based on the search warrants: Leaf Spring eye bushing a) Plastic Polypropylene - C190 27 } - C240 rear 40 } - C240 front 41 } BAG 1 b) Polyvinyl Chloride Plastic - C190 13 } c) Vehicle bearing cushion - center bearing cushion 11 } Budder for C190 mold 8 } Diesel Mold a) Mold for spring eye bushing rear 1 set

b) Mold for spring eye bushing front 1 set c) Mold for spring eye bushing for C190 1 set d) Mold for C240 rear 1 piece of the set e) Mold for spring eye bushing for L300 2 sets f) Mold for leaf spring eye bushing C190 with metal 1 set g) Mold for vehicle bearing cushion 1 set8 The respondents filed a motion to quash the search warrants on the following grounds: 2. The copyright registrations were issued in violation of the Intellectual Property Code on the ground that: a) the subject matter of the registrations are not artistic or literary; b) the subject matter of the registrations are spare parts of automobiles meaning there (sic) are original parts that they are designed to replace. Hence, they are not original. 9 The respondents averred that the works covered by the certificates issued by the National Library are not artistic in nature; they are considered automotive spare parts and pertain to technology. They aver that the models are not original, and as such are the proper subject of a patent, not copyright. 10 In opposing the motion, the petitioner averred that the court which issued the search warrants was not the proper forum in which to articulate the issue of the validity of the copyrights issued to him. Citing the ruling of the Court in Malaloan v. Court of Appeals,11 the petitioner stated that a search warrant is merely a judicial process designed by the Rules of Court in anticipation of a criminal case. Until his copyright was nullified in a proper proceeding, he enjoys rights of a registered owner/holder thereof. On January 3, 2002, the trial court issued an Order12 granting the motion, and quashed the search warrant on its finding that there was no probable cause for its issuance. The court ruled that the work covered by the certificates issued to the petitioner pertained to solutions to technical problems, not literary and artistic as provided in Article 172 of the Intellectual Property Code. His motion for reconsideration of the order having been denied by the trial courts Order of February 14, 2002, the petitioner filed a petition for certiorari in the CA, contending that the RTC had no jurisdiction to delve into and resolve the validity of the copyright certificates issued to him by the National Library. He insisted that his works

are covered by Sections 172.1 and 172.2 of the Intellectual Property Code. The petitioner averred that the copyright certificates are prima facie evidence of its validity, citing the ruling of the United States Court of Appeals in Wildlife Express Corporation v. Carol Wright Sales, Inc.13 The petitioner asserted that the respondents failed to adduce evidence to support their motion to quash the search warrants. The petitioner noted that respondent William Salinas, Jr. was not being honest, as he was able to secure a similar copyright registration of a similar product from the National Library on January 14, 2002. On September 26, 2003, the CA rendered judgment dismissing the petition on its finding that the RTC did not commit any grave abuse of its discretion in issuing the assailed order, to wit: It is settled that preliminarily, there must be a finding that a specific offense must have been committed to justify the issuance of a search warrant. In a number of cases decided by the Supreme Court, the same is explicitly provided, thus: "The probable cause must be in connection with one specific offense, and the judge must, before issuing the warrant, personally examine in the form of searching questions and answers, in writing and under oath, the complainant and any witness he may produce, on facts personally known to them and attach to the record their sworn statements together with any affidavit submitted. "In the determination of probable cause, the court must necessarily resolve whether or not an offense exists to justify the issuance or quashal of the search warrant." In the instant case, the petitioner is praying for the reinstatement of the search warrants issued, but subsequently quashed, for the offense of Violation of Class Designation of Copyrightable Works under Section 177.1 in relation to Section 177.3 of Republic Act 8293, when the objects subject of the same, are patently not copyrightable. It is worthy to state that the works protected under the Law on Copyright are: literary or artistic works (Sec. 172) and derivative works (Sec. 173). The Leaf Spring Eye Bushing and Vehicle Bearing Cushion fall on neither classification. Accordingly, if, in the first place, the item subject of the petition is not entitled to be protected by the law on copyright, how can there be any violation?14 The petitioners motion for reconsideration of the said decision suffered the same fate. The petitioner forthwith filed the present petition for review on certiorari, contending that the revocation of his copyright certificates should be raised in a direct action and not in a search warrant proceeding. The petitioner posits that even assuming ex argumenti that the trial court may resolve the validity of his copyright in a proceeding to quash a search warrant for allegedly infringing items, the RTC committed a grave abuse of its discretion when it declared that his works are not copyrightable in the first place. He claims that R.A. No. 8293, otherwise known as the Intellectual Property Code of the Philippines, which took effect on January 1, 1998, provides in no uncertain terms that copyright protection

automatically attaches to a work by the sole fact of its creation, irrespective of its mode or form of expression, as well as of its content, quality or purpose.15 The law gives a non-inclusive definition of "work" as referring to original intellectual creations in the literary and artistic domain protected from the moment of their creation; and includes original ornamental designs or models for articles of manufacture, whether or not registrable as an industrial design and other works of applied art under Section 172.1(h) of R.A. No. 8293.lawphil.net As such, the petitioner insists, notwithstanding the classification of the works as either literary and/or artistic, the said law, likewise, encompasses works which may have a bearing on the utility aspect to which the petitioners utility designs were classified. Moreover, according to the petitioner, what the Copyright Law protects is the authors intellectual creation, regardless of whether it is one with utilitarian functions or incorporated in a useful article produced on an industrial scale. The petitioner also maintains that the law does not provide that the intended use or use in industry of an article eligible for patent bars or invalidates its registration under the Law on Copyright. The test of protection for the aesthetic is not beauty and utility, but art for the copyright and invention of original and ornamental design for design patents.16 In like manner, the fact that his utility designs or models for articles of manufacture have been expressed in the field of automotive parts, or based on something already in the public domain does not automatically remove them from the protection of the Law on Copyright.17 The petitioner faults the CA for ignoring Section 218 of R.A. No. 8293 which gives the same presumption to an affidavit executed by an author who claims copyright ownership of his work. The petitioner adds that a finding of probable cause to justify the issuance of a search warrant means merely a reasonable suspicion of the commission of the offense. It is not equivalent to absolute certainty or a finding of actual and positive cause.18 He assists that the determination of probable cause does not concern the issue of whether or not the alleged work is copyrightable. He maintains that to justify a finding of probable cause in the issuance of a search warrant, it is enough that there exists a reasonable suspicion of the commission of the offense. The petitioner contends that he has in his favor the benefit of the presumption that his copyright is valid; hence, the burden of overturning this presumption is on the alleged infringers, the respondents herein. But this burden cannot be carried in a hearing on a proceeding to quash the search warrants, as the issue therein is whether there was probable cause for the issuance of the search warrant. The petitioner concludes that the issue of probable cause should be resolved without invalidating his copyright. In their comment on the petition, the respondents aver that the work of the petitioner is essentially a technical solution to the problem of wear and tear in automobiles, the substitution of materials, i.e., from rubber to plastic matter of polyvinyl chloride, an oil resistant soft texture plastic material strong enough to endure pressure brought about by

the vibration of the counter bearing and thus brings bushings. Such work, the respondents assert, is the subject of copyright under Section 172.1 of R.A. No. 8293. The respondents posit that a technical solution in any field of human activity which is novel may be the subject of a patent, and not of a copyright. They insist that the certificates issued by the National Library are only certifications that, at a point in time, a certain work was deposited in the said office. Furthermore, the registration of copyrights does not provide for automatic protection. Citing Section 218.2(b) of R.A. No. 8293, the respondents aver that no copyright is said to exist if a party categorically questions its existence and legality. Moreover, under Section 2, Rule 7 of the Implementing Rules of R.A. No. 8293, the registration and deposit of work is not conclusive as to copyright outlay or the time of copyright or the right of the copyright owner. The respondents maintain that a copyright exists only when the work is covered by the protection of R.A. No. 8293. The petition has no merit. The RTC had jurisdiction to delve into and resolve the issue whether the petitioners utility models are copyrightable and, if so, whether he is the owner of a copyright over the said models. It bears stressing that upon the filing of the application for search warrant, the RTC was duty-bound to determine whether probable cause existed, in accordance with Section 4, Rule 126 of the Rules of Criminal Procedure: SEC. 4. Requisite for issuing search warrant. A search warrant shall not issue but upon probable cause in connection with one specific offense to be determined personally by the judge after examination under oath or affirmation of the complainant and the witnesses he may produce, and, particularly, describing the place to be searched and the things to be seized. In Solid Triangle Sales Corporation v. The Sheriff of RTC QC, Br. 93,19 the Court held that in the determination of probable cause, the court must necessarily resolve whether or not an offense exists to justify the issuance of a search warrant or the quashal of one already issued by the court. Indeed, probable cause is deemed to exist only where facts and circumstances exist which could lead a reasonably cautious and prudent man to believe that an offense has been committed or is being committed. Besides, in Section 3, Rule 126 of the Rules of Criminal Procedure, a search warrant may be issued for the search and seizure of personal property (a) subject of the offense; (b) stolen or embezzled and other proceeds or fruits of the offense; or (c) used or intended to be used as the means of committing an offense. The RTC is mandated under the Constitution and Rules of Criminal Procedure to determine probable cause. The court cannot abdicate its constitutional obligation by refusing to determine whether an offense has been committed.20 The absence of probable cause will cause the outright nullification of the search warrant.21 For the RTC to determine whether the crime for infringement under R.A. No. 8293 as alleged in an application is committed, the petitioner-applicant was burdened to prove that (a) respondents Jessie Ching and

Joseph Yu were the owners of copyrighted material; and (b) the copyrighted material was being copied and distributed by the respondents. Thus, the ownership of a valid copyright is essential. 22 Ownership of copyrighted material is shown by proof of originality and copyrightability. By originality is meant that the material was not copied, and evidences at least minimal creativity; that it was independently created by the author and that it possesses at least same minimal degree of creativity.23 Copying is shown by proof of access to copyrighted material and substantial similarity between the two works.24 The applicant must thus demonstrate the existence and the validity of his copyright because in the absence of copyright protection, even original creation may be freely copied. 25 By requesting the NBI to investigate and, if feasible, file an application for a search warrant for infringement under R.A. No. 8293 against the respondents, the petitioner thereby authorized the RTC (in resolving the application), to delve into and determine the validity of the copyright which he claimed he had over the utility models. The petitioner cannot seek relief from the RTC based on his claim that he was the copyright owner over the utility models and, at the same time, repudiate the courts jurisdiction to ascertain the validity of his claim without running afoul to the doctrine of estoppel. To discharge his burden, the applicant may present the certificate of registration covering the work or, in its absence, other evidence. 26 A copyright certificate provides prima facie evidence of originality which is one element of copyright validity. It constitutes prima facie evidence of both validity and ownership27 and the validity of the facts stated in the certificate.28 The presumption of validity to a certificate of copyright registration merely orders the burden of proof. The applicant should not ordinarily be forced, in the first instance, to prove all the multiple facts that underline the validity of the copyright unless the respondent, effectively challenging them, shifts the burden of doing so to the applicant. 29 Indeed, Section 218.2 of R.A. No. 8293 provides: 218.2. In an action under this Chapter: (a) Copyright shall be presumed to subsist in the work or other subject matter to which the action relates if the defendant does not put in issue the question whether copyright subsists in the work or other subject matter; and (b) Where the subsistence of the copyright is established, the plaintiff shall be presumed to be the owner of the copyright if he claims to be the owner of the copyright and the defendant does not put in issue the question of his ownership. A certificate of registration creates no rebuttable presumption of copyright validity where other evidence in the record casts doubt on the question. In such a case, validity will not be presumed. 30

To discharge his burden of probable cause for the issuance of a search warrant for violation of R.A. No. 8293, the petitioner-applicant submitted to the RTC Certificate of Copyright Registration Nos. 2001-197 and 2001-204 dated September 3, 2001 and September 4, 2001, respectively, issued by the National Library covering work identified as Leaf Spring Eye Bushing for Automobile and Vehicle Bearing Cushion both classified under Section 172.1(h) of R.A. No. 8293, to wit: SEC. 172. Literary and Artistic Works. 172.1. Literary and artistic works, hereinafter referred to as "works," are original intellectual creations in the literary and artistic domain protected from the moment of their creation and shall include in particular: ... (h) Original ornamental designs or models for articles of manufacture, whether or not registrable as an industrial design, and other works of applied art. Related to the provision is Section 171.10, which provides that a "work of applied art" is an artistic creation with utilitarian functions or incorporated in a useful article, whether made by hand or produced on an industrial scale. But, as gleaned from the specifications appended to the application for a copyright certificate filed by the petitioner, the said Leaf Spring Eye Bushing for Automobile is merely a utility model described as comprising a generally cylindrical body having a co-axial bore that is centrally located and provided with a perpendicular flange on one of its ends and a cylindrical metal jacket surrounding the peripheral walls of said body, with the bushing made of plastic that is either polyvinyl chloride or polypropylene.31 Likewise, the Vehicle Bearing Cushion is illustrated as a bearing cushion comprising a generally semi-circular body having a central hole to secure a conventional bearing and a plurality of ridges provided therefore, with said cushion bearing being made of the same plastic materials.32 Plainly, these are not literary or artistic works. They are not intellectual creations in the literary and artistic domain, or works of applied art. They are certainly not ornamental designs or one having decorative quality or value. It bears stressing that the focus of copyright is the usefulness of the artistic design, and not its marketability. The central inquiry is whether the article is a work of art.33 Works for applied art include all original pictorials, graphics, and sculptural works that are intended to be or have been embodied in useful article regardless of factors such as mass production, commercial exploitation, and the potential availability of design patent protection.34 As gleaned from the description of the models and their objectives, these articles are useful articles which are defined as one having an intrinsic utilitarian function that is not merely to portray the appearance of the article or to convey information. Indeed, while works of applied art, original intellectual, literary and artistic works are copyrightable, useful articles and works of industrial design are not.35 A useful article may be copyrightable only if and only to the extent that such design incorporates pictorial, graphic, or sculptural features that can be identified

separately from, and are capable of existing independently of the utilitarian aspects of the article. We agree with the contention of the petitioner (citing Section 171.10 of R.A. No. 8293), that the authors intellectual creation, regardless of whether it is a creation with utilitarian functions or incorporated in a useful article produced on an industrial scale, is protected by copyright law. However, the law refers to a "work of applied art which is an artistic creation." It bears stressing that there is no copyright protection for works of applied art or industrial design which have aesthetic or artistic features that cannot be identified separately from the utilitarian aspects of the article. 36 Functional components of useful articles, no matter how artistically designed, have generally been denied copyright protection unless they are separable from the useful article. 37 In this case, the petitioners models are not works of applied art, nor artistic works. They are utility models, useful articles, albeit with no artistic design or value. Thus, the petitioner described the utility model as follows: LEAF SPRING EYE BUSHING FOR AUTOMOBILE Known bushings inserted to leaf-spring eye to hold leafsprings of automobile are made of hard rubber. These rubber bushings after a time, upon subjecting them to so much or intermittent pressure would eventually wore (sic) out that would cause the wobbling of the leaf spring. The primary object of this utility model, therefore, is to provide a leaf-spring eye bushing for automobile that is made up of plastic. Another object of this utility model is to provide a leafspring eye bushing for automobiles made of polyvinyl chloride, an oil resistant soft texture plastic or polypropylene, a hard plastic, yet both causes cushion to the leaf spring, yet strong enough to endure pressure brought about by the up and down movement of said leaf spring. Yet, an object of this utility model is to provide a leaf-spring eye bushing for automobiles that has a much longer life span than the rubber bushings. Still an object of this utility model is to provide a leaf-spring eye bushing for automobiles that has a very simple construction and can be made using simple and ordinary molding equipment. A further object of this utility model is to provide a leafspring eye bushing for automobile that is supplied with a metal jacket to reinforce the plastic eye bushing when in engaged with the steel material of the leaf spring. These and other objects and advantages will come to view and be understood upon a reading of the detailed description when taken in conjunction with the accompanying drawings. Figure 1 is an exploded perspective of a leaf-spring eye bushing according to the present utility model; Figure 2 is a sectional view taken along line 2-2 of Fig. 1;

Figure 3 is a longitudinal sectional view of another embodiment of this utility model; Figure 4 is a perspective view of a third embodiment; and Figure 5 is a sectional view thereof. Referring now to the several views of the drawings wherein like reference numerals designated same parts throughout, there is shown a utility model for a leaf-spring eye bushing for automobile generally designated as reference numeral 10. Said leaf-spring eye bushing 10 comprises a generally cylindrical body 11 having a co-axial bore 12 centrally provided thereof. As shown in Figs. 1 and 2, said leaf-spring eye bushing 10 is provided with a perpendicular flange 13 on one of its ends and a cylindrical metal jacket 14 surrounding the peripheral walls 15 of said body 11. When said leaf-spring bushing 10 is installed, the metal jacket 14 acts with the leaf-spring eye (not shown), which is also made of steel or cast steel. In effect, the bushing 10 will not be directly in contact with steel, but rather the metal jacket, making the life of the bushing 10 longer than those without the metal jacket. In Figure 2, the bushing 10 as shown is made of plastic, preferably polyvinyl chloride, an oil resistant soft texture plastic or a hard polypropylene plastic, both are capable to endure the pressure applied thereto, and, in effect, would lengthen the life and replacement therefor. Figure 3, on the other hand, shows the walls 16 of the coaxial bore 12 of said bushing 10 is insertably provided with a steel tube 17 to reinforce the inner portion thereof. This steel tube 17 accommodates or engages with the leaf-spring bolt (not shown) connecting the leaf spring and the automobiles chassis. Figures 4 and 5 show another embodiment wherein the leaf eye bushing 10 is elongated and cylindrical as to its construction. Said another embodiment is also made of polypropylene or polyvinyl chloride plastic material. The steel tube 17 and metal jacket 14 may also be applied to this embodiment as an option thereof.38 VEHICLE BEARING CUSHION Known bearing cushions inserted to bearing housings for vehicle propeller shafts are made of hard rubber. These rubber bushings after a time, upon subjecting them to so much or intermittent pressure would eventually be worn out that would cause the wobbling of the center bearing. The primary object of this utility model therefore is to provide a vehicle-bearing cushion that is made up of plastic. Another object of this utility model is to provide a vehicle bearing cushion made of polyvinyl chloride, an oil resistant soft texture plastic material which causes cushion to the propellers center bearing, yet strong enough to endure pressure brought about by the vibration of the center bearing.

Yet, an object of this utility model is to provide a vehiclebearing cushion that has a much longer life span than rubber bushings. Still an object of this utility model is to provide a vehicle bearing cushion that has a very simple construction and can be made using simple and ordinary molding equipment. These and other objects and advantages will come to view and be understood upon a reading of the detailed description when taken in conjunction with the accompanying drawings. Figure 1 is a perspective view of the present utility model for a vehicle-bearing cushion; and Figure 2 is a sectional view thereof. Referring now to the several views of the drawing, wherein like reference numeral designate same parts throughout, there is shown a utility model for a vehicle-bearing cushion generally designated as reference numeral 10. Said bearing cushion 10 comprises of a generally semicircular body 11, having central hole 12 to house a conventional bearing (not shown). As shown in Figure 1, said body 11 is provided with a plurality of ridges 13 which serves reinforcing means thereof. The subject bearing cushion 10 is made of polyvinyl chloride, a soft texture oil and chemical resistant plastic material which is strong, durable and capable of enduring severe pressure from the center bearing brought about by the rotating movement of the propeller shaft of the vehicle. 39 A utility model is a technical solution to a problem in any field of human activity which is new and industrially applicable. It may be, or may relate to, a product, or process, or an improvement of any of the aforesaid. 40 Essentially, a utility model refers to an invention in the mechanical field. This is the reason why its object is sometimes described as a device or useful object. 41 A utility model varies from an invention, for which a patent for invention is, likewise, available, on at least three aspects: first, the requisite of "inventive step"42 in a patent for invention is not required; second, the maximum term of protection is only seven years43 compared to a patent which is twenty years,44 both reckoned from the date of the application; and third, the provisions on utility model dispense with its substantive examination45 and prefer for a less complicated system. Being plain automotive spare parts that must conform to the original structural design of the components they seek to replace, the Leaf Spring Eye Bushing and Vehicle Bearing Cushion are not ornamental. They lack the decorative quality or value that must characterize authentic works of applied art. They are not even artistic creations with incidental utilitarian functions or works incorporated in a useful article. In actuality, the personal properties described in the search warrants are mechanical works, the principal function of which is utility sans any aesthetic embellishment. Neither are we to regard the Leaf Spring Eye Bushing and Vehicle Bearing Cushion as included in the catch-all phrase

"other literary, scholarly, scientific and artistic works" in Section 172.1(a) of R.A. No. 8293. Applying the principle of ejusdem generis which states that "where a statute describes things of a particular class or kind accompanied by words of a generic character, the generic word will usually be limited to things of a similar nature with those particularly enumerated, unless there be something in the context of the state which would repel such inference,"46 the Leaf Spring Eye Bushing and Vehicle Bearing Cushion are not copyrightable, being not of the same kind and nature as the works enumerated in Section 172 of R.A. No. 8293. No copyright granted by law can be said to arise in favor of the petitioner despite the issuance of the certificates of copyright registration and the deposit of the Leaf Spring Eye Bushing and Vehicle Bearing Cushion. Indeed, in Joaquin, Jr. v. Drilon47 and Pearl & Dean (Phil.), Incorporated v. Shoemart, Incorporated,48 the Court ruled that: Copyright, in the strict sense of the term, is purely a statutory right. It is a new or independent right granted by the statute, and not simply a pre-existing right regulated by it. Being a statutory grant, the rights are only such as the statute confers, and may be obtained and enjoyed only with respect to the subjects and by the persons, and on terms and conditions specified in the statute. Accordingly, it can cover only the works falling within the statutory enumeration or description. That the works of the petitioner may be the proper subject of a patent does not entitle him to the issuance of a search warrant for violation of copyright laws. In Kho v. Court of Appeals49 and Pearl & Dean (Phil.), Incorporated v. Shoemart, Incorporated, 50 the Court ruled that "these copyright and patent rights are completely distinct and separate from one another, and the protection afforded by one cannot be used interchangeably to cover items or works that exclusively pertain to the others." The Court expounded further, thus: Trademark, copyright and patents are different intellectual property rights that cannot be interchanged with one another. A trademark is any visible sign capable of distinguishing the goods (trademark) or services (service mark) of an enterprise and shall include a stamped or marked container of goods. In relation thereto, a trade name means the name or designation identifying or distinguishing an enterprise. Meanwhile, the scope of a copyright is confined to literary and artistic works which are original intellectual creations in the literary and artistic domain protected from the moment of their creation. Patentable inventions, on the other hand, refer to any technical solution of a problem in any field of human activity which is new, involves an inventive step and is industrially applicable. The petitioner cannot find solace in the ruling of the United States Supreme Court in Mazer v. Stein51 to buttress his petition. In that case, the artifacts involved in that case were statuettes of dancing male and female figures made of semivitreous china. The controversy therein centered on the fact that although copyrighted as "works of art," the statuettes were intended for use and used as bases for table lamps, with electric wiring, sockets and lampshades attached. The issue raised was whether the statuettes were copyright protected in the United States, considering that the copyright

applicant intended primarily to use them as lamp bases to be made and sold in quantity, and carried such intentions into effect. At that time, the Copyright Office interpreted the 1909 Copyright Act to cover works of artistic craftsmanship insofar as their form, but not the utilitarian aspects, were concerned. After reviewing the history and intent of the US Congress on its copyright legislation and the interpretation of the copyright office, the US Supreme Court declared that the statuettes were held copyrightable works of art or models or designs for works of art. The High Court ruled that: "Works of art (Class G) (a) In General. This class includes works of artistic craftsmanship, in so far as their form but not their mechanical or utilitarian aspects are concerned, such as artistic jewelry, enamels, glassware, and tapestries, as well as all works belonging to the fine arts, such as paintings, drawings and sculpture. " So we have a contemporaneous and long-continued construction of the statutes by the agency charged to administer them that would allow the registration of such a statuette as is in question here. 52

ornamental design for design patents." Significantly, the copyright office promulgated a rule to implement Mazer to wit: [I]f "the sole intrinsic function of an article is its utility, the fact that the work is unique and attractively shaped will not qualify it as a work of art." In this case, the bushing and cushion are not works of art. They are, as the petitioner himself admitted, utility models which may be the subject of a patent. IN LIGHT OF ALL THE FOREGOING, the instant petition is hereby DENIED for lack of merit. The assailed Decision and Resolution of the Court of Appeals in CAG.R. SP No. 70411 are AFFIRMED. Search Warrant Nos. 01-2401 and 01-2402 issued on October 15, 2001 are ANNULLED AND SET ASIDE. Costs against the petitioner. SO ORDERED. Puno

The High Court went on to state that "[t]he dichotomy of protection for the aesthetic is not beauty and utility but art for the copyright and the invention of original and , (Chairman), Austria-Martinez, Tinga, and Chico-Nazario, JJ., concur.

G.R. No. L-11937 April 1, 1918 PEDRO SERRANO LAKTAW, plaintiff-appellant, vs. MAMERTO PAGLINAWAN, defendant-appellee. Perfecto Gabriel for appellant. Felix Ferrer and Crossfield and O'Brien for appellee. ARAULLO, J.: In the complaint presented in the Court of First Instance of the City of Manila on February 20, 1915, it was alleged: (1) That the plaintiff was, according to the laws regulating literary properties, the registered owner and author of a literary work entitled Diccionario Hispano-Tagalog (Spanish-Tagalog Dictionary) published in the City of Manila in 1889 by the printing establishment La Opinion, and a copy of which was attached to the complaint, as Exhibit A; (2) that the defendant, without the consent of the plaintiff, reproduced said literary work, improperly copied the greater part thereof in the work published by him and entitled Diccionariong Kastila-Tagalog (Spanish-Tagalog Dictionary), a copy of which was also attached to the complaint as Exhibit B; (3) that said act of the defendant, which is a violation of article 7 of the Law of January 10, 1879, on Intellectual Property, caused irreparable injuries to the plaintiff, who was surprised when, on publishing his new work entitled Diccionario Tagalog-Hispano (TagalogSpanish Dictionary) he learned of the fact, and (4) that the damages occasioned to the plaintiff by the publication of defendant's work amounted to $10,000. The plaintiff therefore prayed the court to order the defendant to withdraw from sale all stock of the work herein identified as Exhibit B and to pay the plaintiff the sum of $10,000, with costs. The defendant in his answer denied generally each and every allegation of the complaint and prayed the court to absolve him from the complaint. After trial and the introduction of evidence by both parties, the court on August 20, 1915, rendered judgment, absolving the defendant from the complaint, but without making any special pronouncement as to costs. The plaintiff moved for a new trial on the ground that the judgment was against the law and the weight of the evidence. Said motion having been overruled, plaintiff excepted to the order overruling it, and appealed the case to the Supreme Court upon a bill of exceptions. The ground of the decision appealed from is that a comparison of the plaintiff's dictionary with that of the defendant does not show that the latter is an improper copy of the former, which has been published and offered for sale by the plaintiff for about twenty-five years or more. For this reason the court held that the plaintiff had no right of action and that the remedy sought by him could not be granted. The appellant contends that court below erred in not declaring that the defendant had reproduced the plaintiff's work and that the defendant had violated article 7 of the Law of January 10, 1879, on Intellectual Property. Said article provides: Nobody may reproduce another person's work without the owner's consent, even

merely to annotate or add anything to it, or improve any edition thereof. Therefore, in order that said article may be violated, it is not necessary, as the court below seems to have understood, that a work should be an improper copy of another work previously published. It is enough that another's work has been reproduced without the consent of the owner, even though it be only to annotate, add something to it, or improve any edition thereof. Upon making a careful and minute comparison of Exhibit A, the dictionary written and published by the plaintiff, and Exhibit B, written and published by the defendant, and, taking into account the memorandum (fols. 55 to 59) presented by the defendant, in which he enumerates the words and terms which, according to him, are in his dictionary but not in that of that of the plaintiff, and viceversa, and the equivalents or definitions given by the plaintiff, as well as the new Tagalog words which are in the dictionary of the defendant but not in that of the plaintiff; and considering the notes, Exhibit C, first series, presented by the plaintiff, in which the terms copied by the defendant from the plaintiff's dictionary are enumerated in detail and in relation to each letter of the alphabet and which the plaintiff's own words and terms are set forth, with a summary, at the foot of each group of letters, which shows the number of initial Spanish words contained in the defendant's dictionary, the words that are his own and the fact that the remaining ones are truly copied from the plaintiff's dictionary considering all of these facts, we come to a conclusion completely different and contrary to that of the trial court, for said evidence clearly shows: 1. That, of the Spanish words in the defendant's dictionary, Exhibit B, which correspond to each letter of the alphabet, those that are enumerated below have been copied and reproduced from the plaintiff's dictionary, with the exception of those that are stated to be defendant's own. Letter "A" "B" "C" "CH" "D" "E" "F" "G" "H" "I" "J" "K" Words 1,184 364 660 76 874 880 383 302 57 814 113 11 Defendant's own 231 28 261 10 231 301 152 111 64 328 25 11

"L" "LL" "M" "N" "" "O" "P" "Q" "R" "S" "T" "U" "V" "X" "Y" "Z"

502 36 994 259 6 317 803 84 847 746 591 107 342 6 24 73 ______ 23,560

94 2 225 53 2 67 358 11 140 118 147 15 96 6 4 17 _____ 3,108

Therefore, of the 23,560 Spanish words in the defendant's dictionary, after deducting 17 words corresponding to the letters K and X (for the plaintiff has no words corresponding to them), only 3,108 words are the defendant's own, or, what is the same thing, the defendant has added only this number of words to those that are in the plaintiff's dictionary, he having reproduced or copied the remaining 20,452 words. 2. That the defendant also literally reproduced and copied for the Spanish words in his dictionary, the equivalents, definitions and different meanings in Tagalog, given in plaintiff's dictionary, having reproduced, as to some words, everything that appears in the plaintiff's dictionary for similar Spanish words, although as to some he made some additions of his own. Said copies and reproductions are numerous as may be seen, by comparing both dictionaries and using as a guide or index the defendant's memorandum and notes, first series, Exhibit C, in which, as to each word, the similarities and differences between them are set forth in detail. 3. That the printer's errors in the plaintiff's dictionary as to the expression of some words in Spanish as well as their equivalents in Tagalog are also reproduced, a fact which shows that the defendant, in preparing his dictionary, literally copied those Spanish words and their meanings and equivalents in Tagalog from the plaintiff's dictionary. The trial court has chosen at random, as is stated in the judgment appealed from, some words from said dictionaries

in making the comparison on which its conclusion is based, and consequently the conclusion reached by it must be inaccurate and not well founded, because said comparison was not complete. In said judgment some words of the defendant's dictionary are transcribed, the equivalents and meanings of which in Tagalog are exactly the same as those that are given in the plaintiff's dictionary, with the exception, as to some of them, of only one acceptation, which is the defendant's own production. And with respect to the examples used by the defendant in his dictionary, which, according to the judgment, are not copied from the plaintiff's the judgment referring to the preposition a (to), in Tagalog sa it must be noted that the defendant, in giving in his dictionary an example of said preposition, uses the expression "voy a Tayabas" (I am going to Tayabas) instead of "voy a Bulacan" (I am going to Bulacan), as the plaintiff does in his dictionary, or what is the same thing, that one speaks of Bulacan while the other speaks of Tayabas. This does not show that there was no reproduction or copying by the defendant of the plaintiffs work, but just the opposite, for he who intends to imitate the work of another, tries to make it appear in some manner that there is some difference between the original and the imitation; and in the example referred to, with respect to the preposition a (to), that dissimilarity as to the province designated seems to effect the same purpose. In the judgment appealed from, the court gives one to understand that the reproduction of another's dictionary without the owner's consent does not constitute a violation of the Law of Intellectual Property for the court's idea of a dictionary is stated in the decision itself, as follows: Dictionaries have to be made with the aid of others, and they are improved by the increase of words. What may be said of a pasture ground may be said also of a dictionary, i. e., that it should be common property for all who may desire to write a new dictionary, and the defendant has come to this pasture ground and taken whatever he needed from it in the exercise of a perfect right. Such idea is very erroneous, especially in relation to the Law of Intellectual Property. Danvilla y Collado the author of the Law of January 10, 1879, on Intellectual Property, which was discussed and approved in the Spanish Cortes, in his work entitled La Propiedad Intelectual (page 362, 1st ed.) states with respect to dictionaries and in relation to article 7 of said law: The protection of the law cannot be denied to the author of a dictionary, for although words are not the property of anybody, their definitions, the example that explain their sense, and the manner of expressing their different meanings, may constitute a special work. On this point, the correctional court of the Seine held, on August 16, 1864, that a dictionary constitutes property, although some of the words therein are explained by mere

definitions expressed in a few lines and sanctioned by usage, provided that the greater part of the other words contain new meanings; new meanings which evidently may only belonged to the first person who published them. Therefore, the plaintiff, Pedro Serrano, cannot be denied the legal protection which he seeks, and which is based on the fact that the dictionary published by him in 1889 is his property said property right being recognized and having been granted by article 7, in connection with article 2, of said law and on the further fact that said work was reproduced by the defendant without his permission. This law was published in the Gaceta de Madrid on January 12, 1879. It took effect in these Islands six months after its promulgation or publication, as provided in article 56 thereof. The body of rules for the execution of said law having been approved by royal decree of September 3, 1880, and published in the Gaceta de Madrid on September 6, 1880 and extended to the Philippine Islands by royal decree of May 5, 1887, it was in turn published in the Gaceta de Manila, with the approval of the Governor-General of the Islands, on June 15, 1887. Said law of January 10, 1879, and the rules for its application, were therefore in force in these Islands when the plaintiff's dictionary was edited and published in 1889. It appears from the evidence that although the plaintiff did not introduce at the trial the certificate of registration of his property rights to said work which, according to said rules, was kept in the Central Government of these Islands, and was issued to him in 1890, the same having been lost during the revolution against Spain, and no trace relative to the issuance of said certificate being obtainable in the Division of Archives of the Executive Bureau on account of the loss of the corresponding records, yet as in the first page of said dictionary the property right of the plaintiff was reserved by means of the words "Es propiedad del autor" (All rights reserved), taken in connection with the permission granted him by the Governor-General on November 24, 1889, to print and publish said dictionary, after an examination thereof by the permanent committee of censors, which examination was made, and the necessary license granted to him, these facts constitute sufficient proof, under the circumstances of the case, as they have not been overcome by any evidence on the part of the defendant, showing that said plaintiff did not comply with the requirements of article 36 of said law, which was the prerequisite to the enjoyment of the benefits thereof according to the preceding articles, among which is article 7, which is alleged in the complaint to have been violated by the defendant. Even considering that said Law of January 10, 1879, ceased to operate in these Islands, upon the termination of Spanish sovereignty and the substitution thereof by that of the United States of America, the right of the plaintiff to invoke said law in support of the action instituted by him in the present case cannot be disputed. His property right to the work Diccionario Hispano-Tagalog (Spanish-Tagalog Dictionary), published by him and edited in 1889, is recognized and sanctioned by said law, and by virtue thereof, he had acquired a right of which he cannot be deprived merely because the law is not in force now or is of no actual application. This conclusion is necessary to protect

intellectual property rights vested after the sovereignty of Spain was superseded by that of the United States. It was so held superseded by that of the United States. It was so held in the Treaty of Paris of December 10, 1898, between Spain and the United States, when it declared in article 13 thereof that the rights to literary, artistic, and industrial properties acquired by the subject of Spain in the Island of Cuba and in Puerto Rico and the Philippines and other ceded territories, at the time of the exchange of the ratification of said Treaty, shall continue to be respect. In addition to what has been said, according to article 428 of the Civil Code, the author of a literary, scientific, or artistic work, has the right to exploit it and dispose thereof at will. In relation to this right, there exists the exclusive right of the author, who is the absolute owner of his own work, to produce it, according to article 2 of the Law of January 10, 1879, and consequently, nobody may reproduce it, without his permission, not even to annotate or add something to it, or to improve any edition thereof, according to article 7 of said law. Manresa, in his commentaries on article 429 of the Civil Code (vol. 3, p. 633, 3d ed.) says that the concrete statement of the right to literary properties is found in the legal doctrine according to which nobody may reproduce another person's work, without the consent of his owner, or even to annotate or add something to it or to improve any edition thereof. And on page 616 of said volume, Manresa says the following: He who writes a book, or carves a statue, or makes an invention, has the absolute right to reproduce or sell it, just as the owner of land has the absolute right to sell it or its fruits. But while the owner of land, by selling it and its fruits, perhaps fully realizes all its economic value, by receiving its benefits and utilities, which are presented, for example, by the price, on the other hand the author of a book, statue or invention, does not reap all the benefits and advantages of his own property by disposing of it, for the most important form of realizing the economic advantages of a book, statue or invention, consists in the right to reproduce it in similar or like copies, everyone of which serves to give to the person reproducing them all the conditions which the original requires in order to give the author the full enjoyment thereof. If the author of a book, after its publication, cannot prevent its reproduction by any person who may want to reproduce it, then the property right granted him is reduced to a very insignificant thing and the effort made in

the production of the book is no way rewarded. Indeed the property right recognized and protected by the Law of January 10, 1879, on Intellectual Property, would be illusory if, by reason of the fact that said law is no longer in force as a consequence of the change of sovereignty in these Islands, the author of a work, who has the exclusive right to reproduce it, could not prevent another person from so doing without his consent, and could not enforce this right through the courts of justice in order to prosecute the violator of this legal provision and the defrauder or usurper of his right, for he could not obtain the full enjoyment of the book or other work, and his property right thereto, which is recognized by law, would be reduced, as Manresa says, to an insignificant thing, if he should have no more right than that of selling his work. The reproduction by the defendant without the plaintiff's consent of the Diccionario Hispano-Tagalog (SpanishTagalog Dictionary), published and edited in the City of Manila in 1889, by the publication of the Diccionariong Kastila-Tagalog (Spanish-Tagalog Dictionary), published in the same city and edited in the press El Progreso in 1913, as appears from Exhibit B, which is attached to the complaint, has caused the plaintiff, according to the latter, damages in the sum of $10,000. It is true that it cannot be denied that the reproduction of the plaintiff's book by the defendant has caused damages to the former, but the amount thereof has not been determined at the trial, for the statement of the plaintiff as to the proceeds he would have realized if he had printed in 1913 the number of copies of his work which he stated in his declaration a fact which he did not do because the defendant had reproduced it was not corroborated in any way at the trial and is based upon mere calculations made by the plaintiff himself; for which reason no pronouncement can be made in this decision as to the indemnification for damages which the plaintiff seeks to recover. The plaintiff having prayed, not for a permanent injunction against the defendant, as the plaintiff himself in his brief erroneously states, but for a judgment ordering the defendant to withdraw from sale all stock of his work Diccionariong Kastila-Tagalog (Spanish-Tagalog Dictionary), of which Exhibit B is a copy, and the suit instituted by said plaintiff being proper, we reverse the judgment appealed from and order the defendant to withdraw from sale, as prayed for in the complaint, all stock of his work above-mentioned, and to pay the costs of first instance. We make no special pronouncement as to the costs of this instance. So ordered. Arellano, C. J., Torres, and Street, JJ., concur. Carson, and Malcolm, JJ., concur in the result.

G.R. No. 108946 January 28, 1999 FRANCISCO G. JOAQUIN, JR., and BJ PRODUCTIONS, INC., petitioners, vs. HONORABLE FRANKLIN DRILON, GABRIEL ZOSA, WILLIAM ESPOSO, FELIPE MEDINA, JR., and CASEY FRANCISCO, respondents. MENDOZA, J.:

This is a petition for certiorari. Petitioners seek to annul the resolution of the Department of Justice, dated August 12, 1992, in Criminal Case No. Q-92-27854, entitled "Gabriel Zosa, et al. v. City Prosecutor of Quezon City and Francisco Joaquin, Jr.," and its resolution, dated December 3, 1992, denying petitioner Joaquin's motion for reconsideration. Petitioner BJ Productions, Inc. (BJPI) is the holder/grantee of Certificate of Copyright No. M922, dated January 28, 1971, of Rhoda and Me, a dating game show aired from 1970 to 1977. On June 28, 1973, petitioner BJPI submitted to the National Library an addendum to its certificate of copyright specifying the show's format and style of presentation. On July 14, 1991, while watching television, petitioner Francisco Joaquin, Jr., president of BJPI, saw on RPN Channel 9 an episode of It's a Date, which was produced by IXL Productions, Inc. (IXL). On July 18, 1991, he wrote a letter to private respondent Gabriel M. Zosa, president and general manager of IXL, informing Zosa that BJPI had a copyright to Rhoda and Me and demanding that IXL discontinue airing It's a Date. In a letter, dated July 19, 1991, private respondent Zosa apologized to petitioner Joaquin and requested a meeting to discuss a possible settlement. IXL, however, continued airing It's a Date, prompting petitioner Joaquin to send a second letter on July 25, 1991 in which he reiterated his demand and warned that, if IXL did not comply, he would endorse the matter to his attorneys for proper legal action. Meanwhile, private respondent Zosa sought to register IXL's copyright to the first episode of It's a Date for which it was issued by the National Library a certificate of copyright August 14, 1991. Upon complaint of petitioners, an information for violation of P.D. No. 49 was filed against private respondent Zosa together with certain officers of RPN Channel 9, namely, William Esposo, Felipe Medina, and Casey Francisco, in the Regional Trial Court of Quezon City where it was docketed as Criminal Case No. 92-27854 and assigned to Branch 104 thereof. However, private respondent Zosa sought a review of the resolution of the Assistant City Prosecutor before the Department of Justice. On August 12, 1992, respondent Secretary of Justice Franklin M. Drilon reversed the Assistant City Prosecutor's findings and directed him to move for the dismissal of the case against private respondents. 1 Petitioner Joaquin filed a motion for reconsideration, but his motion denied by respondent Secretary of Justice on December 3, 1992. Hence, this petition. Petitioners contend that: 1. The public respondent gravely abused his discretion amounting to lack of jurisdiction when he invoked non-presentation of the master tape as being fatal to the existence of probable cause to prove infringement, despite the fact that

private respondents never raised the same as a controverted issue. 2. The public respondent gravely abused his discretion amounting to lack of jurisdiction when he arrogated unto himself the determination of what is copyrightable an issue which is exclusively within the jurisdiction of the regional trial court to assess in a proper proceeding. Both public and private respondents maintain that petitioners failed to establish the existence of probable cause due to their failure to present the copyrighted master videotape of Rhoda and Me. They contend that petitioner BJPI's copyright covers only a specific episode of Rhoda and Me and that the formats or concepts of dating game shows are not covered by copyright protection under P.D. No. 49. Non-Assignment of Error. Petitioners claim that their failure to submit the copyrighted master videotape of the television show Rhoda and Me was not raised in issue by private respondents during the preliminary investigation and, therefore, it was error for the Secretary of Justice to reverse the investigating prosecutor's finding of probable cause on this ground. A preliminary investigation falls under the authority of the state prosecutor who is given by law the power to direct and control criminal actions. 2 He is, however, subject to the control of the Secretary of Justice. Thus, Rule 112, 4 of the Revised Rules of Criminal Procedure, provides: Sec. 4. Duty of investigating fiscal. If the investigating fiscal finds cause to hold the respondent for trial, he shall prepare the resolution and corresponding information. He shall certify under oath that he, or as shown by the record, an authorized officer, has personally examined the complainant and his witnesses, that there is reasonable ground to believe that a crime has been committed and that the accused is probably guilty thereof, that the accused was informed of the complaint and of the evidence submitted against him and that he was given an opportunity to submit controverting evidence. Otherwise, he shall recommend dismissal of the complaint. In either case, he shall forward the records of the case to the provincial or city fiscal or chief state prosecutor within five (5) days from his resolution. The latter shall take appropriate action thereon ten (10) days from receipt thereof, immediately informing the parties of said action.

No complaint or information may be filed or dismissed by an investigating fiscal without the prior written authority or approval of the provincial or city fiscal or chief state prosecutor. Where the investigating assistant fiscal recommends the dismissal of the case but his findings are reversed by the provincial or city fiscal or chief state prosecutor on the ground that a probable cause exists, the latter may, by himself, file the corresponding information against the respondent or direct any other assistant fiscal or state prosecutor to do so, without conducting another preliminary investigation. If upon petition by a proper party, the Secretary of Justice reverses the resolution of the provincial or city fiscal or chief state prosecutor, he shall direct the fiscal concerned to file the corresponding information without conducting another preliminary investigation or to dismiss or move for dismissal of the complaint or information. In reviewing resolutions of prosecutors, the Secretary of Justice is not precluded from considering errors, although unassigned, for the purpose of determining whether there is probable cause for filing cases in court. He must make his own finding, of probable cause and is not confined to the issues raised by the parties during preliminary investigation. Moreover, his findings are not subject to review unless shown to have been made with grave abuse. Opinion of the Secretary of Justice Petitioners contend, however, that the determination of the question whether the format or mechanics of a show is entitled to copyright protection is for the court, and not the Secretary of Justice, to make. They assail the following portion of the resolution of the respondent Secretary of Justice: [T]he essence of copyright infringement is the copying, in whole or in part, of copyrightable materials as defined and enumerated in Section 2 of PD. No. 49. Apart from the manner in which it is actually expressed, however, the idea of a dating game show is, in the opinion of this Office, a non-copyrightable material. Ideas, concepts, formats, or schemes in their abstract form clearly do not fall within the class of works or materials susceptible of copyright registration as provided in PD. No. 49. 3 (Emphasis added.) It is indeed true that the question whether the format or mechanics of petitioners television show is entitled to copyright protection is a legal question for the court to

make. This does not, however, preclude respondent Secretary of Justice from making a preliminary determination of this question in resolving whether there is probable cause for filing the case in court. In doing so in this case, he did not commit any grave error. Presentation of Master Tape Petitioners claim that respondent Secretary of Justice gravely abused his discretion in ruling that the master videotape should have been predented in order to determine whether there was probable cause for copyright infringement. They contend that 20th Century Fox Film Corporation v. Court of Appeals, 4 on which respondent Secretary of Justice relied in reversing the resolution of the investigating prosecutor, is inapplicable to the case at bar because in the present case, the parties presented sufficient evidence which clearly establish "linkage between the copyright show "Rhoda and Me" and the infringing TV show "It's a Date." 5 The case of 20th Century Fox Film Corporation involved raids conducted on various videotape outlets allegedlly selling or renting out "pirated" videotapes. The trial court found that the affidavits of NBI agents, given in support of the application for the search warrant, were insufficient without the master tape. Accordingly, the trial court lifted the search warrants it had previously issued against the defendants. On petition for review, this Court sustained the action of the trial court and ruled: 6 The presentation of the master tapes of the copyrighted films from which the pirated films were allegedly copied, was necessary for the validity of search warrants against those who have in their possession the pirated films. The petitioner's argument to the effect that the presentation of the master tapes at the time of application may not be necessary as these would be merely evidentiary in nature and not determinative of whether or not a probable cause exists to justify the issuance of the search warrants is not meritorious. The court cannot presume that duplicate or copied tapes were necessarily reproduced from master tapes that it owns. The application for search warrants was directed against video tape outlets which allegedly were engaged in the unauthorized sale and renting out of copyrighted films belonging to the petitioner pursuant to P.D. 49. The essence of a copyright infringement is the similarity or at least substantial similarity of the purported pirated works to the copyrighted work. Hence, the applicant must present to the court the copyrighted films to compare them with the purchased evidence of the video tapes allegedly pirated to determine

whether the latter is an unauthorized reproduction of the former. This linkage of the copyrighted films to the pirated films must be established to satisfy the requirements of probable cause. Mere allegations as to the existence of the copyrighted films cannot serve as basis for the issuance of a search warrant. This ruling was qualified in the later case of Columbia Pictures, Inc. v. Court of Appeals 7 in which it was held: In fine, the supposed pronunciamento in said case regarding the necessity for the presentation of the master tapes of the copyrighted films for the validity of search warrants should at most be understood to merely serve as a guidepost in determining the existence of probable cause in copyright infringement cases where there is doubt as to the true nexus between the master tape and the printed copies. An objective and careful reading of the decision in said case could lead to no other conclusion than that said directive was hardly intended to be a sweeping and inflexible requirement in all or similar copyright infringement cases. . .
8

RHODA AND ME "IT'S A DATE" Set 1 Set 1 a. Unmarried participant of a. same one gender (searcher) appears on one side of a divider, while three (3) unmarried participants of the other gender are on the other side of the divider. This arrangement is done to ensure that the searcher does not see the searchees. b. Searcher asks a question b. same to be answered by each of the searchees. The purpose is to determine who among the searchees is the most compatible with the searcher. c. Searcher speculates on the c. same match to the searchee. d. Selection is made by the d. Selection is based on the use of compute (sic) answer of the Searchees. methods, or by the way questions are answered, or similar methods. Set 2 Set 2 Same as above with the e.same genders of the searcher and searchees interchanged. 9 Petitioners assert that the format of Rhoda and Me is a product of ingenuity and skill and is thus entitled to copyright protection. It is their position that the presentation of a point-by-point comparison of the formats of the two shows clearly demonstrates the nexus between the shows and hence establishes the existence of probable cause for copyright infringement. Such being the case, they did not have to produce the master tape. To begin with the format of a show is not copyrightable. Section 2 of P.D. No. 49, 10 otherwise known as the DECREE ON INTELLECTUAL PROPERTY, enumerates the classes of work entitled to copyright protection, to wit: Sec. 2. The rights granted by this Decree shall, from the moment of creation, subsist with respect to any of the following classes of works: (A) Books, including composite and cyclopedic works, manuscripts, directories, and gazetteers: (B) Periodicals, including pamphlets and newspapers; (C) Lectures, sermons, addresses, dissertations prepared for oral delivery; (D) Letters;

In the case at bar during the preliminary investigation, petitioners and private respondents presented written descriptions of the formats of their respective televisions shows, on the basis of which the investigating prosecutor ruled: As may [be] gleaned from the evidence on record, the substance of the television productions complainant's "RHODA AND ME" and Zosa's "IT'S A DATE" is that two matches are made between a male and a female, both single, and the two couples are treated to a night or two of dining and/or dancing at the expense of the show. The major concepts of both shows is the same. Any difference appear mere variations of the major concepts. That there is an infringement on the copyright of the show "RHODA AND ME" both in content and in the execution of the video presentation are established because respondent's "IT'S A DATE" is practically an exact copy of complainant's "RHODA AND ME" because of substantial similarities as follows, to wit:

(E) Dramatic or dramatico-musical compositions; choreographic works and entertainments in dumb shows, the acting form of which is fixed in writing or otherwise; (F) Musical compositions, with or without words; (G) Works of drawing, painting, architecture, sculpture, engraving, lithography, and other works of art; models or designs for works of art; (H) Reproductions of a work of art; (I) Original ornamental designs or models for articles of manufacture, whether or not patentable, and other works of applied art; (J) Maps, plans, sketches, and charts; (K) Drawings or plastic works of a scientific or technical character; (I) Photographic works and works produced by a process analogous to photography lantern slides; (M) Cinematographic works and works produced by a process analogous to cinematography or any process for making audio-visual recordings; (N) Computer programs; (O) Prints, pictorial illustrations advertising copies, labels tags, and box wraps; (P) Dramatizations, translations, adaptations, abridgements, arrangements and other alterations of literary, musical or artistic works or of works of the Philippine government as herein defined, which shall be protected as provided in Section 8 of this Decree. (Q) Collections of literary, scholarly, or artistic works or of works referred to in Section 9 of this Decree which by reason of the selection and arrangement of their contents constitute intellectual creations, the same to be protected as such in accordance with Section 8 of this Decree. (R) Other literary, scholarly, scientific and artistic works. This provision is substantially the same as 172 of the INTELLECTUAL PROPERTY CODE OF PHILIPPINES (R.A. No. 8293). 11 The format or mechanics of a television

show is not included in the list of protected works in 2 of P.D. No. 49. For this reason, the protection afforded by the law cannot be extended to cover them. Copyright, in the strict sense of the term, is purely a statutory right. It is a new or independent right granted by the statute, and not simply a pre-existing right regulated by the statute. Being a statutory grant, the rights are only such as the statute confers, and may be obtained and enjoyed only with respect to the subjects and by the persons and on terms and conditions specified in the statute. 12 Since . . . copyright in published works is purely a statutory creation, a copyright may be obtained only for a work falling within the statutory enumeration or description. 13 Regardless of the historical viewpoint, it is authoritatively settled in the United States that there is no copyright except that which is both created and secured by act of Congress . . . . . 14 P.D. No. 49, 2, in enumerating what are subject to copyright, refers to finished works and not to concepts. The copyright does not extend to an idea, procedure, process, system, method of operation, concept, principle, or discovery, regardless of the form in which it is described, explained, illustrated, or embodied in such work. 15 Thus, the new INTELLECTUAL PROPERTY CODE OF THE PHILIPPINES provides: Sec. 175. Unprotected Subject Matter. Notwithstanding the provisions of Sections 172 and 173, no protection shall extend, under this law, to any idea, procedure, system, method or operation, concept, principle, discovery or mere data as such, even if they are expressed, explained, illustrated or embodied in a work; news of the day and other miscellaneous facts having the character of mere items of press information; or any official text of a legislative, administrative or legal nature, as well as any official translation thereof. What then is the subject matter of petitioners' copyright? This Court is of the opinion that petitioner BJPI's copyright covers audio-visual recordings of each episode of Rhoda and Me, as falling within the class of works mentioned in P.D. 49, 2(M), to wit: Cinematographic works and works produced by a process analogous to cinematography or any process for making audio-visual recordings; The copyright does not extend to the general concept or format of its dating

game show. Accordingly, by the very nature of the subject of petitioner BJPI's copyright, the investigating prosecutor should have the opportunity to compare the videotapes of the two shows. Mere description by words of the general format of the two dating game shows is insufficient; the presentation of the master videotape in evidence was indispensable to the determination of the existence of probable cause. As aptly observed by respondent Secretary of Justice: A television show includes more than mere words can describe because it

involves a whole spectrum of visuals and effects, video and audio, such that no similarity or dissimilarity may be found by merely describing the general copyright/format of both dating game shows. WHEREFORE, the petition is hereby DISMISSED SO ORDERED.1wphi1.nt Puno, Quisumbing and Buena, JJ., concur. Bellosillo, J., took no part.

G.R. No. L-36402 March 16, 1987 FILIPINO SOCIETY OF COMPOSERS, AUTHORS AND PUBLISHERS, INC., plaintiff-appellant, vs. BENJAMIN TAN, defendant-appellee. Lichauco, Picazo & Agcaoili Law Office for plaintiffappellant. Ramon A. Nieves for defendant-appellee. PARAS, J.: An appeal was made to the Court of Appeals docketed as CA-G.R. No. 46373-R * entitled Filipino Society of Composers, Authors, Publishers, Inc., Plaintiff-Appellant v. Benjamin Tan, Defendant-Appellee, from the decision of the Court of First Instance of Manila, Branch VII in Civil Case No. 71222 ** "Filipino Society of Composers, Authors and Publishers, Inc., Plaintiff v. Benjamin Tan, Defendant," which had dismissed plaintiffs' complaint without special pronouncement as to costs. The Court of Appeals, finding that the case involves pure questions of law, certified the same to the Supreme Court for final determination (Resolution, CA-G.R. No. 46373-R, Rollo, p. 36; Resolution of the Supreme Court of February 16, 1973 in L-36402, Rollo, p. 38). The undisputed facts of this case are as follows: Plaintiff-appellant is a non-profit association of authors, composers and publishers duly organized under the Corporation Law of the Philippines and registered with the Securities and Exchange Commission. Said association is the owner of certain musical compositions among which are the songs entitled: "Dahil Sa Iyo", "Sapagkat Ikaw Ay Akin," "Sapagkat Kami Ay Tao Lamang" and "The Nearness Of You." On the other hand, defendant-appellee is the operator of a restaurant known as "Alex Soda Foundation and Restaurant" where a combo with professional singers, hired to play and sing musical compositions to entertain and amuse customers therein, were playing and singing the above-mentioned compositions without any license or permission from the appellant to play or sing the same. Accordingly, appellant Hence, on November 7, 1967, appellant filed a complaint with the lower court for infringement of copyright against defendant-appellee for allowing the playing in defendantappellee's restaurant of said songs copyrighted in the name of the former. Defendant-appellee, in his answer, countered that the complaint states no cause of action. While not denying the playing of said copyrighted compositions in his establishment, appellee maintains that the mere singing and playing of songs and popular tunes even if they are copyrighted do not constitute an infringement (Record on Appeal, p. 11; Resolution, CA-G.R. NO. 46373-R, Rollo, pp. 32-36) under the provisions of Section 3 of the Copyright Law (Act 3134 of the Philippine Legislature). The lower court, finding for the defendant, dismissed the complaint (Record on Appeal, p. 25). Plaintiff appealed to the Court of Appeals which as already stated certified the case to the Supreme Court for adjudication on the legal question involved. (Resolution, Court of Appeals, Rollo, p. 36; Resolution of the Supreme Court of February 18, 1973, Rollo, p. 38). In its brief in the Court of Appeals, appellant raised the following Assignment of Errors: I THE LOWER COURT ERRED IN HOLDING THAT THE MUSICAL COMPOSITIONS OF THE APPELLANT WERE IN THE NATURE OF PUBLIC PROPERTY WHEN THEY WERE COPYRIGHTED OR REGISTERED. II demanded from the appellee payment of the necessary license fee for the playing and singing of aforesaid compositions but the demand was ignored.

THE LOWER COURT ERRED IN HOLDING THAT THE MUSICAL COMPOSITIONS OF THE APPELLANT WERE PLAYED AND SUNG IN THE SODA FOUNTAIN AND RESTAURANT OF THE APPELLEE BY INDEPENDENT CONTRACTORS AND ONLY UPON THE REQUEST OF CUSTOMERS. III THE LOWER COURT ERRED IN HOLDING THAT THE PLAYING AND SINGING OF COPYRIGHTED MUSICAL COMPOSITIONS IN THE SODA FOUNTAIN AND RESTAURANT OF THE APPELLEE ARE NOT PUBLIC PERFORMANCES FOR PROFIT OF THE SAID COMPOSITIONS WITHIN THE MEANING AND CONTEMPLATION OF THE COPYRIGHT LAW. IV THE LOWER COURT ERRED IN NOT HOLDING THAT THE APPELLEE IS LIABLE TO THE APPELLANT FOR FOUR (4) SEPARATE INFRINGEMENTS. (Brief for Appellant, pp. A and B). The petition is devoid of merit. The principal issues in this case are whether or not the playing and signing of musical compositions which have been copyrighted under the provisions of the Copyright Law (Act 3134) inside the establishment of the defendantappellee constitute a public performance for profit within the meaning and contemplation of the Copyright Law of the Philippines; and assuming that there were indeed public performances for profit, whether or not appellee can be held liable therefor. Appellant anchors its claim on Section 3(c) of the Copyright Law which provides: SEC. 3. The proprietor of a copyright or his heirs or assigns shall have the exclusive right: xxx xxx xxx (c) To exhibit, perform, represent, produce, or reproduce the copyrighted work in any manner or by any method whatever for profit or otherwise; if not reproduced in copies for sale, to sell any manuscripts or any record whatsoever thereof; xxx xxx xxx It maintains that playing or singing a musical composition is universally accepted as performing the musical composition and that playing and singing of copyrighted music in the soda fountain and restaurant of the appellee for the entertainment of the customers although the latter do not pay for the music but only for the food and drink constitute performance for profit under the Copyright Law (Brief for the Appellant, pp. 19-25).

We concede that indeed there were "public performances for profit. " The word "perform" as used in the Act has been applied to "One who plays a musical composition on a piano, thereby producing in the air sound waves which are heard as music ... and if the instrument he plays on is a piano plus a broadcasting apparatus, so that waves are thrown out, not only upon the air, but upon the other, then also he is performing the musical composition." (Buck, et al. v. Duncan, et al.; Same Jewell La Salle Realty Co., 32F. 2d. Series 367). In relation thereto, it has been held that "The playing of music in dine and dance establishment which was paid for by the public in purchases of food and drink constituted "performance for profit" within a Copyright Law." (Buck, et al. v. Russon No. 4489 25 F. Supp. 317). Thus, it has been explained that while it is possible in such establishments for the patrons to purchase their food and drinks and at the same time dance to the music of the orchestra, the music is furnished and used by the orchestra for the purpose of inducing the public to patronize the establishment and pay for the entertainment in the purchase of food and drinks. The defendant conducts his place of business for profit, and it is public; and the music is performed for profit (Ibid, p. 319). In a similar case, the Court ruled that "The Performance in a restaurant or hotel dining room, by persons employed by the proprietor, of a copyrighted musical composition, for the entertainment of patrons, without charge for admission to hear it, infringes the exclusive right of the owner of the copyright." (Herbert v. Shanley Co.; John Church Co. v. Hillard Hotel Co., et al., 242 U.S. 590-591). In delivering the opinion of the Court in said two cases, Justice Holmes elaborated thus: If the rights under the copyright are infringed only by a performance where money is taken at the door, they are very imperfectly protected. Performances not different in kind from those of the defendants could be given that might compete with and even destroy the success of the monopoly that the law intends the plaintiffs to have. It is enough to say that there is no need to construe the statute so narrowly. The defendants' performances are not eleemosynary. They are part of a total for which the public pays, and the fact that the price of the whole is attributed to a particular item which those present are expected to order is not important. It is true that the music is not the sole object, but neither is the food, which probably could be got cheaper elsewhere. The object is a repast in surroundings that to people having limited power of conversation or disliking the rival noise, give a luxurious pleasure not to be had from eating a silent meal. If music did not pay, it would be given up. If it pays, it pays out of the public's pocket. Whether it pays or not, the purpose of employing it is profit, and that is enough. (Ibid., p. 594).

In the case at bar, it is admitted that the patrons of the restaurant in question pay only for the food and drinks and apparently not for listening to the music. As found by the trial court, the music provided is for the purpose of entertaining and amusing the customers in order to make the establishment more attractive and desirable (Record on Appeal, p. 21). It will be noted that for the playing and singing the musical compositions involved, the combo was paid as independent contractors by the appellant (Record on Appeal, p. 24). It is therefore obvious that the expenses entailed thereby are added to the overhead of the restaurant which are either eventually charged in the price of the food and drinks or to the overall total of additional income produced by the bigger volume of business which the entertainment was programmed to attract. Consequently, it is beyond question that the playing and singing of the combo in defendant-appellee's restaurant constituted performance for profit contemplated by the Copyright Law. (Act 3134 amended by P.D. No. 49, as amended). Nevertheless, appellee cannot be said to have infringed upon the Copyright Law. Appellee's allegation that the composers of the contested musical compositions waived their right in favor of the general public when they allowed their intellectual creations to become property of the public domain before applying for the corresponding copyrights for the same (Brief for Defendant-Appellee, pp. 14-15) is correct. The Supreme Court has ruled that "Paragraph 33 of Patent Office Administrative Order No. 3 (as amended, dated September 18, 1947) entitled 'Rules of Practice in the Philippines Patent Office relating to the Registration of Copyright Claims' promulgated pursuant to Republic Act 165, provides among other things that an intellectual creation should be copyrighted thirty (30) days after its publication, if made in Manila, or within the (60) days if made elsewhere, failure of which renders such creation public property." (Santos v. McCullough Printing Company,

12 SCRA 324-325 [1964]. Indeed, if the general public has made use of the object sought to be copyrighted for thirty (30) days prior to the copyright application the law deems the object to have been donated to the public domain and the same can no longer be copyrighted. A careful study of the records reveals that the song "Dahil Sa Iyo" which was registered on April 20, 1956 (Brief for Appellant, p. 10) became popular in radios, juke boxes, etc. long before registration (TSN, May 28, 1968, pp. 3-5; 25) while the song "The Nearness Of You" registered on January 14, 1955 (Brief for Appellant, p. 10) had become popular twenty five (25) years prior to 1968, (the year of the hearing) or from 1943 (TSN, May 28, 1968, p. 27) and the songs "Sapagkat Ikaw Ay Akin" and "Sapagkat Kami Ay Tao Lamang" both registered on July 10, 1966, appear to have been known and sang by the witnesses as early as 1965 or three years before the hearing in 1968. The testimonies of the witnesses at the hearing of this case on this subject were unrebutted by the appellant. (Ibid, pp. 28; 29 and 30). Under the circumstances, it is clear that the musical compositions in question had long become public property, and are therefore beyond the protection of the Copyright Law. PREMISES CONSIDERED, the appealed decision of the Court of First Instance of Manila in Civil Case No. 71222 is hereby AFFIRMED. SO ORDERED. Fernan (Chairman), Gutierrez, Jr., Padilla, Bidin and Cortes, JJ., concur. Alampay, J., took no part

G.R. No. L-19439 October 31, 1964 MAURO MALANG SANTOS, plaintiff-appellant, vs. MCCULLOUGH PRINTING COMPANY, defendant-appellee. Taada Teehankee & Carreon for plaintiff-appellant. Esposo & Usison for defendant-appellee

PAREDES, J.: This is an action for damages based on the provisions of Articles 721 and 722 of the Civil Code of the Philippines, allegedly on the unauthorized use, adoption and appropriation by the defendant company of plaintiff's intellectual creation or artistic design for a Christmas Card. The design depicts "a Philippine rural Christmas time scene consisting of a woman and a child in a nipa hut adorned with a star-shaped lantern and a man astride a carabao, beside a tree, underneath which appears the plaintiff's pen name, Malang." The complaint alleges that plaintiff Mauro Malang Santos designed for former Ambassador Felino Neri, for his personal Christmas Card greetings for the year 1959, the

artistic motif in question. The following year the defendant McCullough Printing Company, without the knowledge and authority of plaintiff, displayed the very design in its album of Christmas cards and offered it for sale, for a price. For such unauthorized act of defendant, plaintiff suffered moral damages to the tune of P16,000.00, because it has placed plaintiff's professional integrity and ethics under serious question and caused him grave embarrassment before Ambassador Neri. He further prayed for the additional sum of P3,000.00 by way of attorney's fee. Defendant in answer to the complaint, after some denials and admissions, moved for a dismissal of the action claiming that

(1) The design claimed does not contain a clear notice that it belonged to him and that he prohibited its use by others; (2) The design in question has been published but does not contain a notice of copyright, as in fact it had never been copyrighted by the plaintiff, for which reason this action is barred by the Copyright Law; (3) The complaint does not state a cause of action. The documentary evidence submitted were the Christmas cards, as originally designed by plaintiff, the design as printed for Ambassador Neri, and the subsequent reprints ordered by other parties. The case was submitted an a "Stipulation of Fact" the pertinent portions of which are hereunder reproduced: 1. That the plaintiff was the artist who created the design shown in Exhibit A, ... 2. That the design carries the pen name of plaintiff, MALANG, on its face ... and indicated in Exhibit A, ... 3. That said design was created by plaintiff in the latter part of 1959 for the personal use of former Ambassador Felino Neri; ... 4. That former Ambassador Neri had 800 such cards ... printed by the defendant company in 1959, ... which he distributed to his friends in December, 1959; 5. That defendant company utilized plaintiff's design in the year 1960 in its album of Christmas card samples displayed to its customers ... . 6. That the Sampaguita Pictures, Inc., placed an order with defendant company for 700 of said cards ... while Raul Urra & Co. ordered 200 ..., which cards were sent out by them to their respective correspondent, clients and friends during the Christmas season of 1960; 7. That defendant company's use of plaintiff's design was without knowledge, authority or consent of plaintiff; 8. That said design has not been copyrighted; 9. That plaintiff is an artist of established name, good-will and reputation. ... . Upon the basis of the facts stipulated, the lower court rendered judgment on December 1, 1961, the pertinent portions of which are recited below: As a general proposition, there can be no dispute that the artist acquires ownership of the product of his art. At the time of its creation, he has the

absolute dominion over it. To help the author protect his rights the copyright law was enacted. In intellectual creations, a distinction must be made between two classes of property rights; the fact of authorship and the right to publish and/or distribute copies of the creation. With regard to the first, i.e. the fact of authorship, the artist cannot be divested of the same. In other words, he may sell the right to print hundred of his work yet the purchaser of said right can never be the author of the creation. It is the second right, i.e., the right to publish, republish, multiply and/or distribute copies of the intellectual creation which the state, through the enactment of the copyright law, seeks to protect. The author or his assigns or heirs may have the work copyrighted and once this is legally accomplished any infringement of the copyright will render the infringer liable to the owner of the copyright. xxx xxx xxx

The plaintiff in this case did not choose to protect his intellectual creation by a copyright. The fact that the design was used in the Christmas card of Ambassador Neri who distributed eight hundred copies thereof among his friends during the Christmas season of 1959, shows that the, same was published. Unless satisfactorily explained a delay in applying for a copyright, of more than thirty days from the date of its publication, converts the property to one of public domain. Since the name of the author appears in each of the alleged infringing copies of the intellectual creation, the defendant may not be said to have pirated the work nor guilty of plagiarism Consequently, the complaint does not state a cause of action against the defendant. xxx xxx ;xxx

WHEREFORE, the Court dismisses the complaint without pronouncement as to costs. In his appeal to this Court, plaintiff-appellant pointed five (5) errors allegedly committed by the trial court, all of which bring to the fore, the following propositions: (1) whether plaintiff is entitled to protection, notwithstanding the, fact that he has not copyrighted his design; (2) whether the publication is limited, so as to prohibit its use by others, or it is general publication, and (3) whether the provisions of the Civil Code or the Copyright Law should apply in the case. We will undertake a collective discussion of these propositions. Under the established facts, We find that plaintiff is not entitled to a protection, the provision of the Civil Code, notwithstanding. Paragraph 33 of Patent Office Administrative Order No. 3 (as amended dated September

18, 1947) entitled "Rules of Practice in the Philippines Patent Office relating to the Registration of Copyright Claims" promulgated pursuant to Republic Act 165, provides, among others, that an intellectual creation should be copyrighted thirty (30) days after its publication, if made in Manila, or within sixty (60) day's if made elsewhere, failure of which renders such creation public property. In the case at bar, even as of this moment, there is no copyright for the design in question. We are not also prepared to accept the contention of appellant that the publication of the design was a limited one, or that there was an understanding that only Ambassador Neri should, have absolute right to use the same. In the first place, if such were the condition then Ambassador Neri would be the aggrieved party, and not the appellant. In the second place, if there was such a limited publication or prohibition, the same was not shown on the face of the design. When the purpose is a limited publication, but the effect is general publication, irrevocable rights thereupon become vested in the public, in consequence of which enforcement of the restriction becomes impossible (Nutt vs. National Institute, 31 F [2d] 236). It has been held that the effect of offering for sale a dress, for example manufactured in accordance with an original design which is not protected by either a copyright or a patent, is to divest the owner of his common law rights therein by virtue of the publication of a 'copy' and thereafter anyone is free to copy the design or the dress (Fashion

Originators Guild of America v. Federal Trade Commission, 114 F [2d] 80). When Ambassador Neri distributed 800 copies of the design in controversy, the plaintiff lost control of his design and the necessary implication was that there had been a general publication, there having been no showing of a clear indication that a limited publication was intended. The author of a literary composition has a light to the first publication thereof. He has a right to determine whether it shall be published at all, and if published, when, where, by whom, and in what form. This exclusive right is confined to the first publication. When once published, it is dedicated to the public, and the author loses the exclusive right to control subsequent publication by others, unless the work is placed under the protection of the copyright law. (See II Tolentino's Comments on the Civil Code, p. 433, citing Wright v. Eisle 83 N.Y. Supp. 887.) CONFORMABLY WITH ALL THE FOREGOING, We find that the errors assigned have not been committed by the lower court. The decision appealed from, therefore, should be, as it is hereby affirmed. Costs taxed against plaintiffappellant. Bengzon, C.J., Bautista Angelo, Concepcion, Reyes, J.B.L., Barrera, Dizon, Makalintal, Bengzon, J. P., and Zaldivar JJ., concur. Regala, J., took no part.

G.R. No. 131522 July 19, 1999 PACITA I. HABANA, ALICIA L. CINCO and JOVITA N. FERNANDO, petitioners, vs. FELICIDAD C. ROBLES and GOODWILL TRADING CO., INC., respondents. PARDO, J.: The case before us is a petition for review on certiorari 1 to set aside the (a) decision or the Court of Appeals 2, and (b) the resolution denying petitioners' motion for reconsideration, 3 in which the appellate court affirmed the trial court's dismissal of the complaint for infringement and/or unfair competition and damages but deleted the award for attorney's fees.1wphi1.nt The facts are as follows: Petitioners are authors and copyright owners of duly issued certificates of copyright registration covering their published works, produced through their combined resources and efforts, entitled COLLEGE ENGLISH FOR TODAY (CET for brevity), Books 1 and 2, and WORKBOOK FOR COLLEGE FRESHMAN ENGLISH, Series 1. Respondent Felicidad Robles and Goodwill Trading Co., Inc. are the author/publisher and distributor/seller of another published work entitled "DEVELOPING ENGLISH PROFICIENCY" (DEP for brevity), Books 1 and 2 (1985 edition) which book was covered by copyrights issued to them. In the course of revising their published works, petitioners scouted and looked around various bookstores to check on other textbooks dealing with the same subject matter. By chance they came upon the book of respondent Robles and upon perusal of said book they were surprised to see that the book was strikingly similar to the contents, scheme of presentation, illustrations and illustrative examples in their own book, CET. After an itemized examination and comparison of the two books (CET and DEP), petitioners found that several pages of the respondent's book are similar, if not all together a copy of petitioners' book, which is a case of plagiarism and copyright infringement. Petitioners then made demands for damages against respondents and also demanded that they cease and desist from further selling and distributing to the general public the infringed copies of respondent Robles' works. However, respondents ignored the demands, hence, on July 7, 1988; petitioners filed with the Regional Trial Court, Makati, a complaint for "Infringement and/or unfair competition with damages" 4 against private respondents. 5 In the complaint, petitioners alleged that in 1985, respondent Felicidad C. Robles being substantially familiar with the contents of petitioners' works, and without securing their permission, lifted, copied, plagiarized and/or transposed certain portions of their book CET. The textual contents and illustrations of CET were literally reproduced in the book DEP. The plagiarism, incorporation and reproduction of particular portions of the book CET in the book DEP, without the authority or consent of petitioners, and the misrepresentations of respondent Robles that the same was her original work and concept adversely affected and

substantially diminished the sale of the petitioners' book and caused them actual damages by way of unrealized income. Despite the demands of the petitioners for respondents to desist from committing further acts of infringement and for respondent to recall DEP from the market, respondents refused. Petitioners asked the court to order the submission of all copies of the book DEP, together with the molds, plates and films and other materials used in its printing destroyed, and for respondents to render an accounting of the proceeds of all sales and profits since the time of its publication and sale. Respondent Robles was impleaded in the suit because she authored and directly committed the acts of infringement complained of, while respondent Goodwill Trading Co., Inc. was impleaded as the publisher and joint co-owner of the copyright certificates of registration covering the two books authored and caused to be published by respondent Robles with obvious connivance with one another. On July 27, 1988, respondent Robles filed a motion for a bill of particulars 6 which the trial court approved on August 17, 1988. Petitioners complied with the desired particularization, and furnished respondent Robles the specific portions, inclusive of pages and lines, of the published and copyrighted books of the petitioners which were transposed, lifted, copied and plagiarized and/or otherwise found their way into respondent's book. On August 1, 1988, respondent Goodwill Trading Co., Inc. filed its answer to the complaint 7 and alleged that petitioners had no cause of action against Goodwill Trading Co., Inc. since it was not privy to the misrepresentation, plagiarism, incorporation and reproduction of the portions of the book of petitioners; that there was an agreement between Goodwill and the respondent Robles that Robles guaranteed Goodwill that the materials utilized in the manuscript were her own or that she had secured the necessary permission from contributors and sources; that the author assumed sole responsibility and held the publisher without any liability.
8

During the pre-trial conference, the parties agreed to a stipulation of facts 10 and for the trial court to first resolve the issue of infringement before disposing of the claim for damages. After the trial on the merits, on April 23, 1993, the trial court rendered its judgment finding thus: WHEREFORE, premises considered, the court hereby orders that the complaint filed against defendants Felicidad Robles and Goodwill Trading Co., Inc. shall be DISMISSED; that said plaintiffs solidarily reimburse defendant Robles for P20,000.00 attorney's fees and defendant Goodwill for P5,000.00 attorney's fees. Plaintiffs are liable for cost of suit. IT IS SO ORDERED. Done in the City of Manila this 23rd day of April, 1993. (s/t) MARVIE R. ABRAHAM SINGSON Assisting Judge S. C. Adm. Order No. 124-92 11 On May 14, 1993, petitioners filed their notice of appeal with the trial court 12, and on July 19, 1993, the court directed its branch clerk of court to forward all the records of the case to the Court of Appeals. 13 In the appeal, petitioners argued that the trial court completely disregarded their evidence and fully subscribed to the arguments of respondent Robles that the books in issue were purely the product of her researches and studies and that the copied portions were inspired by foreign authors and as such not subject to copyright. Petitioners also assailed the findings of the trial court that they were animated by bad faith in instituting the complaint. 14 On June 27, 1997, the Court of Appeals rendered judgment in favor of respondents Robles and Goodwill Trading Co., Inc. The relevant portions of the decision state: It must be noted, however, that similarity of the allegedly infringed work to the author's or proprietor's copyrighted work does not of itself establish copyright infringement, especially if the similarity results from the fact that both works deal with the same subject or have the same common source, as in this case. Appellee Robles has fully explained that the portion or material of the book claimed by appellants to have been copied or lifted from foreign books. She has duly proven that most of the topics or materials contained in her book, with particular reference to those matters claimed by appellants to have been plagiarized were

On November 28, 1988, respondent Robles filed her answer , and denied the allegations of plagiarism and copying that petitioners claimed. Respondent stressed that (1) the book DEP is the product of her independent researches, studies and experiences, and was not a copy of any existing valid copyrighted book; (2) DEP followed the scope and sequence or syllabus which are common to all English grammar writers as recommended by the Association of Philippine Colleges of Arts and Sciences (APCAS), so any similarity between the respondents book and that of the petitioners was due to the orientation of the authors to both works and standards and syllabus; and (3) the similarities may be due to the authors' exercise of the "right to fair use of copyrigthed materials, as guides." Respondent interposed a counterclaim for damages on the ground that bad faith and malice attended the filing of the complaint, because petitioner Habana was professionally jealous and the book DEP replaced CET as the official textbook of the graduate studies department of the Far Eastern University. 9

topics or matters appearing not only in appellants and her books but also in earlier books on College English, including foreign books, e.i. Edmund Burke's "Speech on Conciliation", Boerigs' "Competence in English" and Broughton's, "Edmund Burke's Collection." xxx xxx xxx Appellant's reliance on the last paragraph on Section II is misplaced. It must be emphasized that they failed to prove that their books were made sources by appellee. 15 The Court of Appeals was of the view that the award of attorneys' fees was not proper, since there was no bad faith on the part of petitioners Habana et al. in instituting the action against respondents. On July 12, 1997, petitioners filed a motion for reconsideration, 16 however, the Court of Appeals denied the same in a Resolution 17 dated November 25, 1997. Hence, this petition. In this appeal, petitioners submit that the appellate court erred in affirming the trial court's decision. Petitioners raised the following issues: (1) whether or not, despite the apparent textual, thematic and sequential similarity between DEP and CET, respondents committed no copyright infringement; (2) whether or not there was animus furandi on the part of respondent when they refused to withdraw the copies of CET from the market despite notice to withdraw the same; and (3) whether or not respondent Robles abused a writer's right to fair use, in violation of Section 11 of Presidential Decree No. 49. 18 We find the petition impressed with merit. The complaint for copyright infringement was filed at the time that Presidential Decree No. 49 was in force. At present, all laws dealing with the protection of intellectual property rights have been consolidated and as the law now stands, the protection of copyrights is governed by Republic Act No. 8293. Notwithstanding the change in the law, the same principles are reiterated in the new law under Section 177. It provides for the copy or economic rights of an owner of a copyright as follows: Sec. 177. Copy or Economic rights. Subject to the provisions of chapter VIII, copyright or economic rights shall consist of the exclusive right to carry out, authorize or prevent the following acts: 177.1 Reproduction of the work or substanlial portion of the work;

177.2 Dramatization, translation, adaptation, abridgement, arrangement or other transformation of the work; 177.3 The first public distribution of the original and each copy of the work by sale or other forms of transfer of ownership; 177.4 Rental of the original or a copy of an audiovisual or cinematographic work, a work embodied in a sound recording, a computer program, a compilation of data and other materials or a musical work in graphic form, irrespective of the ownership of the original or the copy which is the subject of the rental; (n) 177.5 Public display of the original or copy of the work; 177.6 Public performance of the work; and 177.7 Other communication to the public of the work 19 The law also provided for the limitations on copyright, thus: Sec. 184.1 Limitations on copyright. Notwithstanding the provisions of Chapter V, the following acts shall not constitute infringement of copyright: (a) the recitation or performance of a work, once it has been lawfully made accessible to the public, if done privately and free of charge or if made strictly for a charitable or religious institution or society; [Sec. 10(1), P.D. No. 49] (b) The making of quotations from a published work if they are compatible with fair use and only to the extent justified for the purpose, including quotations from newspaper articles and periodicals in the form of press summaries; Provided, that the source and the name of the author, if appearing on the work are mentioned; (Sec. 11 third par. P.D. 49) xxx xxx xxx (e) The inclusion of a work in a publication, broadcast, or other communication to the public, sound recording of film, if such inclusion is made by way of illustration for teaching purposes and is compatible with fair use: Provided, That the source and the name of

the author, if appearing in the work is mentioned; 20 In the above quoted provisions, "work" has reference to literary and artistic creations and this includes books and other literary, scholarly and scientific works. 21 A perusal of the records yields several pages of the book DEP that are similar if not identical with the text of CET. On page 404 of petitioners' Book 1 of College English for Today, the authors wrote: Items in dates and addresses: He died on Monday, April 15, 1975. Miss Reyes lives in 214 Taft Avenue, Manila 22 On page 73 of respondents Book 1 Developing English Today, they wrote: He died on Monday, April 25, 1975. Miss Reyes address is 214 Taft Avenue Manila 23 On Page 250 of CET, there is this example on parallelism or repetition of sentence structures, thus: The proposition is peace. Not peace through the medium of war; not peace to be hunted through the labyrinth of intricate and endless negotiations; not peace to arise out of universal discord, fomented from principle, in all parts of the empire; not peace to depend on the juridical determination of perplexing questions, or the precise marking of the boundary of a complex government. It is simple peace; sought in its natural course, and in its ordinary haunts. It is peace sought in the spirit of peace, and laid in principles purely pacific. Edmund Burke, "Speech on Criticism." 24 On page 100 of the book DEP 25 , also in the topic of parallel structure and repetition, the same example is found in toto. The only difference is that petitioners acknowledged the author Edmund Burke, and respondents did not. In several other pages 26 the treatment and manner of presentation of the topics of DEP are similar if not a rehash of that contained in CET. We believe that respondent Robles' act of lifting from the book of petitioners substantial portions of discussions and examples, and her failure to acknowledge the same in her book is an infringement of petitioners' copyrights.

When is there a substantial reproduction of a book? It does not necessarily require that the entire copyrighted work, or even a large portion of it, be copied. If so much is taken that the value of the original work is substantially diminished, there is an infringement of copyright and to an injurious extent, the work is appropriated. 27 In determining the question of infringement, the amount of matter copied from the copyrighted work is an important consideration. To constitute infringement, it is not necessary that the whole or even a large portion of the work shall have been copied. If so much is taken that the value of the original is sensibly diminished, or the labors of the original author are substantially and to an injurious extent appropriated by another, that is sufficient in point of law to constitute piracy. 28 The essence of intellectual piracy should be essayed in conceptual terms in order to underscore its gravity by an appropriate understanding thereof. Infringement of a copyright is a trespass on a private domain owned and occupied by the owner of the copyright, and, therefore, protected by law, and infringement of copyright, or piracy, which is a synonymous term in this connection, consists in the doing by any person, without the consent of the owner of the copyright, of anything the sole right to do which is conferred by statute on the owner of the copyright. 29 The respondents' claim that the copied portions of the book CET are also found in foreign books and other grammar books, and that the similarity between her style and that of petitioners can not be avoided since they come from the same background and orientation may be true. However, in this jurisdiction under Sec 184 of Republic Act 8293 it is provided that: Limitations on Copyright. Notwithstanding the provisions of Chapter V, the following shall not constitute infringement of copyright: xxx xxx xxx (c) The making of quotations from a published work if they are compatible with fair use and only to the extent justified for the purpose, including quotations from newspaper articles and periodicals in the form of press summaries: Provided, That the source and the name of the author, if appearing on the work, are mentioned. A copy of a piracy is an infringement of the original, and it is no defense that the pirate, in such cases, did not know whether or not he was infringing any copyright; he at least knew that what he was copying was not his, and he copied at his peril. 30 The next question to resolve is to what extent can copying be injurious to the author of the book being copied. Is it

enough that there are similarities in some sections of the books or large segments of the books are the same? In the case at bar, there is no question that petitioners presented several pages of the books CET and DEP that more or less had the same contents. It may be correct that the books being grammar books may contain materials similar as to some technical contents with other grammar books, such as the segment about the "Author Card". However, the numerous pages that the petitioners presented showing similarity in the style and the manner the books were presented and the identical examples can not pass as similarities merely because of technical consideration. The respondents claim that their similarity in style can be attributed to the fact that both of them were exposed to the APCAS syllabus and their respective academic experience, teaching approach and methodology are almost identical because they were of the same background. However, we believe that even if petitioners and respondent Robles were of the same background in terms of teaching experience and orientation, it is not an excuse for them to be identical even in examples contained in their books. The similarities in examples and material contents are so obviously present in this case. How can similar/identical examples not be considered as a mark of copying? We consider as an indicia of guilt or wrongdoing the act of respondent Robles of pulling out from Goodwill bookstores the book DEP upon learning of petitioners' complaint while pharisaically denying petitioners' demand. It was further noted that when the book DEP was re-issued as a revised version, all the pages cited by petitioners to contain portion of their book College English for Today were eliminated. In cases of infringement, copying alone is not what is prohibited. The copying must produce an "injurious effect". Here, the injury consists in that respondent Robles lifted from petitioners' book materials that were the result of the

latter's research work and compilation and misrepresented them as her own. She circulated the book DEP for commercial use did not acknowledged petitioners as her source. Hence, there is a clear case of appropriation of copyrighted work for her benefit that respondent Robles committed. Petitioners' work as authors is the product of their long and assiduous research and for another to represent it as her own is injury enough. In copyrighting books the purpose is to give protection to the intellectual product of an author. This is precisely what the law on copyright protected, under Section 184.1 (b). Quotations from a published work if they are compatible with fair use and only to the extent justified by the purpose, including quotations from newspaper articles and periodicals in the form of press summaries are allowed provided that the source and the name of the author, if appearing on the work, are mentioned. In the case at bar, the least that respondent Robles could have done was to acknowledge petitioners Habana et. al. as the source of the portions of DEP. The final product of an author's toil is her book. To allow another to copy the book without appropriate acknowledgment is injury enough. WHEREFORE, the petition is hereby GRANTED. The decision and resolution of the Court of Appeals in CA-G. R. CV No. 44053 are SET ASIDE. The case is ordered remanded to the trial court for further proceedings to receive evidence of the parties to ascertain the damages caused and sustained by petitioners and to render decision in accordance with the evidence submitted to it. SO ORDERED. Kapunan and Ynares-Santiago, JJ., concur. Davide, Jr., C.J., I dissent, please see dissenting opinion. Melo, J., no part, personal reason. .

G.R. No. 175769-70 January 19, 2009 ABS-CBN BROADCASTING CORPORATION, Petitioners, vs. PHILIPPINE MULTI-MEDIA SYSTEM, INC., CESAR G. REYES, FRANCIS CHUA (ANG BIAO), MANUEL F. ABELLADA, RAUL B. DE MESA, AND ALOYSIUS M. COLAYCO, Respondents. D EC ISIO N YNARES-SANTIAGO, J.: This petition for review on certiorari1 assails the July 12, 2006 Decision2 of the Court of Appeals in CA-G.R. SP Nos. 88092 and 90762, which affirmed the December 20, 2004 Decision of the Director-General of the Intellectual Property Office (IPO) in Appeal No. 10-2004-0002. Also assailed is the December 11, 2006 Resolution3 denying the motion for reconsideration. Petitioner ABS-CBN Broadcasting Corporation (ABS-CBN) is licensed under the laws of the Republic of the Philippines to engage in television and radio broadcasting.4 It broadcasts television programs by wireless means to Metro Manila and nearby provinces, and by satellite to provincial stations through Channel 2 on Very High Frequency (VHF) and Channel 23 on Ultra High Frequency (UHF). The programs aired over Channels 2 and 23 are either produced by ABSCBN or purchased from or licensed by other producers. ABS-CBN also owns regional television stations which pattern their programming in accordance with perceived demands of the region. Thus, television programs shown in Metro Manila and nearby provinces are not necessarily shown in other provinces. Respondent Philippine Multi-Media System, Inc. (PMSI) is the operator of Dream Broadcasting System. It delivers digital direct-to-home (DTH) television via satellite to its subscribers all over the Philippines. Herein individual respondents, Cesar G. Reyes, Francis Chua, Manuel F. Abellada, Raul B. De Mesa, and Aloysius M. Colayco, are members of PMSIs Board of Directors.

PMSI was granted a legislative franchise under Republic Act No. 8630 5 on May 7, 1998 and was given a Provisional Authority by the National Telecommunications Commission (NTC) on February 1, 2000 to install, operate and maintain a nationwide DTH satellite service. When it commenced operations, it offered as part of its program line-up ABSCBN Channels 2 and 23, NBN, Channel 4, ABC Channel 5, GMA Channel 7, RPN Channel 9, and IBC Channel 13, together with other paid premium program channels. However, on April 25, 2001, 6 ABS-CBN demanded for PMSI to cease and desist from rebroadcasting Channels 2 and 23. On April 27, 2001, 7 PMSI replied that the rebroadcasting was in accordance with the authority granted it by NTC and its obligation under NTC Memorandum Circular No. 4-08-88,8 Section 6.2 of which requires all cable television system operators operating in a community within Grade A or B contours to carry the television signals of the authorized television broadcast stations. 9 Thereafter, negotiations ensued between the parties in an effort to reach a settlement; however, the negotiations were terminated on April 4, 2002 by ABS-CBN allegedly due to PMSIs inability to ensure the prevention of illegal retransmission and further rebroadcast of its signals, as well as the adverse effect of the rebroadcasts on the business operations of its regional television stations.10 On May 13, 2002, ABS-CBN filed with the IPO a complaint for Violation of Laws Involving Property Rights, with Prayer for the Issuance of a Temporary Restraining Order and/or Writ of Preliminary Injunction, which was docketed as IPV No. 10-2002-0004. It alleged that PMSIs unauthorized rebroadcasting of Channels 2 and 23 infringed on its broadcasting rights and copyright. On July 2, 2002, the Bureau of Legal Affairs (BLA) of the IPO granted ABS-CBNs application for a temporary restraining order. On July 12, 2002, PMSI suspended its retransmission of Channels 2 and 23 and likewise filed a petition for certiorari with the Court of Appeals, which was docketed as CA-G.R. SP No. 71597. Subsequently, PMSI filed with the BLA a Manifestation reiterating that it is subject to the must-carry rule under Memorandum Circular No. 04-08-88. It also submitted a letter dated December 20, 2002 of then NTC Commissioner Armi Jane R. Borje to PMSI stating as follows: This refers to your letter dated December 16, 2002 requesting for regulatory guidance from this Commission in connection with the application and coverage of NTC Memorandum Circular No. 4-08-88, particularly Section 6 thereof, on mandatory carriage of television broadcast signals, to the direct-to-home (DTH) pay television services of Philippine Multi-Media System, Inc. (PMSI). Preliminarily, both DTH pay television and cable television services are broadcast services, the only difference being the medium of delivering such services (i.e. the former by satellite and the latter by cable). Both can carry broadcast signals to the remote areas, thus enriching the lives of the residents thereof through the dissemination of social, economic, educational information and cultural programs.

The DTH pay television services of PMSI is equipped to provide nationwide DTH satellite services. Concededly, PMSIs DTH pay television services covers very much wider areas in terms of carriage of broadcast signals, including areas not reachable by cable television services thereby providing a better medium of dissemination of information to the public. In view of the foregoing and the spirit and intent of NTC memorandum Circular No. 4-08-88, particularly section 6 thereof, on mandatory carriage of television broadcast signals, DTH pay television services should be deemed covered by such NTC Memorandum Circular. For your guidance. (Emphasis added)11 On August 26, 2003, PMSI filed another Manifestation with the BLA that it received a letter dated July 24, 2003 from the NTC enjoining strict and immediate compliance with the must-carry rule under Memorandum Circular No. 04-08-88, to wit: Dear Mr. Abellada: Last July 22, 2003, the National Telecommunications Commission (NTC) received a letter dated July 17, 2003 from President/COO Rene Q. Bello of the International Broadcasting Corporation (IBC-Channel 13) complaining that your company, Dream Broadcasting System, Inc., has cut-off, without any notice or explanation whatsoever, to air the programs of IBC-13, a free-to-air television, to the detriment of the public. We were told that, until now, this has been going on. Please be advised that as a direct broadcast satellite operator, operating a direct-to-home (DTH) broadcasting system, with a provisional authority (PA) from the NTC, your company, along with cable television operators, are mandated to strictly comply with the existing policy of NTC on mandatory carriage of television broadcast signals as provided under Memorandum Circular No. 04-08-88, also known as the Revised Rules and Regulations Governing Cable Television System in the Philippines. This mandatory coverage provision under Section 6.2 of said Memorandum Circular, requires all cable television system operators, operating in a community within the Grade A or B contours to must-carry the television signals of the authorized television broadcast stations, one of which is IBC-13. Said directive equally applies to your company as the circular was issued to give consumers and the public a wider access to more sources of news, information, entertainment and other programs/contents. This Commission, as the governing agency vested by laws with the jurisdiction, supervision and control over all public services, which includes direct broadcast satellite operators, and taking into consideration the paramount interest of the public in general, hereby directs you to immediately restore the signal of IBC-13 in your network programs, pursuant to existing circulars and regulations of the Commission.

For strict compliance. (Emphasis added)12 Meanwhile, on October 10, 2003, the NTC issued Memorandum Circular No. 10-10-2003, entitled Implementing Rules and Regulations Governing Community Antenna/Cable Television (CATV) and Direct Broadcast Satellite (DBS) Services to Promote Competition in the Sector. Article 6, Section 8 thereof states: As a general rule, the reception, distribution and/or transmission by any CATV/DBS operator of any television signals without any agreement with or authorization from program/content providers are prohibited. On whether Memorandum Circular No. 10-10-2003 amended Memorandum Circular No. 04-08-88, the NTC explained to PMSI in a letter dated November 3, 2003 that: To address your query on whether or not the provisions of MC 10-10-2003 would have the effect of amending the provisions of MC 4-08-88 on mandatory carriage of television signals, the answer is in the negative. xxxx The Commission maintains that, MC 4-08-88 remains valid, subsisting and enforceable. Please be advised, therefore, that as duly licensed direct-tohome satellite television service provider authorized by this Commission, your company continues to be bound by the guidelines provided for under MC 04-08-88, specifically your obligation under its mandatory carriage provisions, in addition to your obligations under MC 1010-2003. (Emphasis added) Please be guided accordingly. 13 On December 22, 2003, the BLA rendered a decision 14 finding that PMSI infringed the broadcasting rights and copyright of ABS-CBN and ordering it to permanently cease and desist from rebroadcasting Channels 2 and 23. On February 6, 2004, PMSI filed an appeal with the Office of the Director-General of the IPO which was docketed as Appeal No. 10-2004-0002. On December 23, 2004, it also filed with the Court of Appeals a Motion to Withdraw Petition; Alternatively, Memorandum of the Petition for Certiorari in CA-G.R. SP No. 71597, which was granted in a resolution dated February 17, 2005. On December 20, 2004, the Director-General of the IPO rendered a decision15 in favor of PMSI, the dispositive portion of which states: WHEREFORE, premises considered, the instant appeal is hereby GRANTED. Accordingly, Decision No. 2003-01 dated 22 December 2003 of the Director of Bureau of Legal Affairs is hereby REVERSED and SET ASIDE. Let a copy of this Decision be furnished the Director of the Bureau of Legal Affairs for appropriate action, and the records be returned to her for proper disposition. The Documentation, Information and Technology Transfer

Bureau is also given a copy for library and reference purposes. SO ORDERED.16 Thus, ABS-CBN filed a petition for review with prayer for issuance of a temporary restraining order and writ of preliminary injunction with the Court of Appeals, which was docketed as CA-G.R. SP No. 88092. On July 18, 2005, the Court of Appeals issued a temporary restraining order. Thereafter, ABS-CBN filed a petition for contempt against PMSI for continuing to rebroadcast Channels 2 and 23 despite the restraining order. The case was docketed as CA- G.R. SP No. 90762. On November 14, 2005, the Court of Appeals ordered the consolidation of CA-G.R. SP Nos. 88092 and 90762. In the assailed Decision dated July 12, 2006, the Court of Appeals sustained the findings of the Director-General of the IPO and dismissed both petitions filed by ABS-CBN.17 ABS-CBNs motion for reconsideration was denied, hence, this petition. ABS-CBN contends that PMSIs unauthorized rebroadcasting of Channels 2 and 23 is an infringement of its broadcasting rights and copyright under the Intellectual Property Code (IP Code);18that Memorandum Circular No. 04-08-88 excludes DTH satellite television operators; that the Court of Appeals interpretation of the must-carry rule violates Section 9 of Article III19 of the Constitution because it allows the taking of property for public use without payment of just compensation; that the Court of Appeals erred in dismissing the petition for contempt docketed as CA-G.R. SP No. 90762 without requiring respondents to file comment. Respondents, on the other hand, argue that PMSIs rebroadcasting of Channels 2 and 23 is sanctioned by Memorandum Circular No. 04-08-88; that the must-carry rule under the Memorandum Circular is a valid exercise of police power; and that the Court of Appeals correctly dismissed CA-G.R. SP No. 90762 since it found no need to exercise its power of contempt. After a careful review of the facts and records of this case, we affirm the findings of the Director-General of the IPO and the Court of Appeals. There is no merit in ABS-CBNs contention that PMSI violated its broadcasters rights under Section 211 of the IP Code which provides in part: Chapter BROADCASTING ORGANIZATIONS XIV

Sec. 211. Scope of Right. - Subject to the provisions of Section 212, broadcasting organizations shall enjoy the exclusive right to carry out, authorize or prevent any of the following acts: 211.1. The rebroadcasting of their broadcasts;

xxxx Neither is PMSI guilty of infringement of ABS-CBNs copyright under Section 177 of the IP Code which states that copyright or economic rights shall consist of the exclusive right to carry out, authorize or prevent the public performance of the work (Section 177.6), and other communication to the public of the work (Section 177.7). 20 Section 202.7 of the IP Code defines broadcasting as the transmission by wireless means for the public reception of sounds or of images or of representations thereof; such transmission by satellite is also broadcasting where the means for decrypting are provided to the public by the broadcasting organization or with its consent. On the other hand, rebroadcasting as defined in Article 3(g) of the International Convention for the Protection of Performers, Producers of Phonograms and Broadcasting Organizations, otherwise known as the 1961 Rome Convention, of which the Republic of the Philippines is a signatory, 21 is the simultaneous broadcasting by one broadcasting organization of the broadcast of another broadcasting organization. The Director-General of the IPO correctly found that PMSI is not engaged in rebroadcasting and thus cannot be considered to have infringed ABS-CBNs broadcasting rights and copyright, thus: That the Appellants [herein respondent PMSI] subscribers are able to view Appellees [herein petitioner ABS-CBN] programs (Channels 2 and 23) at the same time that the latter is broadcasting the same is undisputed. The question however is, would the Appellant in doing so be considered engaged in broadcasting. Section 202.7 of the IP Code states that broadcasting means the transmission by wireless means for the public reception of sounds or of images or of representations thereof; such transmission by satellite is also broadcasting where the means for decrypting are provided to the public by the broadcasting organization or with its consent. Section 202.7 of the IP Code, thus, provides two instances wherein there is broadcasting, to wit: 1. The transmission by wireless means for the public reception of sounds or of images or of representations thereof; and 2. The transmission by satellite for the public reception of sounds or of images or of representations thereof where the means for decrypting are provided to the public by the broadcasting organization or with its consent. It is under the second category that Appellants DTH satellite television service must be examined since it is satellite-based. The elements of such category are as follows: 1. There is transmission of sounds or images or of representations thereof;

2. The transmission is through satellite; 3. The transmission is for public reception; and 4. The means for decrypting are provided to the public by the broadcasting organization or with its consent. It is only the presence of all the above elements can a determination that the DTH is broadcasting and consequently, rebroadcasting Appellees signals in violation of Sections 211 and 177 of the IP Code, may be arrived at. Accordingly, this Office is of the view that the transmission contemplated under Section 202.7 of the IP Code presupposes that the origin of the signals is the broadcaster. Hence, a program that is broadcasted is attributed to the broadcaster. In the same manner, the rebroadcasted program is attributed to the rebroadcaster. In the case at hand, Appellant is not the origin nor does it claim to be the origin of the programs broadcasted by the Appellee. Appellant did not make and transmit on its own but merely carried the existing signals of the Appellee. When Appellants subscribers view Appellees programs in Channels 2 and 23, they know that the origin thereof was the Appellee. Aptly, it is imperative to discern the nature of broadcasting. When a broadcaster transmits, the signals are scattered or dispersed in the air. Anybody may pick-up these signals. There is no restriction as to its number, type or class of recipients. To receive the signals, one is not required to subscribe or to pay any fee. One only has to have a receiver, and in case of television signals, a television set, and to tune-in to the right channel/frequency. The definition of broadcasting, wherein it is required that the transmission is wireless, all the more supports this discussion. Apparently, the undiscriminating dispersal of signals in the air is possible only through wireless means. The use of wire in transmitting signals, such as cable television, limits the recipients to those who are connected. Unlike wireless transmissions, in wire-based transmissions, it is not enough that one wants to be connected and possesses the equipment. The service provider, such as cable television companies may choose its subscribers. The only limitation to such dispersal of signals in the air is the technical capacity of the transmitters and other equipment employed by the broadcaster. While the broadcaster may use a less powerful transmitter to limit its coverage, this is merely a business strategy or decision and not an inherent limitation when transmission is through cable. Accordingly, the nature of broadcasting is to scatter the signals in its widest area of coverage as possible. On this score, it may be said that making public means that accessibility is undiscriminating as long as it [is] within the range of the transmitter and equipment of the broadcaster. That the medium through which the Appellant carries the Appellees signal, that is via satellite, does not diminish the fact that it operates and functions as a cable television. It remains that the Appellants transmission of signals via its DTH satellite television service cannot be considered within the purview of broadcasting. x x x

xxxx This Office also finds no evidence on record showing that the Appellant has provided decrypting means to the public indiscriminately. Considering the nature of this case, which is punitive in fact, the burden of proving the existence of the elements constituting the acts punishable rests on the shoulder of the complainant. Accordingly, this Office finds that there is no rebroadcasting on the part of the Appellant of the Appellees programs on Channels 2 and 23, as defined under the Rome Convention. 22 Under the Rome Convention, rebroadcasting is the simultaneous broadcasting by one broadcasting organization of the broadcast of another broadcasting organization. The Working Paper23 prepared by the Secretariat of the Standing Committee on Copyright and Related Rights defines broadcasting organizations as entities that take the financial and editorial responsibility for the selection and arrangement of, and investment in, the transmitted content.24 Evidently, PMSI would not qualify as a broadcasting organization because it does not have the aforementioned responsibilities imposed upon broadcasting organizations, such as ABSCBN. ABS-CBN creates and transmits its own signals; PMSI merely carries such signals which the viewers receive in its unaltered form. PMSI does not produce, select, or determine the programs to be shown in Channels 2 and 23. Likewise, it does not pass itself off as the origin or author of such programs. Insofar as Channels 2 and 23 are concerned, PMSI merely retransmits the same in accordance with Memorandum Circular 04-08-88. With regard to its premium channels, it buys the channels from content providers and transmits on an as-is basis to its viewers. Clearly, PMSI does not perform the functions of a broadcasting organization; thus, it cannot be said that it is engaged in rebroadcasting Channels 2 and 23. The Director-General of the IPO and the Court of Appeals also correctly found that PMSIs services are similar to a cable television system because the services it renders fall under cable retransmission, as described in the Working Paper, to wit: (G) Cable Retransmission 47. When a radio or television program is being broadcast, it can be retransmitted to new audiences by means of cable or wire. In the early days of cable television, it was mainly used to improve signal reception, particularly in so-called shadow zones, or to distribute the signals in large buildings or building complexes. With improvements in technology, cable operators now often receive signals from satellites before retransmitting them in an unaltered form to their subscribers through cable. 48. In principle, cable retransmission can be either simultaneous with the broadcast over-the-air or delayed (deferred transmission) on the basis of a fixation or a reproduction of a fixation. Furthermore, they might be unaltered or altered, for example through replacement of commercials, etc. In general, however, the term

retransmission seems to be reserved for such transmissions which are both simultaneous and unaltered. 49. The Rome Convention does not grant rights against unauthorized cable retransmission. Without such a right, cable operators can retransmit both domestic and foreign over the air broadcasts simultaneously to their subscribers without permission from the broadcasting organizations or other rightholders and without obligation to pay remuneration.25 (Emphasis added) Thus, while the Rome Convention gives broadcasting organizations the right to authorize or prohibit the rebroadcasting of its broadcast, however, this protection does not extend to cable retransmission. The retransmission of ABS-CBNs signals by PMSI which functions essentially as a cable television does not therefore constitute rebroadcasting in violation of the formers intellectual property rights under the IP Code. It must be emphasized that the law on copyright is not absolute. The IP Code provides that: Sec. 184. Limitations on Copyright. 184.1. Notwithstanding the provisions of Chapter V, the following acts shall not constitute infringement of copyright: xxxx (h) The use made of a work by or under the direction or control of the Government, by the National Library or by educational, scientific or professional institutions where such use is in the public interest and is compatible with fair use; The carriage of ABS-CBNs signals by virtue of the mustcarry rule in Memorandum Circular No. 04-08-88 is under the direction and control of the government though the NTC which is vested with exclusive jurisdiction to supervise, regulate and control telecommunications and broadcast services/facilities in the Philippines.26 The imposition of the must-carry rule is within the NTCs power to promulgate rules and regulations, as public safety and interest may require, to encourage a larger and more effective use of communications, radio and television broadcasting facilities, and to maintain effective competition among private entities in these activities whenever the Commission finds it reasonably feasible.27 As correctly observed by the DirectorGeneral of the IPO: Accordingly, the Must-Carry Rule under NTC Circular No. 4-08-88 falls under the foregoing category of limitations on copyright. This Office agrees with the Appellant [herein respondent PMSI] that the Must-Carry Rule is in consonance with the principles and objectives underlying Executive Order No. 436, 28 to wit: The Filipino people must be given wider access to more sources of news, information, education, sports event and entertainment programs other than those provided for by mass media and afforded television programs to attain a well

informed, well-versed and culturally refined citizenry and enhance their socio-economic growth: WHEREAS, cable television (CATV) systems could support or supplement the services provided by television broadcast facilities, local and overseas, as the national information highway to the countryside. 29 The Court of Appeals likewise correctly observed that: [T]he very intent and spirit of the NTC Circular will prevent a situation whereby station owners and a few networks would have unfettered power to make time available only to the highest bidders, to communicate only their own views on public issues, people, and to permit on the air only those with whom they agreed contrary to the state policy that the (franchise) grantee like the petitioner, private respondent and other TV station owners, shall provide at all times sound and balanced programming and assist in the functions of public information and education. This is for the first time that we have a structure that works to accomplish explicit state policy goals.30 Indeed, intellectual property protection is merely a means towards the end of making society benefit from the creation of its men and women of talent and genius. This is the essence of intellectual property laws, and it explains why certain products of ingenuity that are concealed from the public are outside the pale of protection afforded by the law. It also explains why the author or the creator enjoys no more rights than are consistent with public welfare.31 Further, as correctly observed by the Court of Appeals, the must-carry rule as well as the legislative franchises granted to both ABS-CBN and PMSI are in consonance with state policies enshrined in the Constitution, specifically Sections 9, 32 17,33 and 2434 of Article II on the Declaration of Principles and State Policies.35 ABS-CBN was granted a legislative franchise under Republic Act No. 7966, Section 1 of which authorizes it to construct, operate and maintain, for commercial purposes and in the public interest, television and radio broadcasting in and throughout the Philippines x x x. Section 4 thereof mandates that it shall provide adequate public service time to enable the government, through the said broadcasting stations, to reach the population on important public issues; provide at all times sound and balanced programming; promote public participation such as in community programming; assist in the functions of public information and education x x x. PMSI was likewise granted a legislative franchise under Republic Act No. 8630, Section 4 of which similarly states that it shall provide adequate public service time to enable the government, through the said broadcasting stations, to reach the population on important public issues; provide at all times sound and balanced programming; promote public participation such as in community programming; assist in the functions of public information and education x x x. Section 5, paragraph 2 of the same law provides that the radio spectrum is a finite resource that is a part of the national patrimony and the use thereof is a privilege

conferred upon the grantee by the State and may be withdrawn anytime, after due process. In Telecom. & Broadcast Attys. of the Phils., Inc. v. COMELEC,36 the Court held that a franchise is a mere privilege which may be reasonably burdened with some form of public service. Thus: All broadcasting, whether by radio or by television stations, is licensed by the government. Airwave frequencies have to be allocated as there are more individuals who want to broadcast than there are frequencies to assign. A franchise is thus a privilege subject, among other things, to amendment by Congress in accordance with the constitutional provision that any such franchise or right granted . . . shall be subject to amendment, alteration or repeal by the Congress when the common good so requires. xxxx Indeed, provisions for COMELEC Time have been made by amendment of the franchises of radio and television broadcast stations and, until the present case was brought, such provisions had not been thought of as taking property without just compensation. Art. XII, 11 of the Constitution authorizes the amendment of franchises for the common good. What better measure can be conceived for the common good than one for free air time for the benefit not only of candidates but even more of the public, particularly the voters, so that they will be fully informed of the issues in an election? [I]t is the right of the viewers and listeners, not the right of the broadcasters, which is paramount. Nor indeed can there be any constitutional objection to the requirement that broadcast stations give free air time. Even in the United States, there are responsible scholars who believe that government controls on broadcast media can constitutionally be instituted to ensure diversity of views and attention to public affairs to further the system of free expression. For this purpose, broadcast stations may be required to give free air time to candidates in an election. Thus, Professor Cass R. Sunstein of the University of Chicago Law School, in urging reforms in regulations affecting the broadcast industry, writes: xxxx In truth, radio and television broadcasting companies, which are given franchises, do not own the airwaves and frequencies through which they transmit broadcast signals and images. They are merely given the temporary privilege of using them. Since a franchise is a mere privilege, the exercise of the privilege may reasonably be burdened with the performance by the grantee of some form of public service. x x x37 There is likewise no merit to ABS-CBNs claim that PMSIs carriage of its signals is for a commercial purpose; that its being the countrys top broadcasting company, the availability of its signals allegedly enhances PMSIs attractiveness to potential customers;38 or that the unauthorized carriage of its signals by PMSI has created competition between its Metro Manila and regional stations.

ABS-CBN presented no substantial evidence to prove that PMSI carried its signals for profit; or that such carriage adversely affected the business operations of its regional stations. Except for the testimonies of its witnesses,[39] no studies, statistical data or information have been submitted in evidence. Administrative charges cannot be based on mere speculation or conjecture. The complainant has the burden of proving by substantial evidence the allegations in the complaint. 40 Mere allegation is not evidence, and is not equivalent to proof. 41 Anyone in the country who owns a television set and antenna can receive ABS-CBNs signals for free. Other broadcasting organizations with free-to-air signals such as GMA-7, RPN-9, ABC-5, and IBC-13 can likewise be accessed for free. No payment is required to view the said channels42 because these broadcasting networks do not generate revenue from subscription from their viewers but from airtime revenue from contracts with commercial advertisers and producers, as well as from direct sales. In contrast, cable and DTH television earn revenues from viewer subscription. In the case of PMSI, it offers its customers premium paid channels from content providers like Star Movies, Star World, Jack TV, and AXN, among others, thus allowing its customers to go beyond the limits of Free TV and Cable TV.43 It does not advertise itself as a local channel carrier because these local channels can be viewed with or without DTH television. Relevantly, PMSIs carriage of Channels 2 and 23 is material in arriving at the ratings and audience share of ABS-CBN and its programs. These ratings help commercial advertisers and producers decide whether to buy airtime from the network. Thus, the must-carry rule is actually advantageous to the broadcasting networks because it provides them with increased viewership which attracts commercial advertisers and producers. On the other hand, the carriage of free-to-air signals imposes a burden to cable and DTH television providers such as PMSI. PMSI uses none of ABS-CBNs resources or equipment and carries the signals and shoulders the costs without any recourse of charging.44 Moreover, such carriage of signals takes up channel space which can otherwise be utilized for other premium paid channels. There is no merit to ABS-CBNs argument that PMSIs carriage of Channels 2 and 23 resulted in competition between its Metro Manila and regional stations. ABS-CBN is free to decide to pattern its regional programming in accordance with perceived demands of the region; however, it cannot impose this kind of programming on the regional viewers who are also entitled to the free-to-air channels. It must be emphasized that, as a national broadcasting organization, one of ABS-CBNs responsibilities is to scatter its signals to the widest area of coverage as possible. That it should limit its signal reach for the sole purpose of gaining profit for its regional stations undermines public interest and deprives the viewers of their right to access to information. Indeed, television is a business; however, the welfare of the people must not be sacrificed in the pursuit of profit. The

right of the viewers and listeners to the most diverse choice of programs available is paramount.45 The Director-General correctly observed, thus: The Must-Carry Rule favors both broadcasting organizations and the public. It prevents cable television companies from excluding broadcasting organization especially in those places not reached by signal. Also, the rule prevents cable television companies from depriving viewers in far-flung areas the enjoyment of programs available to city viewers. In fact, this Office finds the rule more burdensome on the part of the cable television companies. The latter carries the television signals and shoulders the costs without any recourse of charging. On the other hand, the signals that are carried by cable television companies are dispersed and scattered by the television stations and anybody with a television set is free to pick them up. With its enormous resources and vaunted technological capabilities, Appellees [herein petitioner ABS-CBN] broadcast signals can reach almost every corner of the archipelago. That in spite of such capacity, it chooses to maintain regional stations, is a business decision. That the Must-Carry Rule adversely affects the profitability of maintaining such regional stations since there will be competition between them and its Metro Manila station is speculative and an attempt to extrapolate the effects of the rule. As discussed above, Appellants DTH satellite television services is of limited subscription. There was not even a showing on part of the Appellee the number of Appellants subscribers in one region as compared to nonsubscribing television owners. In any event, if this Office is to engage in conjecture, such competition between the regional stations and the Metro Manila station will benefit the public as such competition will most likely result in the production of better television programs.46 All told, we find that the Court of Appeals correctly upheld the decision of the IPO Director-General that PMSI did not infringe on ABS-CBNs intellectual property rights under the IP Code. The findings of facts of administrative bodies charged with their specific field of expertise, are afforded great weight by the courts, and in the absence of substantial showing that such findings are made from an erroneous estimation of the evidence presented, they are conclusive, and in the interest of stability of the governmental structure, should not be disturbed.47 Moreover, the factual findings of the Court of Appeals are conclusive on the parties and are not reviewable by the Supreme Court. They carry even more weight when the Court of Appeals affirms the factual findings of a lower fact-finding body, 48 as in the instant case. There is likewise no merit to ABS-CBNs contention that the Memorandum Circular excludes from its coverage DTH television services such as those provided by PMSI. Section 6.2 of the Memorandum Circular requires all cable television system operators operating in a community within Grade A or B contours to carry the television signals of the authorized television broadcast stations.49 The rationale behind its issuance can be found in the whereas clauses which state:

Whereas, Cable Television Systems or Community Antenna Television (CATV) have shown their ability to offer additional programming and to carry much improved broadcast signals in the remote areas, thereby enriching the lives of the rest of the population through the dissemination of social, economic, educational information and cultural programs; Whereas, the national government supports the promotes the orderly growth of the Cable Television industry within the framework of a regulated fee enterprise, which is a hallmark of a democratic society; Whereas, public interest so requires that monopolies in commercial mass media shall be regulated or prohibited, hence, to achieve the same, the cable TV industry is made part of the broadcast media; Whereas, pursuant to Act 3846 as amended and Executive Order 205 granting the National Telecommunications Commission the authority to set down rules and regulations in order to protect the public and promote the general welfare, the National Telecommunications Commission hereby promulgates the following rules and regulations on Cable Television Systems; The policy of the Memorandum Circular is to carry improved signals in remote areas for the good of the general public and to promote dissemination of information. In line with this policy, it is clear that DTH television should be deemed covered by the Memorandum Circular. Notwithstanding the different technologies employed, both DTH and cable television have the ability to carry improved signals and promote dissemination of information because they operate and function in the same way. In its December 20, 2002 letter, the NTC explained that both DTH and cable television services are of a similar nature, the only difference being the medium of delivering such services. They can carry broadcast signals to the remote areas and possess the capability to enrich the lives of the residents thereof through the dissemination of social, economic, educational information and cultural programs. Consequently, while the Memorandum Circular refers to cable television, it should be understood as to include DTH television which provides essentially the same services. In Eastern Telecommunications Philippines, Inc. International Communication Corporation, 51 we held: v.
50

questions is that the resolution of the constitutional question must be necessary in deciding the case.53 In Spouses Mirasol v. Court of Appeals,54 we held: As a rule, the courts will not resolve the constitutionality of a law, if the controversy can be settled on other grounds. The policy of the courts is to avoid ruling on constitutional questions and to presume that the acts of the political departments are valid, absent a clear and unmistakable showing to the contrary. To doubt is to sustain. This presumption is based on the doctrine of separation of powers. This means that the measure had first been carefully studied by the legislative and executive departments and found to be in accord with the Constitution before it was finally enacted and approved.55 The instant case was instituted for violation of the IP Code and infringement of ABS-CBNs broadcasting rights and copyright, which can be resolved without going into the constitutionality of Memorandum Circular No. 04-08-88. As held by the Court of Appeals, the only relevance of the circular in this case is whether or not compliance therewith should be considered manifestation of lack of intent to commit infringement, and if it is, whether such lack of intent is a valid defense against the complaint of petitioner. 56 The records show that petitioner assailed the constitutionality of Memorandum Circular No. 04-08-88 by way of a collateral attack before the Court of Appeals. In Philippine National Bank v. Palma,57 we ruled that for reasons of public policy, the constitutionality of a law cannot be collaterally attacked. A law is deemed valid unless declared null and void by a competent court; more so when the issue has not been duly pleaded in the trial court. 58 As a general rule, the question of constitutionality must be raised at the earliest opportunity so that if not raised in the pleadings, ordinarily it may not be raised in the trial, and if not raised in the trial court, it will not be considered on appeal.59 In Philippine Veterans Bank v. Court of Appeals,60 we held: We decline to rule on the issue of constitutionality as all the requisites for the exercise of judicial review are not present herein. Specifically, the question of constitutionality will not be passed upon by the Court unless, at the first opportunity, it is properly raised and presented in an appropriate case, adequately argued, and is necessary to a determination of the case, particularly where the issue of constitutionality is the very lis mota presented.x x x61 Finally, we find that the dismissal of the petition for contempt filed by ABS-CBN is in order. Indirect contempt may either be initiated (1) motu proprio by the court by issuing an order or any other formal charge requiring the respondent to show cause why he should not be punished for contempt or (2) by the filing of a verified petition, complying with the requirements for filing initiatory pleadings.62 ABS-CBN filed a verified petition before the Court of Appeals, which was docketed CA G.R. SP No. 90762, for PMSIs alleged disobedience to the Resolution and Temporary Restraining Order, both dated July 18, 2005,

The NTC, being the government agency entrusted with the regulation of activities coming under its special and technical forte, and possessing the necessary rule-making power to implement its objectives, is in the best position to interpret its own rules, regulations and guidelines. The Court has consistently yielded and accorded great respect to the interpretation by administrative agencies of their own rules unless there is an error of law, abuse of power, lack of jurisdiction or grave abuse of discretion clearly conflicting with the letter and spirit of the law.52 With regard to the issue of the constitutionality of the mustcarry rule, the Court finds that its resolution is not necessary in the disposition of the instant case. One of the essential requisites for a successful judicial inquiry into constitutional

issued in CA-G.R. SP No. 88092. However, after the cases were consolidated, the Court of Appeals did not require PMSI to comment on the petition for contempt. It ruled on the merits of CA-G.R. SP No. 88092 and ordered the dismissal of both petitions. ABS-CBN argues that the Court of Appeals erred in dismissing the petition for contempt without having ordered respondents to comment on the same. Consequently, it would have us reinstate CA-G.R. No. 90762 and order respondents to show cause why they should not be held in contempt. It bears stressing that the proceedings for punishment of indirect contempt are criminal in nature. The modes of procedure and rules of evidence adopted in contempt proceedings are similar in nature to those used in criminal prosecutions. 63 While it may be argued that the Court of Appeals should have ordered respondents to comment, the issue has been rendered moot in light of our ruling on the merits. To order respondents to comment and have the Court of Appeals conduct a hearing on the contempt charge when the main case has already been disposed of in favor of PMSI would be circuitous. Where the issues have become moot, there is no justiciable controversy, thereby rendering the resolution of the same of no practical use or value. 64 WHEREFORE, the petition is DENIED. The July 12, 2006 Decision of the Court of Appeals in CA-G.R. SP Nos. 88092 and 90762, sustaining the findings of the DirectorGeneral of the Intellectual Property Office and dismissing the petitions filed by ABS-CBN Broadcasting Corporation, and the December 11, 2006 Resolution denying the motion for reconsideration, are AFFIRMED. SO ORDERED.

ACONSUELO YNARES-SANTIAGO Associate Justice WE CONCUR: MA. ALICIA AUSTRIA-MARTINEZ Associate Justice MINITA V. CHICONAZARIO Associate Justice ANTONIO EDUARDO B. NACHURA Associate Justice

TERESITA J. LEONARDO-DE CASTRO Associate Justice ATTESTATION I attest that the conclusions in the above decision were reached in consultation before the case was assigned to the writer of the opinion of the Courts Division. CONSUELO YNARES-SANTIAGO Associate Justice Chairperson, Third Division CERTIFICATION Pursuant to Section 13, Article VIII of the Constitution and the Division Chairpersons Attestation, it is hereby certified that the conclusions in the above Decision were reached in consultation before the case was assigned to the writer of the opinion of the Courts Division.

REYNATO S. PUNO Chief Justice G.R. No. 140946 September 13, 2004 MICROSOFT CORPORATION and LOTUS DEVELOPMENT CORPORATION, petitioners, vs. MAXICORP, INC., respondent. On 25 July 1996, National Bureau of Investigation ("NBI") Agent Dominador Samiano, Jr. ("NBI Agent Samiano") filed several applications for search warrants in the RTC against Maxicorp for alleged violation of Section 29 of PD 49 and Article 189 of the RPC. After conducting a preliminary examination of the applicant and his witnesses, Judge William M. Bayhon issued Search Warrants Nos. 96451, 96-452, 96-453 and 96-454, all dated 25 July 1996, against Maxicorp. Armed with the search warrants, NBI agents conducted on 25 July 1996 a search of Maxicorps premises and seized property fitting the description stated in the search warrants. On 2 September 1996, Maxicorp filed a motion to quash the search warrants alleging that there was no probable cause for their issuance and that the warrants are in the form of "general warrants." The RTC denied Maxicorps motion on 22 January 1997. The RTC also denied Maxicorps motion for reconsideration.

D EC ISIO N CARPIO, J.: The Case This petition for review on certiorari1 seeks to reverse the Court of Appeals Decision2 dated 23 December 1998 and its Resolution dated 29 November 1999 in CA-G.R. SP No. 44777. The Court of Appeals reversed the Order3 of the Regional Trial Court, Branch 23, Manila ("RTC"), denying respondent Maxicorp, Inc.s ("Maxicorp") motion to quash the search warrant that the RTC issued against Maxicorp. Petitioners are the private complainants against Maxicorp for copyright infringement under Section 29 of Presidential Decree No. 49 ("Section 29 of PD 49") 4 and for unfair competition under Article 189 of the Revised Penal Code ("RPC").5 Antecedent Facts

The RTC found probable cause to issue the search warrants after examining NBI Agent Samiano, John Benedict Sacriz ("Sacriz"), and computer technician Felixberto Pante ("Pante"). The three testified on what they discovered during their respective visits to Maxicorp. NBI Agent Samiano also presented certifications from petitioners that they have not authorized Maxicorp to perform the witnessed activities using petitioners products. On 24 July 1997, Maxicorp filed a petition for certiorari with the Court of Appeals seeking to set aside the RTCs order. On 23 December 1998, the Court of Appeals reversed the RTCs order denying Maxicorps motion to quash the search warrants. Petitioners moved for reconsideration. The Court of Appeals denied petitioners motion on 29 November 1999. The Court of Appeals held that NBI Agent Samiano failed to present during the preliminary examination conclusive evidence that Maxicorp produced or sold the counterfeit products. The Court of Appeals pointed out that the sales receipt NBI Agent Samiano presented as evidence that he bought the products from Maxicorp was in the name of a certain "Joel Diaz." Hence, this petition. The Issues Petitioners seek a reversal and raise the following issues for resolution: 1. WHETHER THE QUESTIONS OF LAW; PETITION RAISES

findings of the appellate court conflict with the findings of the trial court.8 The distinction between questions of law and questions of fact is settled. A question of law exists when the doubt or difference centers on what the law is on a certain state of facts. A question of fact exists if the doubt centers on the truth or falsity of the alleged facts. Though this delineation seems simple, determining the true nature and extent of the distinction is sometimes problematic. For example, it is incorrect to presume that all cases where the facts are not in dispute automatically involve purely questions of law. There is a question of law if the issue raised is capable of being resolved without need of reviewing the probative value of the evidence.9 The resolution of the issue must rest solely on what the law provides on the given set of circumstances. Once it is clear that the issue invites a review of the evidence presented, the question posed is one of fact.10 If the query requires a re-evaluation of the credibility of witnesses, or the existence or relevance of surrounding circumstances and their relation to each other, the issue in that query is factual.11 Our ruling in Paterno v. Paterno12 is illustrative on this point: Such questions as whether certain items of evidence should be accorded probative value or weight, or rejected as feeble or spurious, or whether or not the proofs on one side or the other are clear and convincing and adequate to establish a proposition in issue, are without doubt questions of fact. Whether or not the body of proofs presented by a party, weighed and analyzed in relation to contrary evidence submitted by adverse party, may be said to be strong, clear and convincing; whether or not certain documents presented by one side should be accorded full faith and credit in the face of protests as to their spurious character by the other side; whether or not inconsistencies in the body of proofs of a party are of such gravity as to justify refusing to give said proofs weight all these are issues of fact. It is true that Maxicorp did not contest the facts alleged by petitioners. But this situation does not automatically transform all issues raised in the petition into questions of law. The issues must meet the tests outlined in Paterno. Of the three main issues raised in this petition the legal personality of the petitioners, the nature of the warrants issued and the presence of probable cause only the first two qualify as questions of law. The pivotal issue of whether there was probable cause to issue the search warrants is a question of fact. At first glance, this issue appears to involve a question of law since it does not concern itself with the truth or falsity of certain facts. Still, the resolution of this issue would require this Court to inquire into the probative value of the evidence presented before the RTC. For a question to be one of law, it must not involve an examination of the probative value of the evidence presented by the litigants or any of them.13

2. WHETHER PETITIONERS HAVE LEGAL PERSONALITY TO FILE THE PETITION; 3. WHETHER THERE WAS PROBABLE CAUSE TO ISSUE THE SEARCH WARRANTS; 4. WHETHER THE SEARCH WARRANTS ARE "GENERAL WARRANTS." The Ruling of the Court The petition has merit. On Whether the Petition Raises Questions of Law Maxicorp assails this petition as defective since it failed to raise questions of law. Maxicorp insists that the arguments petitioners presented are questions of fact, which this Court should not consider in a Rule 45 petition for review. Petitioners counter that all the issues they presented in this petition involve questions of law. Petitioners point out that the facts are not in dispute. A petition for review under Rule 45 of the Rules of Court should cover questions of law. 6 Questions of fact are not reviewable. As a rule, the findings of fact of the Court of Appeals are final and conclusive and this Court will not review them on appeal, 7 subject to exceptions as when the

Yet, this is precisely what the petitioners ask us to do by raising arguments requiring an examination of the TSNs and the documentary evidence presented during the search warrant proceedings. In short, petitioners would have us substitute our own judgment to that of the RTC and the Court of Appeals by conducting our own evaluation of the evidence. This is exactly the situation which Section 1, Rule 45 of the Rules of Court prohibits by requiring the petition to raise only questions of law. This Court is not a trier of facts. It is not the function of this court to analyze or weigh evidence. 14 When we give due course to such situations, it is solely by way of exception. Such exceptions apply only in the presence of extremely meritorious circumstances.15 Indeed, this case falls under one of the exceptions because the findings of the Court of Appeals conflict with the findings of the RTC. 16 Since petitioners properly raised the conflicting findings of the lower courts, it is proper for this Court to resolve such contradiction. On Whether Petitioners have the Legal Personality to File this Petition Maxicorp argues that petitioners have no legal personality to file this petition since the proper party to do so in a criminal case is the Office of the Solicitor General as representative of the People of the Philippines. Maxicorp states the general rule but the exception governs this case. 17 We ruled in Columbia Pictures Entertainment, Inc. v. Court of Appeals18 that the petitioner-complainant in a petition for review under Rule 45 could argue its case before this Court in lieu of the Solicitor General if there is grave error committed by the lower court or lack of due process. This avoids a situation where a complainant who actively participated in the prosecution of a case would suddenly find itself powerless to pursue a remedy due to circumstances beyond its control. The circumstances in Columbia Pictures Entertainment are sufficiently similar to the present case to warrant the application of this doctrine. On Whether there was Probable Cause to Issue the Search Warrants Petitioners argue that the Court of Appeals erred in reversing the RTC based on the fact that the sales receipt was not in the name of NBI Agent Samiano. Petitioners point out that the Court of Appeals disregarded the overwhelming evidence that the RTC considered in determining the existence of probable cause. Maxicorp counters that the Court of Appeals did not err in reversing the RTC. Maxicorp maintains that the entire preliminary examination that the RTC conducted was defective. The Court of Appeals based its reversal on two factual findings of the RTC. First, the fact that the sales receipt presented by NBI Agent Samiano as proof that he bought counterfeit goods from Maxicorp was in the name of a certain "Joel Diaz." Second, the fact that petitioners other witness, John Benedict Sacriz, admitted that he did not buy counterfeit goods from Maxicorp. We rule that the Court of Appeals erred in reversing the RTCs findings.

Probable cause means "such reasons, supported by facts and circumstances as will warrant a cautious man in the belief that his action and the means taken in prosecuting it are legally just and proper."19 Thus, probable cause for a search warrant requires such facts and circumstances that would lead a reasonably prudent man to believe that an offense has been committed and the objects sought in connection with that offense are in the place to be searched.20 The judge determining probable cause must do so only after personally examining under oath the complainant and his witnesses. The oath required must refer to "the truth of the facts within the personal knowledge of the petitioner or his witnesses, because the purpose thereof is to convince the committing magistrate, not the individual making the affidavit and seeking the issuance of the warrant, of the existence of probable cause."21 The applicant must have personal knowledge of the circumstances. "Reliable information" is insufficient.22 Mere affidavits are not enough, and the judge must depose in writing the complainant and his witnesses.23 The Court of Appeals reversal of the findings of the RTC centers on the fact that the two witnesses for petitioners during the preliminary examination failed to prove conclusively that they bought counterfeit software from Maxicorp. The Court of Appeals ruled that this amounted to a failure to prove the existence of a connection between the offense charged and the place searched. The offense charged against Maxicorp is copyright infringement under Section 29 of PD 49 and unfair competition under Article 189 of the RPC. To support these charges, petitioners presented the testimonies of NBI Agent Samiano, computer technician Pante, and Sacriz, a civilian. The offenses that petitioners charged Maxicorp contemplate several overt acts. The sale of counterfeit products is but one of these acts. Both NBI Agent Samiano and Sacriz related to the RTC how they personally saw Maxicorp commit acts of infringement and unfair competition. During the preliminary examination, the RTC subjected the testimonies of the witnesses to the requisite examination. NBI Agent Samiano testified that he saw Maxicorp display and offer for sale counterfeit software in its premises. He also saw how the counterfeit software were produced and packaged within Maxicorps premises. NBI Agent Samiano categorically stated that he was certain the products were counterfeit because Maxicorp sold them to its customers without giving the accompanying ownership manuals, license agreements and certificates of authenticity. Sacriz testified that during his visits to Maxicorp, he witnessed several instances when Maxicorp installed petitioners software into computers it had assembled. Sacriz also testified that he saw the sale of petitioners software within Maxicorps premises. Petitioners never authorized Maxicorp to install or sell their software. The testimonies of these two witnesses, coupled with the object and documentary evidence they presented, are sufficient to establish the existence of probable cause. From what they have witnessed, there is reason to believe that Maxicorp engaged in copyright infringement and unfair competition to the prejudice of petitioners. Both NBI Agent

Samiano and Sacriz were clear and insistent that the counterfeit software were not only displayed and sold within Maxicorps premises, they were also produced, packaged and in some cases, installed there. The determination of probable cause does not call for the application of rules and standards of proof that a judgment of conviction requires after trial on the merits. As implied by the words themselves, "probable cause" is concerned with probability, not absolute or even moral certainty. The prosecution need not present at this stage proof beyond reasonable doubt. The standards of judgment are those of a reasonably prudent man, 24 not the exacting calibrations of a judge after a full-blown trial. No law or rule states that probable cause requires a specific kind of evidence. No formula or fixed rule for its determination exists. 25 Probable cause is determined in the light of conditions obtaining in a given situation.26 Thus, it was improper for the Court of Appeals to reverse the RTCs findings simply because the sales receipt evidencing NBI Agent Samianos purchase of counterfeit goods is not in his name. For purposes of determining probable cause, the sales receipt is not the only proof that the sale of petitioners software occurred. During the search warrant application proceedings, NBI Agent Samiano presented to the judge the computer unit that he purchased from Maxicorp, in which computer unit Maxicorp had pre-installed petitioners software. 27 Sacriz, who was present when NBI Agent Samiano purchased the computer unit, affirmed that NBI Agent Samiano purchased the computer unit.28 Pante, the computer technician, demonstrated to the judge the presence of petitioners software on the same computer unit.29 There was a comparison between petitioners genuine software and Maxicorps software pre-installed in the computer unit that NBI Agent Sambiano purchased. 30 Even if we disregard the sales receipt issued in the name of "Joel Diaz," which petitioners explained was the alias NBI Agent Samiano used in the operation, there still remains more than sufficient evidence to establish probable cause for the issuance of the search warrants. This also applies to the Court of Appeals ruling on Sacrizs testimony. The fact that Sacriz did not actually purchase counterfeit software from Maxicorp does not eliminate the existence of probable cause. Copyright infringement and unfair competition are not limited to the act of selling counterfeit goods. They cover a whole range of acts, from copying, assembling, packaging to marketing, including the mere offering for sale of the counterfeit goods. The clear and firm testimonies of petitioners witnesses on such other acts stand untarnished. The Constitution and the Rules of Court only require that the judge examine personally and thoroughly the applicant for the warrant and his witnesses to determine probable cause. The RTC complied adequately with the requirement of the Constitution and the Rules of Court. Probable cause is dependent largely on the opinion and findings of the judge who conducted the examination and who had the opportunity to question the applicant and his witnesses. 31 For this reason, the findings of the judge deserve great weight. The reviewing court should overturn

such findings only upon proof that the judge disregarded the facts before him or ignored the clear dictates of reason.32 Nothing in the records of the preliminary examination proceedings reveal any impropriety on the part of the judge in this case. As one can readily see, here the judge examined thoroughly the applicant and his witnesses. To demand a higher degree of proof is unnecessary and untimely. The prosecution would be placed in a compromising situation if it were required to present all its evidence at such preliminary stage. Proof beyond reasonable doubt is best left for trial. On Whether the Search Warrants are in the Nature of General Warrants A search warrant must state particularly the place to be searched and the objects to be seized. The evident purpose for this requirement is to limit the articles to be seized only to those particularly described in the search warrant. This is a protection against potential abuse. It is necessary to leave the officers of the law with no discretion regarding what articles they shall seize, to the end that no unreasonable searches and seizures be committed.33 In addition, under Section 4, Rule 126 of the Rules of Criminal Procedure, a search warrant shall issue "in connection with one specific offense." The articles described must bear a direct relation to the offense for which the warrant is issued.34 Thus, this rule requires that the warrant must state that the articles subject of the search and seizure are used or intended for use in the commission of a specific offense. Maxicorp argues that the warrants issued against it are too broad in scope and lack the specificity required with respect to the objects to be seized. After examining the wording of the warrants issued, the Court of Appeals ruled in favor of Maxicorp and reversed the RTCs Order thus: Under the foregoing language, almost any item in the petitioners store can be seized on the ground that it is "used or intended to be used" in the illegal or unauthorized copying or reproduction of the private respondents software and their manuals.35 The Court of Appeals based its reversal on its perceived infirmity of paragraph (e) of the search warrants the RTC issued. The appellate court found that similarly worded warrants, all of which noticeably employ the phrase "used or intended to be used," were previously held void by this Court.36 The disputed text of the search warrants in this case states: a) Complete or partially complete reproductions or copies of Microsoft software bearing the Microsoft copyrights and/or trademarks owned by MICROSOFT CORPORATION contained in CDROMs, diskettes and hard disks; b) Complete or partially complete reproductions or copies of Microsoft instruction manuals and/or literature bearing the Microsoft copyrights and/or trademarks owned by MICROSOFT CORPORATION;

c) Sundry items such as labels, boxes, prints, packages, wrappers, receptacles, advertisements and other paraphernalia bearing the copyrights and/or trademarks owned by MICROSOFT CORPORATION; d) Sales invoices, delivery receipts, official receipts, ledgers, journals, purchase orders and all other books of accounts and documents used in the recording of the reproduction and/or assembly, distribution and sales, and other transactions in connection with fake or counterfeit products bearing the Microsoft copyrights and/or trademarks owned by MICROSOFT CORPORATION; e) Computer hardware, including central processing units including hard disks, CD-ROM drives, keyboards, monitor screens and diskettes, photocopying machines and other equipment or paraphernalia used or intended to be used in the illegal and unauthorized copying or reproduction of Microsoft software and their manuals, or which contain, display or otherwise exhibit, without the authority of MICROSOFT CORPORATION, any and all Microsoft trademarks and copyrights; and f) Documents relating to any passwords or protocols in order to access all computer hard drives, data bases and other information storage devices containing unauthorized Microsoft software. 37 (Emphasis supplied) It is only required that a search warrant be specific as far as the circumstances will ordinarily allow.38 The description of the property to be seized need not be technically accurate or precise. The nature of the description should vary according to whether the identity of the property or its character is a matter of concern. 39 Measured against this standard we find that paragraph (e) is not a general warrant. The articles to be seized were not only sufficiently identified physically, they were also specifically identified by stating their relation to the offense charged. Paragraph (e) specifically refers to those articles used or intended for use in the illegal and unauthorized copying of petitioners software. This language meets the test of specificity.40 The cases cited by the Court of Appeals are inapplicable. In those cases, the Court found the warrants too broad because of particular circumstances, not because of the mere use of the phrase "used or intended to be used." In Columbia Pictures, Inc. v. Flores, the warrants ordering the seizure of "television sets, video cassette recorders, rewinders and tape cleaners x x x" were found too broad since the defendant there was a licensed distributor of video tapes.41 The mere presence of counterfeit video tapes in the defendants store does not mean that the machines were used to produce the counterfeit tapes. The situation in this case is different.

Maxicorp is not a licensed distributor of petitioners. In Bache & Co. (Phil.), Inc., et al. v. Judge Ruiz, et al., the Court voided the warrants because they authorized the seizure of records pertaining to "all business transactions" of the defendant.42 And in 20th Century Fox Film Corp. v. Court of Appeals, the Court quashed the warrant because it merely gave a list of articles to be seized, aggravated by the fact that such appliances are "generally connected with the legitimate business of renting out betamax tapes."43 However, we find paragraph (c) of the search warrants lacking in particularity. Paragraph (c) states: c) Sundry items such as labels, boxes, prints, packages, wrappers, receptacles, advertisements and other paraphernalia bearing the copyrights and/or trademarks owned by MICROSOFT CORPORATION; The scope of this description is all-embracing since it covers property used for personal or other purposes not related to copyright infringement or unfair competition. Moreover, the description covers property that Maxicorp may have bought legitimately from Microsoft or its licensed distributors. Paragraph (c) simply calls for the seizure of all items bearing the Microsoft logo, whether legitimately possessed or not. Neither does it limit the seizure to products used in copyright infringement or unfair competition. Still, no provision of law exists which requires that a warrant, partially defective in specifying some items sought to be seized yet particular with respect to the other items, should be nullified as a whole. A partially defective warrant remains valid as to the items specifically described in the warrant.44 A search warrant is severable, the items not sufficiently described may be cut off without destroying the whole warrant.45 The exclusionary rule found in Section 3(2) of Article III of the Constitution renders inadmissible in any proceeding all evidence obtained through unreasonable searches and seizure. Thus, all items seized under paragraph (c) of the search warrants, not falling under paragraphs a, b, d, e or f, should be returned to Maxicorp. WHEREFORE, we PARTIALLY GRANT the instant petition. The Decision of the Court of Appeals dated 23 December 1998 and its Resolution dated 29 November 1999 in CA-G.R. SP No. 44777 are REVERSED and SET ASIDE except with respect to articles seized under paragraph (c) of Search Warrants Nos. 96-451, 96-452, 96453 and 96-454. All articles seized under paragraph (c) of the search warrants, not falling under paragraphs a, b, d, e or f, are ordered returned to Maxicorp, Inc. immediately. SO ORDERED. Davide, Jr., Quisumbing, Ynares-Santiago, and Azcuna, JJ., concur.

G.R. No. 113388 September 5, 1997 ANGELITA MANZANO, petitioner, vs. COURT OF APPEALS, and MELECIA MADOLARIA, as Assignor to NEW UNITED FOUNDRY MANUFACTURING CORPORATION, respondents. BELLOSILLO, J.:

The primary purpose of the patent system is not the reward of the individual but the advancement of the arts and sciences. The function of a patent is to add to the sum of useful knowledge and one of the purposes of the patent system is to encourage dissemination of information concerning discoveries and inventions. This is a matter which is properly within the competence of the Patent Office the official action of which has the presumption of correctness and may not be interfered with in the absence of new evidence carrying thorough conviction that the Office has erred. Since the Patent Office is an expert body preeminently qualified to determine questions of patentability, its findings must be accepted if they are consistent with the evidence, with doubts as to patentability resolved in favor of the Patent Office. 1 Petitioner Angelita Manzano filed with the Philippine Patent Office on 19 February 1982 an action for the cancellation of Letters Patent No. UM-4609 for a gas burner registered in the name of respondent Melecia Madolaria who subsequently assigned the letters patent to New United Foundry and Manufacturing Corporation (UNITED FOUNDRY, for brevity). Petitioner alleged that (a) the utility model covered by the letters patent, in this case, an LPG gas burner, was not inventive, new or useful; (b) the specification of the letters patent did not comply with the requirements of Sec. 14, RA No. 165, as amended; (c) respondent Melecia Madolaria was not the original, true and actual inventor nor did she derive her rights from the original, true and actual inventor of the utility model covered by the letters patent; and, (d) the letters patent was secured by means of fraud or misrepresentation. In support of her petition for cancellation petitioner further alleged that (a) the utility model covered by the letters patent of respondent had been known or used by others in the Philippines for more than one (1) year before she filed her application for letters patent on 9 December 1979; (b) the products which were produced in accordance with the utility model covered by the letters patent had been in public use or on sale in the Philippines for more than one (1) year before the application for patent therefor was filed. Petitioner presented the following documents which she correspondingly marked as exhibits: (a) affidavit of petitioner alleging the existence of prior art, marked Exh. "A;" (b) a brochure distributed by Manila Gas Corporation disclosing a pictorial representation of Ransome Burner made by Ransome Torch and Burner Company, USA, marked Exh. "D;" and, (c) a brochure distributed by Esso Gasul or Esso Standard Eastern, Inc., of the Philippines showing a picture of another similar burner with top elevation view and another perspective view of the same burner, marked Exh. "E." Testifying for herself petitioner narrated that her husband Ong Bun Tua worked as a helper in the UNITED FOUNDRY where respondent Melecia Madolaria used to be affiliated with from 1965 to 1970; that Ong helped in the casting of an LPG burner which was the same utility model of a burner for which Letters Patent No. UM-4609 was issued, and that after her husband's separation from the shop she organized Besco Metal Manufacturing (BESCO METAL, for brevity) for the casting of LPG burners one of which had the configuration, form and component parts similar to those being manufactured by UNITED FOUNDRY. Petitioner presented in evidence an alleged

model of an LPG burner marked Exh. "K" and covered by the Letters Patent of respondent, and testified that it was given to her in January 1982 by one of her customers who allegedly acquired it from UNITED FOUNDRY. Petitioner also presented in evidence her own model of an LPG burner called "Ransome" burner marked Exh. "L," which was allegedly manufactured in 1974 or 1975 and sold by her in the course of her business operation in the name of BESCO METAL. Petitioner claimed that this "Ransome" burner (Exh. "L") had the same configuration and mechanism as that of the model which was patented in favor of private respondent Melecia Madolaria. Also presented by petitioner was a burner cup of an imported "Ransome" burner marked Exh "M" which was allegedly existing even before the patent application of private respondent. Petitioner presented two (2) other witnesses, namely, her husband Ong Bun Tua and Fidel Francisco. Ong testified that he worked as a helper in the UNITED FOUNDRY from 1965 to 1970 where he helped in the casting of LPG burners with the same form, configuration and mechanism as that of the model covered by the Letters Patent issued to private respondent. Francisco testified that he had been employed with the Manila Gas Corporation from 1930 to 1941 and from 1952 up to 1969 where he retired as supervisor and that Manila Gas Corporation imported "Ransome" burners way back in 1965 which were advertised through brochures to promote their sale. Private respondent, on the other hand, presented only one witness, Rolando Madolaria, who testified, among others, that he was the General Supervisor of the UNITED FOUNDRY in the foundry, machine and buffing section; that in his early years with the company, UNITED FOUNDRY was engaged in the manufacture of different kinds of gas stoves as well as burners based on sketches and specifications furnished by customers; that the company manufactured early models of single-piece types of burners where the mouth and throat were not detachable; that in the latter part of 1978 respondent Melecia Madolaria confided in him that complaints were being brought to her attention concerning the early models being manufactured; that he was then instructed by private respondent to cast several experimental models based on revised sketches and specifications; that private respondent again made some innovations; that after a few months, private respondent discovered the solution to all the defects of the earlier models and, based on her latest sketches and specifications, he was able to cast several models incorporating the additions to the innovations introduced in the models. Various tests were conducted on the latest model in the presence and under the supervision of Melecia Madolaria and they obtained perfect results. Rolando Madolaria testified that private respondent decided to file her application for utility model patent in December 1979. On 7 July 1986 the Director of Patents Cesar C. Sandiego issued Decision No. 86-56 denying the petition for cancellation and holding that the evidence of petitioner was not able to establish convincingly that the patented utility model of private respondent was anticipated. Not one of the various pictorial representations of business clearly and convincingly showed that the devices presented by petitioner was identical or substantially identical with the utility model of the respondent. The decision also stated that even assuming that the brochures depicted clearly each and

every element of the patented gas burner device so that the prior art and patented device became identical although in truth they were not, they could not serve as anticipatory bars for the reason that they were undated. The dates when they were distributed to the public were not indicated and, therefore, were useless prior art references. The records and evidence also do not support the petitioner's contention that Letters Patent No. UM-4609 was obtained by means of fraud and/or misrepresentation. No evidence whatsoever was presented by petitioner to show that the then applicant Melecia Madolaria withheld with intent to deceive material facts which, if disclosed, would have resulted in the refusal by the Philippine Patent Office to issue the Letters Patent under inquiry. Petitioner elevated the decision of the Director of Patents to the Court of Appeals which on 15 October 1993 affirmed the decision of the Director of Patents. Hence, this petition for review on certiorari alleging that the Court of Appeals erred (a) in relying on imaginary differences which in actuality did not exist between the model of private respondent covered by Letters Patent No. UM-4609 and the previously known model of Esso Standard Eastern, Inc., and Manila Gas Corporation, making such imaginary differences grounded entirely on speculation, surmises and conjectures; (b) in rendering judgment based on misapprehension of facts; (c) in relying mainly on the testimony of private respondent's sole witness Rolando Madolaria; and, (d) in not cancelling Letters Patent No. UM-4609 in the name of private respondent. Petitioner submits that the differences cited by the Court of Appeals between the utility model of private respondent and the models of Manila Gas Corporation and Esso Standard Eastern, Inc., are more imaginary than real. She alleges that based on Exhs. "E," "E-1," "F" and "F-1" or the brochures of Manila Gas Corporation and Esso Standard Eastern, Inc., presented by petitioner, the cup-shaped burner mouth and threaded hole on the side are shown to be similar to the utility model of private respondent. The exhibits also show a detachable burner mouth having a plurality of upwardly existing undulations adopted to act as gas passage when the cover is attached to the top of said cup-shaped mouth all of which are the same as those in the patented model. Petitioner also denies as substantial difference the short cylindrical tube of the burner mouth appearing in the brochures of the burners being sold by Manila Gas Corporation and the long cylindered tube of private respondent's model of the gas burner. Petitioner argues that the actual demonstration made during the hearing disclosed the similarities in form, operation and mechanism and parts between the utility model of private respondent and those depicted in the brochures. The findings of the Patent Office and the Court of Appeals that the brochures of Manila Gas Corporation and Esso Standard Eastern, Inc., are undated cannot overcome the fact of their circulation before private respondent filed her application for utility model patent. Petitioner thus asks this Court to take judicial notice of the fact that Esso Standard Eastern, Inc., disappeared before 1979 and reappeared only during the Martial Law years as Petrophil Corporation. Petitioner also emphasizes that the brochures indicated the telephone number of Manila Gas Corporation as 5-79-81 which is a five (5) numbered telephone number existing before 1975

because telephones in Metro Manila started to have six (6) numbers only after that year. Petitioner further contends that the utility model of private respondent is absolutely similar to the LPG burner being sold by petitioner in 1975 and 1976, and also to the "Ransome" burner depicted in the old brochures of Manila Gas Corporation and Esso Standard Eastern, Inc., fabricated by Ransome Torch and Burner Company of Oakland, California, USA, especially when considered through actual physical examination, assembly and disassembly of the models of petitioner and private respondent. Petitioner faults the Court of Appeals for disregarding the testimonies of Ong Bun Tua and Fidel Francisco for their failure to produce documents on the alleged importation by Manila Gas Corporation of "Ransome" burners in 1965 which had the same configuration, form and mechanism as that of the private respondent's patented model. Finally, it is argued that the testimony of private respondent's lone witness Rolando Madolaria should not have been given weight by the Patent Office and the Court of Appeals because it contained mere after-thoughts and pretensions. We cannot sustain petitioner. Section 7 of RA No. 165, as amended, which is the law on patents, expressly provides Sec. 7. Inventians patentable. Any invention of a new and useful machine, manufactured product or substance, process or an improvement of any of the foregoing, shall be patentable. Further, Sec. 55 of the same law provides Sec. 55. Design patents and patents for utility models. (a) Any new, original and ornamental design for an article of manufacture and (b) any new model of implements or tools or of any industrial product or of part of the same, which does not possess the quality of invention, but which is of practical utility by reason of its form, configuration, construction or composition, may be protected by the author thereof, the former by a patent for a design and the latter by a patent for a utility model, in the same manner and subject to the same provisions and requirements as relate to patents for inventions insofar as they are applicable except as otherwise herein provided. The element of novelty is an essential requisite of the patentability of an invention or discovery. If a device or process has been known or used by others prior to its invention or discovery by the applicant, an application for a patent therefor should be denied; and if the application has been granted, the court, in a judicial proceeding in which the validity of the patent is drawn in question, will hold it void and ineffective. 2 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 the protection the invention must be new to the world. 3 In issuing Letters Patent No. UM-4609 to Melecia Madolaria for an "LPG Burner" on 22 July 1981, the

Philippine Patent Office found her invention novel and patentable. The issuance of such patent creates a presumption which yields only to clear and cogent evidence that the patentee was the original and first inventor. The burden of proving want of novelty is on him who avers it and the burden is a heavy one which is met only by clear and satisfactory proof which overcomes every reasonable doubt. 4 Hence, a utility model shall not be considered "new" if before the application for a patent it has been publicly known or publicly used in this country or has been described in a printed publication or publications circulated within the country, or if it is substantially similar to any other utility model so known, used or described within the country. 5 As found by the Director of Patents, the standard of evidence sufficient to overcome the presumption of legality of the issuance of UM-4609 to respondent Madolaria was not legally met by petitioner in her action for the cancellation of the patent. Thus the Director of Patents explained his reasons for the denial of the petition to cancel private respondent's patent Scrutiny of Exhs. "D" and "E" readily reveals that the utility model (LPG Burner) is not anticipated. Not one of the various pictorial representations of burners clearly and convincingly show that the device presented therein is identical or substantially identical in construction with the aforesaid utility model. It is relevant and material to state that in determining whether novelty or newness is negatived by any prior art, only one item of the prior art may be used at a time. For anticipation to occur, the prior art must show that each element is found either expressly or described or under principles of inherency in a single prior art reference or that the claimed invention was probably known in a single prior art device or practice. (Kalman v. Kimberly Clark, 218 USPQ 781, 789) Even assuming gratia arguendi that the aforesaid brochures do depict clearly on all fours each and every element of the patented gas burner device so that the prior art and the said patented device become identical, although in truth they are not, they cannot serve as anticipatory bars for the reason that they are undated. The dates when they were distributed to the public were not indicated and, therefore, they are useless prior art references. xxx xxx xxx Furthermore, and more significantly, the model marked Exh. "K" does not show whether or not it was manufactured and/or cast before the application for the issuance of patent for the LPG burner was filed by Melecia Madolaria. With respect to Exh. "L," petitioner claimed it to be her own model of LPG burner allegedly manufactured sometime in 1974 or 1975 and sold by her in the course of her business operation in the name of Besco Metal Manufacturing, which burner was denominated as "Ransome" burner

xxx xxx xxx But a careful examination of Exh. "L" would show that it does not bear the word "Ransome" which is the burner referred to as the product being sold by the Petitioner. This is not the way to prove that Exh. "L" anticipates Letters Patent No. UM-4609 through Exhs. "C" and "D." Another factor working against the Petitioner's claims is that an examination of Exh. "L" would disclose that there is no indication of the time or date it was manufactured. This Office, thus has no way of determining whether Exh. "L" was really manufactured before the filing of the aforesaid application which matured into Letters Patent No. UM-4609, subject matter of the cancellation proceeding. At this juncture, it is worthwhile to point out that petitioner also presented Exh. "M" which is the alleged burner cup of an imported "Ransome" burner. Again, this Office finds the same as unreliable evidence to show anticipation. It observed that there is no date indicated therein as to when it was manufactured and/or imported before the filing of the application for issuance of patent of the subject utility model. What is more, some component parts of Exh. "M" are missing, as only the cup was presented so that the same could not be compared to the utility model (subject matter of this case) which consists of several other detachable parts in combination to form the complete LPG burner. xxx xxx xxx It must likewise be pointed out that Ong Bun Tua testified on the brochures allegedly of Manila Gas and of Esso Gasul marked Exhs. "E" and "F" and on the alleged fact that Manila Gas Corporation was importing from the United States "Ransome" burners. But the same could not be given credence since he himself admitted during cross-examination that he has never been connected with Manila Gas Corporation. He could not even present any importation papers relating to the alleged imported ransome burners. Neither did his wife. 6 The above findings and conclusions of the Director of Patent were reiterated and affirmed by the Court of Appeals. 7 The validity of the patent issued by the Philippine Patent Office in favor of private respondent and the question over the inventiveness, novelty and usefulness of the improved model of the LPG burner are matters which are better determined by the Patent Office. The technical staff of the Philippine Patent Office composed of experts in their field has by the issuance of the patent in question accepted private respondent's model of gas burner as a discovery. There is a presumption that the Office has correctly determined the patentability of the model 8 and such action must not be interfered with in the absence of competent evidence to the contrary.

The rule is settled that the findings of fact of the Director of Patents, especially when affirmed by the Court of Appeals, are conclusive on this Court when supported by substantial evidence. Petitioner has failed to show compelling grounds for a reversal of the findings and conclusions of the Patent Office and the Court of Appeals. The alleged failure of the Director of Patents and the Court of Appeals to accord evidentiary weight to the testimonies of the witnesses of petitioner showing anticipation is not a justification to grant the petition. Pursuant to the requirement of clear and convincing evidence to overthrow the presumption of validity of a patent, it has been held that oral testimony to show anticipation is open to suspicion and if uncorroborated by cogent evidence, as what occurred in this case, it may be held insufficient. 9 Finally, petitioner would want this Court to review all over again the evidence she presented before the Patent Office. She argues that contrary to the decision of the Patent Office and the Court of Appeals, the evidence she presented clearly proves that the patented model of private respondent is no longer new and, therefore, fraud attended the acquisition of patent by private respondent. It has been held that the question on priority of invention is one of fact. Novelty and utility are likewise questions of

fact. The validity of patent is decided on the basis of factual inquiries. Whether evidence presented comes within the scope of prior art is a factual issue to be resolved by the Patent Office. 10 There is question of fact when the doubt or difference arises as to the truth or falsehood of alleged facts or when the query necessarily invites calibration of the whole evidence considering mainly the credibility of witnesses, existence and relevance of specific surrounding circumstances, their relation to each other and to the whole and the probabilities of the situation. 11 Time and again we have held that it is not the function of the Supreme Court to analyze or weigh all over again the evidence and credibility of witnesses presented before the lower tribunal or office. The Supreme Court is not a trier of facts. Its jurisdiction is limited to reviewing and revising errors of law imputed to the lower court, its findings of fact being conclusive and not reviewable by this Court. WHEREFORE, the Petition is DENIED. The Decision of the Court of Appeals affirming that of the Philippine Patent Office is AFFIRMED. Costs against petitioner. SO ORDERED. Vitug, Kapunan and Hermosisima, Jr., JJ., concur.

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. Ambrosio Padilla Law Offices for petitioner. PARAS, J.:p Submitted on December 9, 1977 for Our decision is this petition for review on certiorari of the two Resolutions of the Court of Appeals, the first dated July 6, 1976, setting aside its Decision of February 16, 1976 in CA-G.R. No. SP-04706, titled "SUSANA LUCHAN v. Hon. HONRADO, et al." wherein it ruled for the dismissal of the petition for lack of merit and at the same time nullifying the writ of preliminary injunction it had previously issued; and the second, dated November 4, 1976, denying the motion for reconsideration of the first resolution above-mentioned. 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 fromApril 5, 1974.(Petition, Rollo, pp. 6-7). In a letter dated July 10, 1974 (Annex "D", Rollo, p. 86), 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 under Registration Certification Nos. Extension UM-109, Extension UM-110 and Utility Model No. 1184; 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. (Rollo, pp. 7-8). 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. (Taken from allegations in the Answer, par. 4, Rollo, p. 93). And on July 25, 1974, private respondent assailed the validity of the patents involved and filed with the Philippine Patent

Office petitions for cancellation of (1) Utility Model Letter Patent Extension No. UM-109 (Inter Partes Case No. 838, Susana Luchan v. Rosario C. Tan), (2) Utility Model Letters Patent No. UM-1184 (Inter Partes Case No. 839, Susana Luchan v. Rosario C. Tan), (3) Utility Model Letters Patent Extension No. UM-110 (Inter Partes Case No. 840, Susana Luchan v. Rosario C. Tan. (Taken from allegations in the Answer, par. 10, Rollo, pp. 94-95). In view thereof, petitioner, on August 24, 1974, filed a complaint for damages with injunction and preliminary injunction against private respondent with the then Court of First Instance of Rizal, Pasig Branch, docketed as Civil Case No. 19908, for infringing the aforesaid letters patent, and prayed, among others, that a writ of preliminary injunction be immediately issued (Complaint, Rollo, p. 90). 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 UM423 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; (Answer, Rollo, pp. 93-94). On September 18, 1974, the trial court issued an Order (Annex "K", Rollo, p. 125) granting the preliminary injunction prayed for by petitioner. Consequently, the corresponding writ was subsequently issued (Annex "K1", Rollo, p. 131) 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 (Annex " K-1 ", Rollo, p. 131). Private respondent questioned the propriety of the trial court'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 (Motion for Reconsideration, Rollo, p. 132). In an Order dated September 11, 1975, the trial court denied private respondent's motion for reconsideration (Annex "N", Rollo, p. 142). In challenging these Orders private respondent filed a petition for certiorari with the respondent court on September 29, 1975 (Annex "D", Rollo, pp. 148-171) 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. On October 15, 1975, the Writ of Preliminary Injunction was issued by the respondent Court of Appeals as follows: NOW, THEREFORE, you, respondents, and/or any person/persons acting on your stead, are hereby ENJOINED to RESTRAIN from enforcing or continuing to enforce, the proceedings complained of in the petition to wit: 1) Order dated September 18, 1974, granting the preliminary injunction; 2) Writ of Preliminary Injunction dated September 18, 1974; and Order dated September 11, 1975, denying petitioner's motion for reconsideration,

all issued in connection with Civil Case No. 19908, UNTIL FURTHER ORDERS FROM THIS COURT. (Annex "P", Rollo, p. 1.73) On February 16, 1976, respondent court promulgated a decision the dispositive portion of which reads: WHEREFORE, 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. SO ORDERED. (CA Decision, Rollo, p. 189). 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 (Ibid., p. 186). 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 (Rollo, pp. 218-226). 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. SO ORDERED. (CA Resolution, Rollo, p. 226). In a Resolution dated November 4, 1976, respondent court, not persuaded by the grounds embodied in the motion for reconsideration filed by herein petitioner (Annex "V ", Rollo, p. 227), denied the same for lack of merit, thereby maintaining the same stand it took in its July 6, 1976 Resolution (Rollo, p. 281). Hence, this petition. On December 3, 1976, without giving due course to the petition, this Court required respondent to file her Comment (Rollo, p. 290) which was filed on December 16, 1976 (Rollo, pp. 291-316). Thereafter, petitioner filed her Reply (Rollo, p. 323) and on May 30, 1977, the petition was given due course (Rollo, p. 345). Petitioner filed her brief on July 14, 1977 (Rollo, p. 351) while private respondent filed her brief on August 25, 1977 (Rollo, p. 359). Thereafter, petitioner having failed to file reply brief, the Court resolved to declare the case submitted for decision on December 9, 1977 (Rollo, p. 359). The assignment of errors raised by the petitioner in this case (Rollo, pp. 15-16) may be reduced to three main issues: (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." (Vargas v. F.M. Yaptico & Co. 40 Phil. 199 [1919]; Vargas v. Chua, 57 Phil. 790-791 [1933]; Frank and Gohn v. Kosuyana 59 Phil. 207 [1933]). 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. (Rollo, pp. 221-222). 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. (Frank, et al. v. Kosuyama Vargas v. F.M. Yaptico & Co. and Vargas v. Chua, et al., supra). 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) In the same manner, under our jurisprudence, as a general rule because of the injurious consequences a writ of injunction may bring, the right to the relief demanded must be clear and unmistakable. (Sangki v. Comelec, 21 SCRA 1392; December 26, 1967) and the dissolution of the writ is proper where applicant has doubtful title to the disputed property. (Ramos v. C.A., 95 SCRA 359). 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. (Rollo, pp. 291-292). 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." (Hon. Alcasid v. Samson, 102 Phil. 735-736; Tarona v. Sayo, 67 SCRA 508, 524; Lim Se v. Argel, 70 SCRA 378). 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. SO ORDERED. Feria (Chairman), Fernan, Gutierrez, Jr., and Feliciano, * JJ., concur. Alampay, J., took no part.

G.R. No. 118708 February 2, 1998 CRESER PRECISION SYSTEMS, INC., petitioner, vs. COURT OF APPEALS AND FLORO INTERNATIONAL CORP., respondents. MARTINEZ, J.: This petition for review on certiorari assails the decision 1 of the Court of Appeals dated November 9, 1994 in C.A.G.R. SP No. 34425 entitled "Floro International Corp. vs. Hon. Tirso D.C Cruz and Creser Precision System, Inc.", the dispositive portion of which reads: WHEREFORE, THE PETITION IS HEREBY GRANTED. THE COMPLAINT FOR INJUNCTION AND DAMAGES, CIVIL CASE NO. 93-1856 BEFORE THE RESPONDENT JUDGE IS HEREBY ORDERED DISMISSED AND HIS ORDERS THEREIN OF DECEMBER 29, 1993 AND MAY 11, 1994 ARE ORDERED SET ASIDE. Private respondent is a domestic corporation engaged in the manufacture, production, distribution and sale of military armaments, munitions, airmunitions and other similar materials. 2 On January 23, 1990, private respondent was granted by the Bureau of Patents, Trademarks and Technology Transfer (BPTTT), a Letters Patent No. UM-6938 3 covering an aerial fuze which was published in the September-October1990, Vol. III, No. 5 issue of the Bureau of Patent's Official Gazette. 4 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 Armed Forces of the Philippines (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 5 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 on December 7, 1993. In response to private respondent's demand, petitioner filed on December 8, 1993 a complaint 6 for injunction and damages arising from the alleged infringement before the Regional Trial Court of Quezon City, Branch 88. 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 7 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. On December 29, 1993, the trial court issued an Order 8 granting 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 trial court in its Order 9 of May 11, 1994, pertinent portions of which read: For resolution before this Court is the Motion for Reconsideration filed by the defendant and the plaintiff's Opposition thereto. The Court finds no sufficient cause to reconsider its order dated December 29, 1993. During the hearing for the issuance of the preliminary injunction, the plaintiff has amply proven its entitlement to the relief prayed for. It is undisputed that the plaintiff has developed its aerial fuze way back in 1981 while the defendant began manufacturing the same only in 1987. Thus, it is only logical to conclude that it was the plaintiff's aerial fuze that was copied or imitated which gives the plaintiff the right to have the defendant enjoined "from manufacturing, marketing and/or selling aerial fuzes identical to those of the plaintiff, and from profiting therefrom and/or performing any other act in connection therewith until further orders from this Court." With regards to the defendant's assertion that an action for infringement may only be brought by "anyone possessing right, title or interest to the patented invention," (Section 42, RA 165) qualified by Sec. 10, RA 165 to include only "the first true and actual inventor, his heirs, legal representatives or assignees, "this court finds the foregoing to be untenable. Sec. 10 merely enumerates the persons who may have an invention patented which does not necessarily limit to these persons the right to institute an action for infringement. Defendant further contends that the order in issue is disruptive of the status quo. On the contrary, the order issued by the Court in effect maintained the status quo. The last actual, peaceable uncontested status existing prior to this controversy was the plaintiff manufacturing and selling its own aerial fuzes PDR 77 CB4 which was ordered stopped through the defendant's letter. With the issuance of the order, the operations of the plaintiff continue. Lastly, this court believes that the defendant will not suffer irreparable injury by virtue of said order. The defendant's claim is primarily hinged on its patent (Letters Patent No. UM-6983) the validity of which is being questioned in this case.

WHEREFORE, premises considered, the Motion for Reconsideration is hereby denied for lack of merit. SO ORDERED. Aggrieved, private respondent on June 27, 1994, filed a petition for certiorari, mandamus and prohibition 10 before respondent Court of Appeals 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. On November 9, 1994, the respondent court rendered the now assailed decision reversing the trial court's Order of December 29, 1993 and dismissing the complaint filed by petitioner. The motion for reconsideration was also denied on January 17, 1995. 11 Hence, this present petition. It is petitioner's contention that it can file, under Section 42 of the Patent Law (R.A. 165), 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. It advances the theory that while the absence of a patent may prevent one from lawfully suing another for infringement of said patent, such absence does not bar the first true and actual inventor of the patented invention from suing another who was granted a patent in a suit for declaratory or injunctive relief recognized under American patent laws. This remedy, petitioner points out, may be likened to a civil action for infringement under Section 42 of the Philippine Patent Law. We find the above arguments 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. 12 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. 13 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. 14 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. 15 Further, the remedy of declaratory judgment or injunctive suit on patent invalidity relied upon by petitioner cannot be likened to the civil action for infringement under Section 42 of the Patent Law. The reason for this is that the said remedy is available only to the patent holder or his successors-ininterest. Thus, anyone who has no patent over an invention but claims to have a right or interest thereto can not file an action for declaratory judgment or injunctive suit which is not recognized in this jurisdiction. Said person, however, is not left without any remedy. He can, under Section 28 of the aforementioned law, file a petition for cancellation of the patent within three (3) years from the publication of said patent with the Director of Patents and raise as ground therefor that the person to whom the patent was issued is not the true and actual inventor. Hence, petitioner's remedy is not to file an action for injunction or infringement but to file a petition for cancellation of private respondent's patent.

Petitioner however failed to do so. As such, it can not now assail or impugn the validity of the private respondent's letters patent by claiming that it is the true and actual inventor of the aerial fuze. Thus, as correctly ruled by the respondent Court of Appeals in its assailed decision: "since the petitioner (private respondent herein) is the patentee of the disputed invention embraced by letters of patent UM No. 6938 issued to it on January 23, 1990 by the Bureau of Patents, it has in its favor not only the presumption of validity of its patent, but that of a legal and factual first and true inventor of the invention." In the case of Aguas vs. De Leon,
16

Office. The technical Staff of the Philippines Patent Office, composed of experts in their field, have, by the issuance of the patent in question, accepted the thinness of the private respondent's new tiles as a discovery. There is a presumption that the Philippine Patent Office has correctly determined the patentability of the improvement by the private respondent of the process in question. In fine, in the absence of error or abuse of power or lack of jurisdiction or grave abuse of discretion, we sustain the assailed decision of the respondent Court of Appeal. WHEREFORE, the decision of the Court of Appeals is hereby AFFIRMED. No pronouncement as to costs. SO ORDERED. Regalado, Melo, Puno and Mendoza, JJ., concur.

we stated that:

The validity of the patent issued by the Philippine Patent Office in favor of the private respondent and the question over the investments, novelty and usefulness of the improved process therein specified and described are matters which are better determined by the Philippines Patent

G.R. No. 97343 September 13, 1993 PASCUAL GODINES, petitioner, vs. THE HONORABLE COURT OF APPEALS, SPECIAL FOURTH DIVISION and SV-AGRO ENTERPRISES, INC., respondents. Jesus S. Anonat for petitioner. Arturo M. Alinio for private respondent. ROMERO, J.: Through this petition for review in certiorari of a decision of the Court of Appeals affirming the decision of the trial court, petitioner Pascual Godines seeks to reverse the adverse decision of the Court a quo that he was liable for infringement of patent and unfair competition. The dispositive portion of the assailed decision is hereby quoted to wit: WHEREFORE, with the elimination of the award for attorney's fees, the judgment appealed from is hereby AFFIRMED, with costs against appellant. 1 The patent involved in this case is Letters Patent No. UM2236 issued by the Philippine Patent Office to one Magdalena S. Villaruz on July 15, 1976. It covers a utility model for a hand tractor or power tiller, the main components of which are the following: "(1) a vacuumatic house float; (2) a harrow with adjustable operating handle; (3) a pair of paddy wheels; (4) a protective water covering for the engine main drive; (5) a transmission case; (6) an operating handle; (7) an engine foundation on the top midportion of the vacuumatic housing float to which the main engine drive is detachedly installed; (8) a frontal frame extension above the quarter circularly shaped water covering hold (sic) in place the transmission case; (9) a Vbelt connection to the engine main drive with transmission gear through the pulley, and (10) an idler pulley installed on the engine foundation." 2 The patented hand tractor works in the following manner: "the engine drives the transmission gear thru the V-belt, a driven pulley and a transmission shaft. The engine drives the transmission gear by tensioning of the V-belt which is controlled by the idler pulley. The Vbelt drives the pulley attached to the transmission gear which in turn drives the shaft where the paddy wheels are attached. The operator handles the hand tractor through a handle which is inclined upwardly and supported by a pair of substanding pipes and reinforced by a U-shaped G.I. pipe at the V-shaped end." 3 The above mentioned patent was acquired by SV-Agro Industries Enterprises, Inc., herein private respondent, from Magdalena Villaruz, its chairman and president, by virtue of a Deed of Assignment executed by the latter in its favor. On October 31, 1979, SV-Agro Industries caused the publication of the patent in Bulletin Today, a newspaper of general circulation. In accordance with the patent, private respondent manufactured and sold the patented power tillers with the patent imprinted on them. In 1979, SV-Agro Industries suffered a decline of more than 50% in sales in its Molave, Zamboanga del Sur branch. Upon investigation, it discovered that power tillers similar to those patented by private respondent were being manufactured and sold by petitioner herein. Consequently, private respondent notified Pascual Godines about the existing patent and demanded that the latter stop selling and manufacturing similar power tillers. Upon petitioner's failure to comply with the demand, SV-Agro Industries filed before the Regional Trial Court a complaint for infringement of patent and unfair competition. After trial, the court held Pascual Godines liable for infringement of patent and unfair competition. The dispositive portion of the decision reads as follows:

WHEREFORE, premises considered, JUDGMENT is hereby rendered in favor of the plaintiff SV-Agro Industries Enterprises, Inc., and against defendant Pascual Godines: 1. Declaring the writ of preliminary injunction issued by this Court against defendant as permanent; 2. Ordering defendant Pascual Godines to pay plaintiff the sum of Fifty Thousand Pesos (P50,000.00) as damages to its business reputation and goodwill, plus the further sum of Eighty Thousand Pesos (P80,000.00) for unrealized profits during the period defendant was manufacturing and selling copied or imitation floating power tiller; 3. Ordering the defendant to pay the plaintiff, the further sum of Eight Thousand Pesos (P8,000.00) as reimbursement of attorney's fees and other expenses of litigation; and to pay the costs of the suit. SO ORDERED. 4 The decision was affirmed by the appellate court. Thereafter, this petition was filed. Petitioner maintains the defenses which he raised before the trial and appellate courts, to wit: that he was not engaged in the manufacture and sale of the power tillers as he made them only upon the special order of his customers who gave their own specifications; hence, he could not be liable for infringement of patent and unfair competition; and that those made by him were different from those being manufactured and sold by private respondent. We find no merit in his arguments. The question of whether petitioner was manufacturing and selling power tillers is a question of fact better addressed to the lower courts. In dismissing the first argument of petitioner herein, the Court of Appeals quoted the findings of the court, to wit: It is the contention of defendant that he did not manufacture or make imitations or copies of plaintiff's turtle power tiller as what he merely did was to fabricate his floating power tiller upon specifications and designs of those who ordered them. However, this contention appears untenable in the light of the following circumstances: 1) he admits in his Answer that he has been manufacturing power tillers or hand tractors, selling and distributing them long before plaintiff started selling its turtle power tiller in Zamboanga del Sur and Misamis Occidental, meaning that defendant is principally a manufacturer of power tillers, not upon specification and design of buyers, but upon his own specification

and design; 2) it would be unbelievable that defendant would fabricate power tillers similar to the turtle power tillers of plaintiff upon specifications of buyers without requiring a job order where the specification and designs of those ordered are specified. No document was (sic) ever been presented showing such job orders, and it is rather unusual for defendant to manufacture something without the specification and designs, considering that he is an engineer by profession and proprietor of the Ozamis Engineering shop. On the other hand, it is also highly unusual for buyers to order the fabrication of a power tiller or hand tractor and allow defendant to manufacture them merely based on their verbal instructions. This is contrary to the usual business and manufacturing practice. This is not only time consuming, but costly because it involves a trial and error method, repeat jobs and material wastage. Defendant judicially admitted two (2) units of the turtle power tiller sold by him to Policarpio Berondo. 5 Of general acceptance is the rule imbedded in our jurisprudence that ". . . the jurisdiction of the Supreme Court in cases brought to it from the Court of Appeals in a petition for certiorari under Rule 45 of the Rules of Court is limited to the review of errors of law, and that said appellate court's findings of fact are conclusive upon this Court." 6 The fact that petitioner herein manufactured and sold power tillers without patentee's authority has been established by the courts despite petitioner's claims to the contrary. The question now arises: Did petitioner's product infringe upon the patent of private respondent? Tests have been established to determine infringement. These are (a) literal infringement; and (b) the doctrine of equivalents. 7 In using literal infringement as a test, ". . . resort must be had, in the first instance, to the words of the claim. If accused matter clearly falls within the claim, infringement is made out and that is the end of it." 8 To determine whether the particular item falls within the literal meaning of the patent claims, the court must juxtapose the claims of the patent and the accused product within the overall context of the claims and specifications, to determine whether there is exact identity of all material elements. 9 The trial court made the following observation: Samples of the defendant's floating power tiller have been produced and inspected by the court and compared with that of the turtle power tiller of the plaintiff (see Exhibits H to H-28). In appearance and form, both the floating power tillers of the defendant and the turtle power tiller of the plaintiff are virtually the same. Defendant admitted to the Court that two (2) of the power inspected on March 12, 1984, were

manufactured and sold by him (see TSN, March 12, 1984, p. 7). The three power tillers were placed alongside with each other. At the center was the turtle power tiller of plaintiff, and on both sides thereof were the floating power tillers of defendant (Exhibits H to H-2). Witness Rodrigo took photographs of the same power tillers (front, side, top and back views for purposes of comparison (see Exhibits H-4 to H-28). Viewed from any perspective or angle, the power tiller of the defendant is identical and similar to that of the turtle power tiller of plaintiff in form, configuration, design and appearance. The parts or components thereof are virtually the same. Both have the circularly-shaped vacuumatic housing float, a paddy in front, a protective water covering, a transmission box housing the transmission gears, a handle which is Vshaped and inclined upwardly, attached to the side of the vacuumatic housing float and supported by the upstanding G.I. pipes and an engine base at the top midportion of the vacuumatic housing float to which the engine drive may be attached. In operation, the floating power tiller of the defendant operates also in similar manner as the turtle power tiller of plaintiff. This was admitted by the defendant himself in court that they are operating on the same principles. (TSN, August 19, 1987, p. 13)
10

of the patent grant into a hollow and useless thing. Such imitation would leave room for indeed encourage the unscrupulous copyist to make unimportant and insubstantial changes and substitutions in the patent which, though adding nothing, would be enough to take the copied matter outside the claim, and hence outside the reach of the law. 14 In this case, the trial court observed: Defendant's witness Eduardo Caete, employed for 11 years as welder of the Ozamis Engineering, and therefore actually involved in the making of the floating power tillers of defendant tried to explain the difference between the floating power tillers made by the defendant. But a careful examination between the two power tillers will show that they will operate on the same fundamental principles. And, according to establish jurisprudence, in infringement of patent, similarities or differences are to be determined, not by the names of things, but in the light of what elements do, and substantial, rather than technical, identity in the test. More specifically, it is necessary and sufficient to constitute equivalency that the same function can be performed in substantially the same way or manner, or by the same or substantially the same, principle or mode of operation; but where these tests are satisfied, mere differences of form or name are immaterial. . . . 15 It also stated: To establish an infringement, it is not essential to show that the defendant adopted the device or process in every particular; Proof of an adoption of the substance of the thing will be sufficient. "In one sense," said Justice Brown, "it may be said that no device can be adjudged an infringement that does not substantially correspond with the patent. But another construction, which would limit these words to exact mechanism described in the patent, would be so obviously unjust that no court could be expected to adopt it. . . . The law will protect a patentee against imitation of his patent by other forms and proportions. If two devices do the same work in substantially the same way, and accomplish substantially the same result, they are the same, even though they differ in name, form, or shape. 16 We pronounce petitioner liable for infringement in accordance with Section 37 of Republic Act No. 165, as amended, providing, inter alia:

Moreover, it is also observed that petitioner also called his power tiller as a floating power tiller. The patent issued by the Patent Office referred to a "farm implement but more particularly to a turtle hand tractor having a vacuumatic housing float on which the engine drive is held in place, the operating handle, the harrow housing with its operating handle and the paddy wheel protective covering." 11 It appears from the foregoing observation of the trial court that these claims of the patent and the features of the patented utility model were copied by petitioner. We are compelled to arrive at no other conclusion but that there was infringement. Petitioner's argument that his power tillers were different from private respondent's is that of a drowning man clutching at straws. Recognizing that the logical fallback position of one in the place of defendant is to aver that his product is different from the patented one, courts have adopted the doctrine of equivalents which recognizes that minor modifications in a patented invention are sufficient to put the item beyond the scope of literal infringement. 12 Thus, according to this doctrine, "(a)n infringement also occurs when a device appropriates a prior invention by incorporating its innovative concept and, albeit with some modification and change, performs substantially the same function in substantially the same way to achieve substantially the same result." 13 The reason for the doctrine of equivalents is that to permit the imitation of a patented invention which does not copy any literal detail would be to convert the protection

Sec. 37. Right 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 terms of the patent; and such making, using, or selling by any person without the authorization of the Patentee constitutes infringement of the patent. (Emphasis ours) As far as the issue regarding unfair competition is concerned, suffice it to say that Republic Act No. 166, as amended, provides, inter alia: Sec. 29. Unfair competition, rights and remedies. . . . xxx xxx xxx In particular, and without in any way limiting the scope of unfair competition, the following shall be deemed guilty of unfair competition: (a) Any person, who in selling his goods shall give them the general appearance of

goods of another manufacturer or dealer, either as to the goods themselves or in the wrapping of the packages in which they are contained, or the devices or words thereon, or in any other feature of their appearance, which would be likely to influence purchasers that the goods offered are those of a manufacturer or dealer other than the actual manufacturer or dealer, or who otherwise clothes the goods with such appearance as shall deceive the public and defraud another of his legitimate trade. . . . xxx xxx xxx Considering the foregoing, we find no reversible error in the decision of the Court of Appeals affirming with modification the decision of the trial court. WHEREFORE, premises considered, the decision of the Court of Appeals is hereby AFFIRMED and this petition DENIED for lack of merit. Bidin, Melo and Vitug, JJ., concur. Feliciano, J., is on leave.

G.R. No. 115106 March 15, 1996 ROBERTO L. DEL ROSARIO, petitioner, vs. COURT OF APPEALS AND JANITO CORPORATION, respondents. BELLOSILLO, J.:p Roberto del Rosario petitions this Court to review the decision of the Court of Appeals 1 which set aside the order of the Regional Trial Court of Makati granting a writ of preliminary injunction in his favor. The antecedents: On 18 January 1993 petitioner filed a complaint for patent infringement against private respondent Janito Corporation. 2 Roberto L. del Rosario alleged that he was a patentee of an audio equipment and improved audio equipment commonly known as the sing-along System or karaoke under Letters Patent No. UM-5269 dated 2 June 1983 as well as Letters Patent No. UM-6237 dated 14 November 1986 issued by the Director of Patents. The effectivity of both Letters Patents was for five (5) years and was extended for another five (5) years starting 2 June 1988 and 14 November 1991, respectively. He described his singalong system as a handy multi-purpose compact machine which incorporates an amplifier speaker, one or two tape mechanisms, optional tuner or radio and microphone mixer with features to enhance one's voice, such as the echo or reverb to stimulate an opera hall or a studio sound, with the whole system enclosed in one cabinet casing. In the early part of 1990 petitioner learned that private respondent was manufacturing a sing-along system bearing the trademark miyata or miyata karaoke substantially similar if not identical to the sing-along system covered by the patents issued in his favor. Thus he sought from .the trial court the issuance of a writ of preliminary injunction to enjoin private respondent, its officers and everybody elsewhere acting on its behalf, from using, selling and advertising the miyata or miyata karaoke brand, the injunction to be made permanent after trial, and praying for damages, attorney's fees and costs of suit. On 5 February 1993 the trial court temporarily restrained private respondent from manufacturing, using and/or selling and advertising the miyata sing-along system or any singalong system substantially identical to the sing-along system patented by petitioner until further orders. On 24 February 1993 the trial court issued a writ of preliminary injunction upon a bond on the basis of its finding that petitioner was a holder of a utility model patent for a sing-along system and that without his approval and consent private respondent was admittedly manufacturing and selling its own sing-along system under the brand name miyata which was substantially similar to the patented utility mode 3 of petitioner. Private respondent assailed the order of 24 February 1993 directing the issuance of the writ by way of a petition for certiorari with prayer for the issuance of a writ of preliminary injunction and a temporary restraining order before respondent Court of Appeals. On 15 November 1993 respondent appellate court granted the writ and set aside the questioned order of the trial court.

It expressed the view that there was no infringement of the patents of petitioner by the fact alone that private respondent had manufactured the miyata karaoke or audio system, and that the karaoke system was a universal product manufactured, advertised and marketed in most countries of the world long before the patents were issued to petitioner. The motion to reconsider the grant of the writ was denied; 4 hence, the instant petition for review. This petition alleges that: (a) it was improper for the Court of Appeals to consider questions of fact in a certiorari proceeding; (b) the Court of Appeals erred in taking judicial notice of private respondent's self-serving presentation of facts; (c) the Court of Appeals erred in disregarding the findings of fact of the trial court; and, (d) there was no basis for the Court of Appeals to grant a writ of preliminary injunction in favor of private respondent. 5 Petitioner argues that in a certiorari proceeding questions of fact are not generally permitted the inquiry being limited essentially to whether the tribunal has acted without or in excess of jurisdiction or with grave abuse of discretion; that respondent court should not have disturbed but respected instead the factual findings of the trial court; that the movant has a clear legal right to be protected and that there is a violation of such right by private respondent. Thus, petitioner herein claims, he has satisfied the legal requisites to justify the order of the trial court directing the issuance of the writ of injunction. On the other hand, in the absence of a patent to justify the manufacture and sale by private respondent of sing-along systems, it is not entitled to the injunctive relief granted by respondent appellate court. The crux of the controversy before us hinges on whether respondent Court of Appeals erred in finding the trial court to have committed grave abuse of discretion in enjoining private respondent from manufacturing, selling and advertising the miyata karaoke brand sing-along system for being substantially similar if not identical to the audio equipment covered by letters patent issued to petitioner. Injunction is a preservative remedy for the protection of substantive rights or interests. It is not a cause of action in itself but merely a provisional remedy, an adjunct to a main suit. The controlling reason for the existence of the judicial power to issue the writ is that the court may thereby prevent a threatened or continuous irremediable injury to some of the parties before their claims can be thoroughly investigated and advisedly adjudicated. It is to be resorted to only when there is a pressing necessity to avoid injurious consequences which cannot be remedied under any standard of compensation. The application of the writ rests upon an alleged existence of an emergency or of a special reason for such an order before the case can be regularly heard, and the essential conditions for granting such temporary injunctive relief are that the complaint alleges facts which appear to be sufficient to constitute a cause of action for injunction and that on the entire showing from both sides, it appears, in view of all the circumstances, that the injunction is reasonably necessary to protect the legal rights of plaintiff pending the litigation. 6 A preliminary injunction may be granted at any time after the commencement of the action and before judgment when it is established that the defendant is doing, threatens, or is

about to do, or is procuring or suffering to be done, some act probably in violation of the plaintiff's rights. Thus, there are only two requisites to be satisfied if an injunction is to issue, namely, the existence of the right to be protected, and that the facts against which the injunction is to be directed are violative of said right. 7 For the writ to issue the interest of petitioner in the controversy or the right he seeks to be protected must be a present right, a legal right which must be shown to be clear and positive. In this regard Sec. 55 of R.A. 165 as amended, known as The Patent Law, provides Sec. 55. Design patents and patents for utility models. (a) Any new, original, and ornamental design for an article of manufacture and (b) new model or implements or tools or of any industrial product or of part of the same, which does not possess the quality of invention but which is of practical utility by reason of its form, configuration, construction or composition, may be protected by the author thereof, the former by a patent for a design and the latter by a patent for a utility model, in the same manner and subject to the same provisions and requirements as relate to patents for inventions insofar as they are applicable, except as otherwise herein provide . . . . Admittedly, petitioner is a holder of Letters Patent No. UM5629 dated 2 June 1985 issued for a term of five (5) years from the grant of a Utility Model herein described The construction of an audio equipment comprising a substantially cubical casing having a window at its rear and upper corner fitted with a slightly inclined control panel, said cubical (casing) having a vertical partition wall therein defining a rear compartment and a front compartment, and said front compartment serving as a speaker baffle; a transistorized amplifier circuit having an echo section and writhed in at least the printed circuit boards placed inside said rear compartment of said casing and attached to said vertical partition wall, said transistorized amplifier circuit capable of being operated from outside, through various controls mounted on said control panel of such casing; a loud speaker fitted inside said front compartment of said casing and connected to the output of the main audio amplifier section of said transistorized amplifier circuit and a tape player mounted on the top wall of said casing and said tape player being connected in conventional manner to said transistorized amplifier circuit. 8 Again, on 14 November 1986 petitioner was granted Letters Patent No. UM-6237 for a term of five (5) years from the grant of a Utility Model described as In an audio equipment consisting of a first cubical casing having an opening at its rear and upper rear portion and a partition therein forming

a rear compartment and a front compartment serving as a loud speaker baffle, a control panel formed by vertical and horizontal sections, a transistorized amplifier circuit wired in at least two printed circuit boards attached at the back of said control panel, a first loud speaker fitted inside said first compartment of such first casing and connected to the output of said transistorized amplifier circuit; the improvement wherein said control panel being removably fitted to said first cubical casing and further comprises a set of tape recorder and tape player mounted on the vertical section of said control panel and said recorder and player are likewise connected to said transistorized amplifier circuit; a second cubical casing having an opening at its rear, said second cubical casing having (being?) provided with a vertical partition therein defining a rear compartment and a front compartment, said rear compartment being provided with a door and enclosing therein a set of tape racks and said front compartment serving as loud speaker baffle, said second cubical casing being adapted to said first cubical casing so that said first and second casings are secured together in compact and portable form; and a second loud speaker fitted inside said front compartment of said casing and connected to the output of said amplifier circuit. 9 The terms of both Letters Patents were extended for another five (5) years each, the first beginning 2 June 1988 and the second, 14 November 1991. The Patent Law expressly acknowledges that any new model of implements or tools of any industrial product even if not possessed of the quality of invention but which is of practical utility is entitled to a patent for utility model. 10 Here, there is no dispute that the letters patent issued to petitioner are for utility models of audio equipment. In issuing, reissuing or withholding patents and extensions thereof, the Director of Patents determines whether the patent is new and whether the machine or device is the proper subject of patent. In passing on an application, the Director decides not only questions of law but also questions of fact, i.e. whether there has been a prior public use or sale of the article sought to be patented. 11 Where petitioner introduces the patent in evidence, if it is in due form, it affords a prima facie presumption of its correctness and validity. The decision of the Director of Patents in granting the patent is always presumed to be correct, and the burden then shifts to respondent to overcome this presumption by competent evidence. 12 Under Sec. 55 of The Patent Law a utility model shall not be considered "new" if before the application for a patent it has been publicly known or publicly used in this country or has been described in a printed publication or publications circulated within the country, or if it is substantially similar to any other utility model so known, used or described within the country. Respondent corporation failed to present before the trial court competent evidence that the utility models covered by the Letters Patents issued to petitioner were not new. This is evident from the testimony of Janito

Cua, President of respondent Janito Corporation, during the hearing on the issuance of the injunction, to wit Q. Mr. Cua, you testified that there are (sic) so many other companies which already have (sic) the sing-along system even before the patent application of Mr. del Rosario and as a matter of fact you mentioned Sanyo, Sony and Sharp, is that right? A. Musicmate and Asahi. Q. Now do you recall that your lawyer filed with this Honorable Court an Urgent Motion to Lift Temporary Restraining Order of this Honorable Court. I am sure you were the one who provided him with the information about the many other companies selling the sing-along system, is that right? These 18 which you enumerated here. A. More than that because. . . . Q. Now you will agree with me that in your statement Sharp you put the date as 1985 agreed? A. No. Q. You mean your lawyer was wrong when he put the word Sharp 1985? A. Maybe I informed him already. xxx xxx xxx Q. You mean your lawyer was wrong in alleging to this Court that Sharp manufactured and sold (in) 1985 as found in the Urgent Motion? A. Since it is urgent it is more or less. Q. The same also with Sanyo 1985 which you put, more or less? A. Sanyo is wrong. Q. It is not 1985? A. Sanyo is 1979 I think. Q. So this is also wrong. Panasonic 1986 is also wrong? A. Panasonic I think. Q. So you don't think this is also correct.

A. The date? Q. So you don't think also that this allegation here that they manufactured in 1986 is correct? A. Wrong. Earlier. Q. National by Precision Electronic 1986 this is also wrong? A. I think earlier. Q. So that means all your allegations here from 2 to 5 are wrong? OK. By Philipps Philippines 1986, this is also correct or wrong? A. More or less. We said more or less. Q. Nakabutshi by Asahi Electronics that is also wrong? A. No that is 1979. Q. Electone by DICO 1989 is this correct or wrong? A. Correct. More or less. Q. Skylers 1985 is that correct or wrong? A. It is more or less because it is urgent. We don't have time to exact the date. Q. Musicmate of G.A. Yupangco 1981 this is more or less? You are not also sure? A. 95% sure. Q. Now you are sure 1981. A. This one because. . . . Q. Mr. Witness so you are now trying to tell this Honorable Court that all your allegations here of the dates in this Urgent Motion except for Musicmate which you are only 95% sure they are all wrong or they are also more or less or not sure, is that right? A. More or less. Q. Now do you have any proof, any advertisement, anything in writing that would show that all these instruments are in the market, do you have it. A. No I don't have it because. . . .

Q. No I am satisfied with your answer. Now Mr. Witness, you don't also have a proof that Akai instrument that you said was also in the market before 1982? You don't have any written proof, any advertisement? A. I have the product. Q. But you have not brought the product in (sic) this Honorable Court, right? A. No. 13 As may be gleaned herein, the rights of petitioner as a patentee have been sufficiently established, contrary to the findings and conclusions of respondent Court of Appeals. Consequently, under Sec. 37 of The Patent law, petitioner as a patentee shall have the exclusive right to make, use and sell the patented machine, article or product 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 authorization of the patentee constitutes infringement of his patent. Petitioner established before the trial court that respondent Janito Corporation was manufacturing a similar sing-along system bearing the trademark miyata which infringed his patented models. He also alleged that both his own patented audio equipment and respondent's sing-along system were constructed in a casing with a control panel, the casing having a vertical partition wall defining the rear compartment from the front compartment, with the front compartment consisting of a loud speaker baffle, both containing a transistorized amplifier circuit capable of being operated from outside through various controls mounted on the control panel, and that both had loud speakers fitted inside the front compartment of the casing and connected to the output of the main audio amplifier section both having a tape recorder and a tape player mounted on the control panel with the tape recorder and tape player being both connected to the transistorized amplifier circuit. 14 Respondent Janito Corporation denied that there was any violation of petitioner's patent rights, and cited the differences between its miyata equipment and petitioner's audio equipment. But, it must be emphasized, respondent only confined its comparison to the first model, Utility Model No. 5269, and completely disregarded Utility Model No. 6237 which improved on the first. As described by respondent corporation, 15 these differences are First. Under Utility Model 5269, the unit is a substantially cubical casing with a window at its rear and upper corner fitted with slightly inclined control panel, while the miyata equipment is a substantially rectangular casing with panel vertically positioned. Second. Under Utility Model 5269, the cubical casing has a vertical partition wall defining a rear compartment and a front compartment serving as a speaker baffle, while the miyata equipment has no rear

compartment and front compartment in its rectangular casing; it has only a front compartment horizontally divided into 3 compartments like a 3-storey building, the 1st compartment being a kit, the 2nd also the speaker, and the 3rd are kits. Third. Under Utility Model No. 5269, a transistorized amplifier circuit with an echo section wired in at least 2 printed circuit boards is placed inside the rear compartment of the casing and attached to the vertical partition wall, the printed circuit board having 1 amplifier and 1 echo, while in the miyata equipment the amplifier is mainly IC (Integrated Circuit) powered with 8 printed circuit boards almost all of which are IC controlled, with 1 amplifier with power supply, 1 main tuner, 1 equalizer (3-band), 1 IC controlled volume control, 1 echo IC, 1 tape pream, 1 instrument and 1 wireless microphone. Fourth. Under Utility Model 5269, 4 printed circuits are placed inside the compartment of its casing attached to the vertical partition wall, while in the miyata, the 7 printed circuit boards (PCB) are attached to the front panel and 1 attached to the horizontal divider. Fifth. Under Utility Model 5269, there are various controls mounted on the control panel of the casing, while in miyata, the various controls are all separated from the printed circuit boards and the various controls are all attached thereto. Sixth. Under Utility Model 5269, a loud speaker fitted inside the front compartment of the casing is connected to the output of the main audio amplifier section of the transistorized amplifier circuit, while in miyata, there is no other way but to use 2 loud speakers connected to the amplifier. Seventh. Under Utility Model 5269, a tape player is mounted on the top wall of the casing, while in miyata, 2 tape players are used mounted side by side at the front. It is elementary that a patent may be infringed where the essential or substantial features of the patented invention are taken or appropriated, or the device, machine or other

subject matter alleged to infringe is substantially identical with the patented invention. In order to infringe a patent, a machine or device must perform the same function, or accomplish the same result by identical or substantially identical means and the principle or mode of operation must be substantially the same. 16 It may be noted that respondent corporation failed to present before the trial court a clear, competent and reliable comparison between its own model and that of petitioner, and disregarded completely petitioner's utility Model No. 6237 which improved on his first patented model. Notwithstanding the differences cited by respondent corporation, it did not refute and disprove the allegations of petitioner before the trial court that: (a) both are used by a singer to sing and amplify his voice; (b) both are used to sing with a minus-one or multiplex tapes, or that both are used to play minus-one or standard cassette tapes for singing or for listening to; (c) both are used to sing with a minus-one tape and multiplex tape and to record the singing and the accompaniment; (d) both are used to sing with live accompaniment and to record the same; (e) both are used to enhance the voice of the singer using echo effect, treble, bass and other controls; (g) both are equipped with cassette tape decks which are installed with one being used for playback and the other, for recording the singer and the accompaniment, and both may also be used to record a speaker's voice or instrumental playing, like the guitar and other instruments; (h) both are encased in a box-like cabinets; and, (i) both can be used with one or more microphones. 17 Clearly, therefore, both petitioner's and respondent's models involve substantially the same modes of operation and produce substantially the same if not identical results when used. In view thereof, we find that petitioner had established before the trial court prima facie proof of violation of his rights as patentee to justify the issuance of a writ of preliminary injunction in his favor during the pendency of the main suit for damages resulting from the alleged infringement. WHEREFORE, the Decision of the Court of Appeals dated 15 November 1993 is REVERSED and SET ASIDE and the Order of the trial court dated 24 February 1993 granting petitioner the writ of injunction is REINSTATED. The trial court is directed to continue with the proceedings on the main action pending before it in order to resolve with dispatch the issues therein presented. SO ORDERED. Padilla, Vitug, Kapunan and Hermosisima, Jr., JJ., concur.

G.R. No. 134217 May 11, 2000 KENNETH ROY SAVAGE/K ANGELIN EXPORT TRADING, owned and managed by GEMMA DEMORALSAVAGE, petitioners, vs. JUDGE APRONIANO B. TAYPIN, Presiding Judge, RTC-BR. 12, Cebu City, CEBU PROVINCIAL PROSECUTOR'S OFFICE, NATIONAL BUREAU OF INVESTIGATION, Region VII, Cebu City, JUANITA NG MENDOZA, MENDCO DEVELOPMENT CORPORATION, ALFREDO SABJON and DANTE SOSMEA, respondents.

BELLOSILLO, J.: Petitioners KENNETH ROY SAVAGE and K ANGELIN EXPORT TRADING, owned and managed by GEMMA DEMORAL-SAVAGE, seek to nullify the search warrant issued by respondent Judge Aproniano B. Taypin of the Regional Trial Court, Br. 12 Cebu City, which resulted in the seizure of certain pieces of wrought iron furniture from the factory of petitioners located in Biasong, Talisay, Cebu. Their motion to quash the search warrant was denied by respondent Judge as well as their motion to reconsider the denial. Hence, this petition for certiorari. The antecedent facts: Acting on a complaint lodged by private respondent Eric Ng Mendoza, president and general manager of Mendco Development Corporation (MENDCO), 1 Supervising Agent Jose Ermie Monsanto of the National Bureau of Investigation (NBI) filed an application for search warrant with the Regional Trial Court of Cebu City. 2 The application sought the authorization to search the premises of K Angelin Export International located in Biasong, Talisay, Cebu, and to seize the pieces of wrought iron furniture found therein which were allegedly the object of unfair competition involving design patents, punishable under Art. 189 of the Revised Penal Code as amended. The assailed Search Warrant No. 637-10-1697-12 was issued by respondent Judge on 16 October 1997 and executed in the afternoon of the following day by NBI agents. 3 Seized from the factory were several pieces of furniture, indicated in the Inventory Sheet attached to the Return of Search Warrant, and all items seized have remained in NBI custody up to the present. 4 On 30 October 1997 petitioners moved to quash the search warrant alleging that: (a) the crime they were accused of did not exist; (b) the issuance of the warrant was not based on probable cause; (c) the judge failed to ask the witnesses searching questions; and, (d) the warrant did not particularly describe the things to be seized. 5 On 10 November 1997 petitioners filed a Supplemental Motion to Quash where they additionally alleged that the assailed warrant was applied for without a certification against forum shopping. 6 On 30 January 1998 respondent Judge denied the Motion to Quash and the Supplemental Motion to Quash. 7 On 2 March 1998 petitioners moved to reconsider the denial of their motion to quash and alleged substantially the same grounds found in their original Motion to Quash but adding thereto two (2) new grounds, namely: (a) respondent court has no jurisdiction over the subject-matter; and, (b) respondent court failed to "substantiate" the order sought to be reconsidered. 8 The denial of their last motion 9 prompted petitioners to come to this Court. The principal issues that must be addressed in this petition are: (a) questions involving jurisdiction over the offense; (b) the need for a certification of non-forum shopping; and, (c) the existence of the crime. Petitioners claim that respondent trial court had no jurisdiction over the offense since it was not designated as a special court for Intellectual Property Rights (IPR), citing in support thereof Supreme Court Administrative Order No. 113-95 designating certain branches of the Regional Trial

Courts, Metropolitan Trial Courts and Municipal Trial Courts in Cities as Special Courts for IPR. The courts enumerated therein are mandated to try and decide violations of IPR including Art. 189 of the Revised Penal Code committed within their respective territorial jurisdictions. The sala of Judge Benigno G. Gaviola of the RTC-Br. 9, Cebu City, was designated Special Court for IPR for the 7th Judicial Region. 10 Subsequently Supreme Court Administrative Order No. 104-96 was issued providing that jurisdiction over all violations of IPR was thereafter confined to the Regional Trial Courts. 11 The authority to issue search warrants was not among those mentioned in the administrative orders. But the Court has consistently ruled that a search warrant is merely a process issued by the court in the exercise of its ancillary jurisdiction and not a criminal action which it may entertain pursuant to its original jurisdiction. 12 The authority to issue search warrants is inherent in all courts and may be effected outside their territorial jurisdiction. 1 In the instant case, the premises searched located in Biasong, Talisay, Cebu, are well within the territorial jurisdiction of the respondent court. 14 Petitioners apparently misconstrued the import of the designation of Special Courts for IPR. Administrative Order No. 113-95 merely specified which court could "try and decide" cases involving violations of IPR. It did not, and could not, vest exclusive jurisdiction with regard to all matters (including the issuance of search warrants and other judicial processes) in any one court. Jurisdiction is conferred upon courts by substantive law; in this case, BP Blg.129, and not by a procedural rule, much less by an administrative order. 15 The power to issue search warrants for violations of IPR has not been exclusively vested in the courts enumerated in Supreme Court Administrative Order No.113-95. Petitioners next allege that the application for a search warrant should have been dismissed outright since it was not accompanied by a certification of non-forum shopping, citing as authority therefor Washington Distillers, Inc. v. Court of Appeals. 16 In that case, we sustained the quashal of the search warrant because the applicant had been guilty of forum shopping as private respondent sought a search warrant from the Manila Regional Trial Court only after he was denied by the courts of Pampanga. The instant case differs significantly, for here there is no allegation of forumshopping, only failure to acquire a certification against forum-shopping. The Rules of Court as amended requires such certification only from initiatory pleadings, omitting any mention of "applications." 17 In contrast, Supreme Court Circular 04-94, the old rule on the matter, required such certification even from "applications." Our ruling in Washington Distillers required no such certification from applications for search warrants. Hence, the absence of such certification will not result in the dismissal of an application for search warrant. The last question to be resolved is whether unfair competition involving design patents punishable under Art. 189 of the Revised Penal Code exists in this case. Prosecutor Ivan Herrero seems to agree as he filed the corresponding Information against petitioners on 17 March 1998. 18 However, since the IPR Code took effect on 1 January 1998

any discussion contrary to the view herein expressed would be pointless. The repealing clause of the Code provides All Acts and parts of Acts inconsistent herewith, more particularly, Republic Act No. 165, as amended; Republic Act No. 166, as amended; and Articles 188 and 189 of the Revised Penal Code; Presidential Decree No. 49, including Presidential Decree No. 285, as amended, are hereby repealed (emphasis ours). 19 The issue involving the existence of "unfair competition" as a felony involving design patents, referred to in Art. 189 of the Revised Penal Code, has been rendered moot and academic by the repeal of the article. The search warrant cannot even be issued by virtue of a possible violation of the IPR Code. The assailed acts specifically alleged were the manufacture and fabrication of wrought iron furniture similar to that patented by MENDCO, without securing any license or patent for the same, for the purpose of deceiving or defrauding Mendco and the buying public. 20 The Code defines "unfair competition" thus 168.2. Any person who shall employ deception or any other means contrary to good faith by which he shall pass off the goods manufactured by him or in which he deals, or his business, or services for those of the one having established such goodwill, or shall commit any acts calculated to produce said result, shall be guilty of unfair competition, and shall be subject to an action therefor. 168.3. In particular, and without in any way limiting the scope of protection against unfair competition, the following shall be deemed guilty of unfair competition: (a) Any person who is selling his goods and gives them the general appearance of goods of another manufacturer or dealer, either as to the goods themselves or in the wrapping of the packages in which they are contained, or the devices or words thereon, or in any other feature of their appearance which would be likely to influence purchasers to believe that the goods offered are those of a manufacturer or dealer, other than the actual manufacturer or dealer, or who otherwise clothes the goods with such appearance as shall deceive the public and defraud another of his legitimate trade, or any subsequent vendor of such goods or any agent of any vendor engaged in selling such goods with a like purpose; (b) Any person who by any artifice, or device, or who employs any other means calculated to induce the false belief that

such person is offering the services of another who has identified such services in the mind of the public; or (c) Any person who shall make any false statement in the course of trade or who shall commit any other act contrary to good faith of a nature calculated to discredit goods, businesses or services of another. 21 There is evidently no mention of any crime of "unfair competition" involving design patents in the controlling provisions on Unfair Competition. It is therefore unclear whether the crime exists at all, for the enactment of RA 8293 did not result in the reenactment of Art. 189 of the Revised Penal Code. In the face of this ambiguity, we must strictly construe the statute against the State and liberally in favor of the accused, 22 for penal statutes cannot be enlarged or extended by intendment, implication or any equitable consideration. 2 Respondents invoke jurisprudence to support their contention that "unfair competition" exists in this case. 24 However, we are prevented from applying these principles, along with the new provisions on Unfair Competition found in the IPR Code, to the alleged acts of the petitioners, for such acts constitute patent infringement as defined by the same Code Sec. 76. Civil Action for Infringement. 76.1. The making, using, offering for sale, selling, or importing a patented product or a product obtained directly or indirectly from a patented process, or the use of a patented process without authorization of the patentee constitutes patent infringement. 25 Although this case traces its origins to the year 1997 or before the enactment of the IPR Code, we are constrained to invoke the provisions of the Code. Article 22 of the Revised Penal Code provides that penal laws shall be applied retrospectively, if such application would be beneficial to the accused. 26 Since the IPR Code effectively obliterates the possibility of any criminal liability attaching to the acts alleged, then that Code must be applied here. In the issuance of search warrants, the Rules of Court requires a finding of probable cause in connection with one specific offense to be determined personally by the judge after examination of the complainant and the witnesses he may produce, and particularly describing the place to be searched and the things to be seized. 27 Hence, since there is no crime to speak of, the search warrant does not even begin to fulfill these stringent requirements and is therefore defective on its face. The nullity of the warrant renders moot and academic the other issues raised in petitioners' Motion to Quash and Motion for Reconsideration. Since the assailed search warrant is null and void, all property seized by virtue thereof should be returned to petitioners in accordance with established jurisprudence. 28 In petitioners' Reply with Additional Information they allege that the trial court denied their motion to transfer their case to a Special Court for IPR. We have gone through the records and we fail to find any trace of such motion or even

a copy of the order denying it. All that appears in the records is a copy of an order granting a similar motion filed by a certain Minnie Dayon with regard to Search Warrant No. 639-10-1697-12. 29 This attachment being immaterial we shall give it no further attention. WHEREFORE, the Order of the Regional Trial Court, Br. 12, Cebu City, dated 30 January 1998, denying the Motion to Quash Search Warrant No. 637-10-1697-12 dated 30 October 1997 and the Supplemental Motion to Quash dated 10 November 1997 filed by petitioners, as well as the Order dated 8 April 1998 denying petitioners' Motion for

Reconsideration dated 2 March 1998, is SET ASIDE. Search Warrant No. 637-10-1697-12 issued on 16 October 1997 is ANNULLED and SET ASIDE, and respondents are ordered to return to petitioners the property seized by virtue of the illegal search warrant. SO ORDERED. Mendoza, Quisumbing and Buena, JJ., concur. De Leon, Jr., J., is on leave.

G.R. No. 121267 October 23, 2001 SMITH KLINE & FRENCH LABORATORIES, LTD. plaintiff-appellee, vs. COURT OF APPEALS and DANLEX RESEARCH LABORATORIES, INC., defendant-appellant. KAPUNAN, J.: This petition for review on certiorari assails the Decision dated January 27, 1995 of the Court of Appeals in CA-G.R. SP No. 337701 which affirmed the decision of the Bureau of Patents, Trademarks and Technology Transfer (BPTTT) granting a compulsory license to private respondent Danlex Research Laboratories for the use of the pharmaceutical product Cimetidine. Likewise assailed is the July 25, 1995 Resolution of the Court of Appeals denying the motion for reconsideration filed by petitioner Smith Kline and French Laboratories, Ltd. Petitioner is the assignee of Letters Patent No. 12207 covering the pharmaceutical product Cimetidine, which relates to derivatives of heterocyclicthio or lower alkoxy or amino lower alkyl thiourea, ureas or guanadines. Said patent was issued by the BPTTT to Graham John Durant, John Collin Emmett and Robin Genellin on November 29, 1978. 2 On August 21, 1989, private respondent filed with the BPTTT a petition for compulsory license to manufacture and produce its own brand of medicines using Cimetidine. Private respondent invoked Section 34 (1) (e) of Republic Act No. 165, 3 (the Patent Law) the law then governing patents, which states that an application for the grant of a compulsory license under a particular patent may be filed with the BPTTT at any time after the lapse of two (2) years from the date of grant of such patent, if the patented invention or article relates to food or medicine, or manufactured substances which can be used as food or medicine, or is necessary for public health or public safety.4 The petition for compulsory license stated that Cimetidine is useful as an antihistamine and in the treatment of ulcers, and that private respondent is capable of using the patented product in the manufacture of a useful product.5 Petitioner opposed the petition for compulsory license, arguing that the private respondent had no cause of action and failed to allege how it intended to work the patented product. Petitioner further stated that its manufacture, use and sales of Cimetidine satisfied the needs of the Philippine market, hence, there was no need to grant a compulsory license to private respondent to manufacture, use and sell the same. Finally, petitioner also claimed that the grant of a compulsory license to private respondent would not promote public safety and that the latter was only motivated by pecuniary gain. 6 After both parties were heard, the BPTTT rendered a decision directing the issuance of a compulsory license to private respondent to use, manufacture and sell in the Philippines its own brand of pharmaceutical products containing Cimetidine and ordered the payment by private respondent to petitioner of royalties at the rate of 2.5% of net sales in Philippine currency.7 Petitioner thereafter filed with the Court of Appeals a petition for review of the decision of the BPTTT, raising the following arguments: (1) the BPTTT's decision is violative of the Paris Convention for the Protection of Industrial Property; (2) said decision is an invalid exercise of police power; (3) the rate of royalties payable to petitioner as fixed by the BPTTT was rendered without factual basis and amounts to an expropriation of private property without just compensation; (4) the petition for compulsory license should have been dismissed by the BPTTT for failure to prove the jurisdictional requirement of publication.8 On January 27, 1995, the Court of Appeals promulgated its Decision, the dispositive portion of which states: WHEREFORE, the petition is DENIED, and the decision of the Bureau of Patents, Trademarks and Technology Transfer is hereby AFFIRMED, with costs against the Petitioner. SO ORDERED.9 In affirming the decision of the BPTTT, the appellate court held that the grant of a compulsory license to private respondent for the manufacture and use of Cimetidine is in accord with the Patent Law since the patented product is medicinal in nature, and therefore necessary for the promotion of public health and safety.10 It explained further that the provisions of the Patent Law permitting the grant of a compulsory license are intended not only to give a chance to others to supply the public with the quantity of the patented article but especially to prevent the building up of patent monopolies.11 Neither did the appellate court find the royalty rate of 2.5% of net sales fixed by the BPTTT unreasonable, considering that what was granted under the compulsory license is only the right to manufacture Cimetidine, without any technical assistance from petitioner, and royalty rates identical to that fixed by the BPTTT have been prescribed for the grant of compulsory license in a

good number of patent cases. 12 The Court of Appeals also ruled that contrary to petitioner's claim, private respondent complied with the requirement of publication under the Patent Law and had submitted proof of such compliance. 13 Not satisfied with the appellate court's decision, petitioner filed a motion for reconsideration thereof as well as a motion for the issuance of a temporary restraining order against private respondent's sister company, Montreal Pharmaceutical, Inc. to refrain from marketing a product similar to Cimetidine, but both motions were denied by the Court of Appeals in its Resolution of July 25, 1995. 14 Petitioner thus filed the present petition on September 15, 1995, with the following assignment of errors: I. The respondent Court erred in upholding the validity of the decision of public respondent BPTTT which is an arbitrary exercise of police power and is violative of international law. II. The respondent Court erred in holding that compulsory licensing will not create a confusion that the patented product is the brainchild of private respondent Danlex and not of petitioner. III.Assuming that the grant of compulsory license is in order, the respondent Court still erred in holding that the BPTTT decision fixing the royalty at 2.5% of the net wholesale price in peso does not amount to expropriation of private property without just compensation. IV.The respondent Court erred in finding that the jurisdictional requirement of publication in a newspaper of general circulation for three (3) consecutive weeks has been complied with by private respondent Danlex. 15 While petitioner concedes that the State in the exercise of police power may regulate the manufacture and use of medicines through the enactment and implementation of pertinent laws, it states that such exercise is valid only if the means employed are reasonably necessary for the accomplishment of the purpose and if not unduly oppressive. 16 According to petitioner, the grant of a compulsory license to private respondent is an invalid exercise of police power since it was not shown that there is an overwhelming public necessity for such grant, considering that petitioner is able to provide an adequate supply of i to satisfy the needs of the Philippine market. Petitioner also claims that the grant of a compulsory license to private respondent unjustly deprives it of a reasonable return on its investment.17 It argues further that the provisions of the Patent Law on compulsory licensing contravene the Convention of Paris for the Protection of Industrial Property18 (Paris Convention), which allegedly permits the granting of a compulsory license over a patented product only to prevent abuses which might result from the exercise of the exclusive rights conferred by the patent, 19 or on the ground of failure to work or insufficient working of

the patented product, within four years from the date of filing of the patent application or three years from the date of grant of the patent, whichever expires last.20 Petitioner opines that the inclusion of grounds for the grant of a compulsory license in Section 34 of the Patent Law other than those provided under the Paris Convention constitutes a violation of the Philippines' obligation to adhere to the provisions of said treaty.21 It is also contended by petitioner that the grant of a compulsory license to private respondent will allow the latter to liberally manufacture and sell medicinal products containing Cimetidine without even extending to petitioner due recognition for pioneering the development and worldwide acceptance of said invention, and will unreasonably dilute petitioner's right over the patent.22 Petitioner likewise asseverates that the rate of royalty fixed by the BPTTT at 2.5% of net sales is grossly inadequate, taking into consideration its huge investments of money, time and other resources in the research and development, as well as marketing of Cimetidine. It is further alleged that such rate has no factual basis since the appellate court and the BPTTT relied solely on analogous cases and did not explain how such rate was arrived at.23 Lastly, petitioner claims that the appellate court erred in ruling that private respondent had complied with the requirement of publication of the notice of the filing of the petition for compulsory license because private respondent failed to formally offer in evidence copies of the notice of filing of the petition and notice of the date of hearing thereof as published and the affidavits of publication thereof. Thus, it says, the BPTTT did not properly acquire jurisdiction over the petition for compulsory license.24 In its Comment to the Petition, private respondent adopted the reasoning of the Court of Appeals in the assailed decision and prayed that the petition be denied for lack of merit.25 The petition has no merit. The Court of Appeals did not err in affirming the validity of the grant by the BPTTT of a compulsory license to private respondent for the use, manufacture and sale of Cimetidine. The said grant is in accord with Section 34 of the Patent Law which provides: Grounds for Compulsory Licensing. (1) Any person may apply to the Director for the grant of a license under a particular patent at any time after the expiration of two years from the date of the grant of the patent, under any of the following circumstances: (a) If the patented invention is not being worked within the Philippines on a commercial scale, although capable of being so worked, without satisfactory reason;

(b) If the demand of the patented article in the Philippines is not being met to an adequate extent and on reasonable terms; (c) If, by reason of refusal of the patentee to grant a license or licenses on reasonable terms, or by reason of the conditions attached by the patentee to licensee or to the purchase, lease or use of the patented article or working of the patented process or machine for production, the establishment of any new trade or industry in the Philippines is prevented, or the trade or industry therein is unduly restrained; (d) If the working of the invention within the country is being prevented or hindered by the importation of the patented article; (e) If the patented invention or article relates to food or medicine or manufactured substances which can be used as food or medicine, or is necessary for public health or public safety. (2) In any of the above cases, a compulsory license shall be granted to the petitioner provided that he has proved his capability to work the patented product or to make use of the patented product in the manufacture of a useful product, or to employ the patented process. (3) The term "worked" or "working" as used in this section means the manufacture and sale of the patented article, of patented machine, or the application of the patented process for production, in or by means of a definite and substantial establishment or organization in the Philippines and on a scale which is reasonable and adequate under the circumstances. Importation shall not constitute "working". (Emphasis supplied.) The grant of the compulsory license satisfies the requirements of the foregoing provision. More than ten years have passed since the patent for Cimetidine was issued to petitioner and its predecessors-in-interest, and the compulsory license applied for by private respondent is for the use, manufacture and sale of a medicinal product. Furthermore, both the appellate court and the BPTTT found that private respondent had the capability to work Cimetidine or to make use thereof in the manufacture of a useful product. Petitioner's contention that Section 34 of the Patent Law contravenes the Paris Convention because the former provides for grounds for the grant of a compulsory license in addition to those found in the latter, is likewise incorrect. Article 5, Section A(2) of the Paris Convention states:

Each country of the union shall have the right to take legislative measures providing for the grant of compulsory licenses to prevent the abuses which might result from the exercise of the exclusive rights conferred by the patent, for example, failure to work.26 This issue has already been resolved by this Court in the case of Smith Kline & French Laboratories, Ltd. vs. Court of Appeals, 27 where petitioner herein questioned the BPTTT's grant of a compulsory license to Doctors Pharmaceuticals, Inc. also for the manufacture, use and sale of Cimetidine. We found no inconsistency between Section 34 and the Paris Convention and held that: It is thus clear that Section A(2) of Article 5 [of the Paris Convention] unequivocally and explicitly respects the right of member countries to adopt legislative measures to provide for the grant of compulsory licenses to prevent abuses which might result from the exercise of the exclusive rights conferred by the patent. An example provided of possible abuses is "failure to work;" however, as such, is merely supplied by way of an example, it is plain that the treaty does not preclude the inclusion of other forms of categories of abuses. Section 34 of R.A. No. 165, even if the Act was enacted prior to the Philippines' adhesion to the Convention, fits well within the aforequoted provisions of Article 5 of the Paris Convention. In the explanatory note of Bill No. 1156 which eventually became R.A. No. 165, the legislative intent in the grant of a compulsory license was not only to afford others an opportunity to provide the public with the quantity of the patented product, but also to prevent the growth of monopolies [Congressional Record, House of Representatives, 12 May 957, 998]. Certainly, the growth of monopolies was among the abuses which Section A, Article 5 of the Convention foresaw, and which our Congress likewise wished to prevent in enacting R.A. No. 165.28 (Emphasis supplied.) Neither does the Court agree with petitioner that the grant of the compulsory license to private respondent was erroneous because the same would lead the public to think that the Cimetidine is the invention of private respondent and not of petitioner. Such fears are unfounded since, as the appellate court pointed out in the assailed decision, by the grant of the compulsory license, private respondent as licensee explicitly acknowledges that petitioner is the source of the patented product Cimetidine.29 Even assuming arguendo that such confusion may indeed occur, the disadvantage is far outweighed by the benefits resulting from the grant of the compulsory license, such as an increased supply of pharmaceutical products containing Cimetidine, and the consequent reduction in the prices thereof.30 There is likewise no basis for the allegation that the grant of a compulsory license to private respondent results in the deprivation of petitioner's property without just compensation. It must be pointed out that as owner of Letters Patent No. 12207, petitioner had already enjoyed exclusive rights to manufacture, use and sell Cimetidine for at least two years from its grant in November, 1978. Even if other entities like private respondent are subsequently

allowed to manufacture, use and sell the patented invention by virtue of a compulsory license, petitioner as owner of the patent would still receive remuneration for the use of such product in the form of royalties. Anent the perceived inadequacy of the royalty awarded to petitioner, the Court of Appeals correctly held that the rate of 2.5% of net wholesale price fixed by the Director of the BPTTT is in accord with the Patent Law. Said law provides: Sec. 35. Grant of License.(1) If the Director finds that a case for the grant of a license under Section 34 hereof has been made out, he shall, within one hundred eighty days from the date the petition was filed, order the grant of an appropriate license. The order shall state the terms and conditions of the license which he himself must fix in default of an agreement on the matter manifested or submitted by the parties during the hearing. xxx Section 35-B. Terms and Conditions of Compulsory License. (1) A compulsory license shall be non-exclusive, but this shall be without prejudice to the licensee's right to oppose an application for such a new license. (2) The terms and conditions of a compulsory license, fixed in accordance with Section 35, may contain obligations and restrictions both for the licensee and for the registered owner of the patent. (3) A compulsory license shall only be granted subject to the payment of adequate royalties commensurate with the extent to which the invention is worked. However, royalty payments shall not exceed five percent (5%) of the net wholesale price (as defined in Section 33-A) of the products manufactured under the license. If the product, substance, or process subject of the compulsory license is involved in an industrial project approved by the Board of Investments, the royalty payable to the patentee or patentees shall not exceed three percent (3%) of the net wholesale price (as defined in Section 33-A) of the patented commodity/and or commodity manufactured under the patented process; the same rate of royalty shall be paid

whenever two or more patents are involved; which royalty shall be distributed to the patentees in rates proportional to the extent of commercial use by the licensee giving preferential values to the holder of the oldest subsisting product patent. xxx Under the aforequoted provisions, in the absence of any agreement between the parties with respect to a compulsory license, the Director of the BPTTT may fix the terms thereof, including the rate of the royalty payable to the licensor. The law explicitly provides that the rate of royalty shall not exceed five percent (5%) of the net wholesale price. The Court agrees with the appellate court's ruling that the rate of royalty payments fixed by the Director of the BPTTT is reasonable. The appellate court, citing Price vs. United Laboratories,31 ruled as such, considering that the compulsory license awarded to private respondent consists only of the bare right to use the patented invention in the manufacture of another product, without any technical assistance from the licensor.32 Furthermore, this Court had earlier noted in the Price case that identical royalty rates have been prescribed by the Director of the BPTTT in numerous patent cases.33 There was thus no error on the part of the Court of Appeals in affirming the royalty rate fixed by the Director of the BPTTT, since it was not shown that the latter erred or abused his discretion in prescribing said rate. The rule is that factual findings of administrative bodies, which are considered as experts in their respective fields, are accorded not only respect but even finality if the same are supported by substantial evidence.34 Finally, as to the alleged lack of jurisdiction of the BPTTT over the petition filed by private respondent for failure to comply with the publication requirement under Section 35-F of R.A. No. 165, the Court holds that petitioner is estopped from questioning the same since it did not raise the issue of lack of jurisdiction at the earliest possible opportunity, i.e., during the hearings before the BPTTT.35 The Court notes that petitioner raised this contention for the first time when it appealed the case to the appellate court. WHEREFORE, the petition is hereby DENIED for lack of merit and the Decision of the Court of Appeals is hereby AFFIRMED. SO ORDERED. Davide, Jr., C.J., (Chairman), Puno, Pardo, and YnaresSantiago, JJ., concur.

G.R. No. L-22221 August 31, 1965 PARKE, DAVIS and COMPANY, petitioner, vs. DOCTORS' PHARMACEUTICALS, INC., ET AL., respondents.

Ross, Selph and Carrascoso for petitioner. Manuel Serapio, Jr., for respondent Doctors' Pharmaceuticals, Inc. Solicitor General for respondent Director of Patents. BAUTISTA ANGELO, J.: Parke Davis & Company, petitioner herein, is a foreign corporation organized and existing under the laws of the State of Michigan, U.S.A., with principal office in the City of Detroit, and as such is the owner of a patent entitled "Process for the Manufacturing of Antibiotics" (Letters Patent No. 50) which was issued by the Philippine Patent Office on February 9, 1950. The patent relates to a chemical compound represented by a formula commonly called chloramphenicol. The patent contains ten claims, nine of which are process claims, and the other is a product claim to the chemical substance chloramphenicol. Respondent Doctors' Pharmaceuticals, Inc., on the other hand, is a domestic corporation duly organized under our Corporation Law with principal office situated in Caloocan City. On October 9, 1959, its general manager wrote a letter to Parke Davis & Company requesting that it be granted a voluntary license "to manufacture and produce our own brand of medicine, containing chloramphenicol, and to use, sell, distribute, or otherwise dispose of the same in the Philippines under such terms and conditions as may be deemed reasonable and mutually satisfactory," to which Parke Davis & Company replied requesting information concerning the facilities and plans for the manufacture of chloramphenicol of Doctors' Pharmaceuticals, Inc. The latter answered saying that it did not intend to manufacture chloramphenicol itself but its purpose was merely to use it in its own brand of medicinal preparations, emphasizing that its request for license was based on an express provision of the Philippine law which has reference to patents that had been in existence for more than three years from their dates of issue. Hence, it reiterated its request that said license be granted under such terms and conditions as may be reasonable and mutually satisfactory. As apparently Parke Davis & Company was not inclined to grant the request for a voluntary license, Doctors' Pharmaceuticals, Inc. filed on March 11, 1960 a petition with the Director of Patents, which was later amended, praying that it be granted a compulsory license under Letters Patent No. 50 granted to Parke Davis & Company based on the following grounds: (1) the patented invention relates to medicine and is necessary for public health and safety; (2) Parke Davis & Company is unwilling to grant petitioner a voluntary license under said patent by reason of which the production and manufacture of needed medicine containing chloramphenicol has been unduly restrained to a certain extent that it is becoming a monopoly; (3) the demand for medicine containing chloramphenicol is not being met to an adequate extent and on reasonable prices; and (4) the patented invention is not being worked in the Philippines on a commercial scale. In its petition, Doctors' Pharmaceuticals, Inc. prayed that it be authorized to manufacture, use, and sell its own products containing chloramphenicol as well as choose its own brand or trademark.

Parke Davis & Company filed a written opposition setting up the following affirmative defenses: (1) a compulsory license may only be issued to one who will work the patent and respondent does not intend to work it itself but merely to import the patented product; (2) respondent has not requested any license to work the patented invention in the Philippines; (3) respondent is not competent to work the patented invention; (4) to grant respondent the requested license would be against public interest and would only serve its monetary interest; and (6) the patented invention is not necessary for public health and safety. At the hearing held on November 14, 1962, respondent abandoned the second, third and fourth grounds of its petition and confined itself merely to the first ground, to wit: that the patented invention relates to medicine and is necessary for public health and safety. Then, after the parties had presented oral and documentary evidence and submitted memoranda in support of their contentions, the Director of Patents rendered on November 15, 1963 his decision granting to respondent the license prayed for. The following is the dispositive part of the decision: WHEREFORE, the Respondent-Patentee is hereby ordered to grant the Petitioner a license under Letters Patent No. 50. The parties hereto are hereby ordered to submit to me, within THIRTY (30) days from their receipt of a copy of this decision a licensing agreement, and in default thereof, they may submit within the same period their respective proposals. It must be shown that negotiations as to the terms and conditions thereof have been made between the parties, and if there are points of disagreement I shall fix such terms and conditions. If, within the said period, no licensing agreement is filed or no negotiations therefor transpires between the parties, I shall issue the licensing agreement in such terms and conditions as may be just and reasonable under the circumstances. In due time, Parke Davis & Company interposed the present petition for review. In this appeal, Parke, Davis & Company imputes to the Director of Patents eleven errors which may be briefly stated as follows: 1. Respondent has not proven the ground relied upon by it in its petition; 2. Respondent Doctors' Pharmaceuticals, Inc. has no intention to work the patent but merely to import the patented article chloramphenicol; 3. Petitioner's invention is being worked in the Philippines; 4. Respondent is not competent to work petitioner's patented invention, that is, to manufacture chloramphenicol and sell the same in the Philippines; 5. The grant of the license is against public interest;

6. The license requested by respondent will not serve any legitimate purpose; 7. Respondent is not competent to use the license requested; 8. The theory that a compulsory license under a patented invention, after the expiration of three years after the grant of the letters patent, may be granted to one who petitions for a license, is erroneous; 9. Respondent Director of Patents cannot issue an in personam order against petitioner to grant the licence; 10. Respondent Director of Patents erred in not considering the defenses interposed by petitioner to the application for license; and 11. Respondent Director of Patents erred in rendering his decision ordering petitioner to grant a compulsory license to co-respondent Doctors' Pharmaceuticals, Inc. As may be gleaned from the errors above pointed out, the principal issue raised by petitioner boils down to whether or not the Director of Patents gravely abused his discretion in ordering the grant of compulsory license to respondent under Section 34(d) of Republic Act No. 165 for the manufacture of preparations containing chloramphenicol under Letters Patent No. 50 issued to petitioner despite the written objection interposed against it by the latter based on the ground therein enumerated. The pertinent statutory provisions that govern the issues raised herein are found in Chapter VIII of Republic Act No. 165, as amended, which for ready reference are hereunder quoted: CHAPTER VIII. Compulsory Licensing SEC. 34. Grounds for compulsory license. Any person may apply to the Director for the grant of a license under a particular patent at any time after the expiration of three 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, without satisfactory reason; (c) If by reason of the refusal of the patentee to grant a license or licenses on reasonable terms, or by reason of the conditions attached by the patentee to licenses or to the purchase, lease or use of the patented article or working of the patented process

or machine of production the establishment of any new trade or industry in the Philippines is prevented, or the trade or industry therein is unduly restrained; or (d) If the patented invention relates to food or medicine or is necessary for public health or public safety. The term "worked" or "working" as used in this section means the manufacture and sale of a patented article, or the carrying on of a patented process or the use of a patented machine for production, in or by means of a definite and substantial establishment or organization in the Philippines and on a scale which is adequate and reasonable under the circumstances. SEC. 35. Notice and hearing. Upon the filing of a petition under section thirty-four hereof, notice shall be given in the same manner and form as that provided in section thirty-one, Chapter VII hereof. SEC. 36. Grant of license. If The Director finds that a case for the grant of a license under section thirty-four hereof has been made out, he may order the grant of an appropriate license and in default of an agreement among the parties as to the terms and conditions of the license he shall fix the terms and conditions of the license in the order. The order of the Director granting a license under this Chapter, when final, shall operate as a deed granting a license executed by the patentee and the other parties in interest. A cursory reading of the provisions above-quoted will reveal that any person may apply for the grant of a license under any of the circumstances stated in Section 34 (a), (b), (c) or (d), which are in the disjunctive, showing that any of the circumstances thus enumerated would be sufficient to support the grant, as evidenced by the use of the particle "or" between paragraphs (c) and (d). As may be noted, each of these circumstances stands alone and is independent of the others. And from them we can see that in order that any person may be granted a license under a particular patented invention relating to medicine under Section 34(d), it is sufficient that the application be made after the expiration of three years from the date of the grant of the patent and that the Director should find that a case for granting such license has been made out. Since in the instant case it is admitted by petitioner that the chemical substance chloramphenicol is a medicine, while Letters Patent No. 50 covering said substance were granted to Parke Davis & Company on February 9, 1950, and the instant application for license under said patent was only filed in 1960, verily the period that had elapsed then is more than three years, and so the conditions for the grant of the license had been fulfilled. We find, therefore, no error in the decision of the Director of Patents on this aspect of the controversy. The claim that respondent has not proven the ground it relies upon in its petition to the effect that chloramphenicol is not only a medicine but is indispensable to public health and safety is not quite correct, for the main reliance of respondent is on the fact that chloramphenicol is an

invention that is related to medicine and as such it comes under Section 34(d) of Republic Act 165. Respondent does not predicate its claim on the fact that invention is necessary for public health or public safety, although either ground is recognized as valid in itself for the grant of a license under said Section 34(d). Indeed, it is sufficient that the invention be related to medicine. It is not required that it be at the same time necessary for public health or public safety. Moreover, the claim of petitioner that the word "necessary" means "indispensable" does not hold water, for necessity admits of many degrees, as it is clearly explained in Bouvier's Law Dictionary. 1 But, even if we assume that the patented invention is not only related to medicine but to one that is also indispensable or necessary to public health and public safety, here we can say that both conditions are present, since according to Dr. Leon V. Picache, who testified in this case, the substance chloramphenicol is one that constitutes an effective cure for gastro-enteritis diseases, while the inventor's own specifications attest that chloramphenicol is a "therapeutic agent notably in the case of shigella pradysenteria. Chloramphenicol is much more active than streptomycin" and "is the first antibiotic exhibiting a high degree of activity against gram negative bacteria which is therapeutically effective upon oral administration" (Exhibit 6). Again, Dr. Querbral-Greaga in the June, 1961 issue of the Scientific Digest, a publication of the Manila Medical Society, affirmed that antibiotics like chloramphenicol have played a very important role in the control of diarrheaenteritis which is the third most rampant killer of infants in this country. The claim that a compulsory license cannot be granted to respondent because the latter does not intend to work the patented invention itself but merely to import it has also no legal nor factual basis. In the first place, Section 34 of Republic Act No. 165 does not require the petitioner of a license to work the patented invention if the invention refers to medicine, for the term "worked" or "working" used in said section does not apply to the circumstance mentioned in subsection (d), which relates to medicine or to one necessary for public health and public safety. Indeed, the Director of Patents has already correctly stated in previous cases that, in its strict sense, the term "worked" or "working" mentioned in the last paragraph of Section 34 of the Patent Law "has no applicability to those cited patented matters and the qualification of the petitioner to work the invention is immaterial, it being not a condition precedent before any person may apply for the grant of the license." In the second place, it is not the intention of respondent to work or manufacture the patented invention itself but merely to manufacture its brand of medicinal preparations containing such substance. And even if it be required that respondent should work itself the invention that it intends to use in the manufacture of its own brand of medicinal preparations said respondent would not be found wanting for it is staffed with adequate and competent personnel and technicians; it has several laboratories where medicines are prepared for safety and quality; it is equipped with machines for subdividing antibiotics; and it has capsule-filling machines and adequate personnel and facilities to test the quality of chloramphenicol. Finally, we may add that it is not a valid ground to refuse the license applied for the fact that the patentee is working

the invention and as such has the exclusive right to the invention for a term of 17 years (Sections 20 & 21, Republic Act 165) as claimed in the third assignment of error, the reason for it being that the provision permitting the grant of 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. 2 The point is raised that the grant of the license is against public interest for it would force Parke, Davis & Company to close or stop manufacturing the patented invention which would thereby adversely affect local employment and prejudice technology and chemical manufacturing and cut off the local supply of medicinal products. It should be noted, however, that respondent does not intend to compete with petitioner in the manufacture of chloramphenicol for it would either obtain the same from petitioner or would import whatever it may need in the manufacture of its own brand of medicinal preparations. But even assuming that the consequence the petitioner has envisioned may come true if the license is granted, still that should not stand in the way of the grant for that is in line with an express provision of our law. The grant of such license may work disadvantage on petitioner but the law must be observed until modified or repealed. On the other hand, there is the advantage that the importation of chloramphenicol might redound to the benefit of the public in general as it will increase the supply of medicines in our country containing chloramphenicol thereby reducing substantially the price of this drug. We find no merit in the contention that the Director of Patents erred in ordering the grant of the patent to respondent for the simple reason that the application does not automatically entitle the person applying to such a grant as was done by said Director. Though in substance such is the effect of the grant, it cannot however be said that the Director of Patents automatically ordered the grant of the license for it was only after hearing and a careful consideration of the evidence that he ordered the grant. In fact, the decision states that the Director has carefully weighed the evidence of the parties and the arguments in support of their contentions and that it was only after analyzing the same that he became convinced of the right of respondent to the compulsory license he prayed for. Finally, with regard to the contention that petitioner is entitled to the exclusive use of the invention for a term which under the law extends to 17 years, suffice it for us to quote what the Director of Patents says on this point: 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 years from the date of the grant of the letters patent. After all, the patentee is not entirely deprived of any proprietary right. In act, he has been given the period of three 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 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 a bilateral and workable licensing agreement and a reasonable royalty to be agreed upon by the parties and in default of such agreement, the Director of Patents may fix the terms and conditions of the license. (See Sec. 36, Rep. Act No. 165)

WHEREFORE, the decision appealed from is affirmed, with costs against petitioner. Bengzon, C.J., Concepcion, Reyes, J.B.L., Dizon, Regala, Makalintal, Bengzon, J.P., and Zaldivar, JJ., concur.

G.R. No. 121867 July 24, 1997 SMITH KLINE & FRENCH LABORATORIES, LTD., petitioner, vs. COURT OF APPEALS, BUREAU OF PATENTS, TRADEMARKS AND TECHNOLOGY TRANSFER and DOCTORS PHARMACEUTICALS, INC. respondents. DAVIDE, JR., J.: This is an appeal under Rule 45 of the Rules of Court from the decision 1 4 November 1994 of the Court of Appeals in CA-G.R. SP No. 33520, which affirmed the 14 February 1994 decision 2 of the Director of the Bureau of Patents, Trademarks and Technology Transfer (BPTTT) granting a compulsory non-exclusive and non-transferable license to private respondent to manufacture, use and sell in the Philippines its own brands of pharmaceutical products containing petitioner's patented pharmaceutical product known as Cimetidine. Petitioner is a foreign corporation with principal office at Welwyn Garden City, England. It owns Philippine Letters Patent No. 12207 issued by the BPTTT for the patent of the drug Cimetidine. Private respondent is a domestic corporation engaged in the business of manufacturing and distributing pharmaceutical products. On 30 March 1987, it filed a petition for compulsory licensing 3 with the BPTTT for authorization to manufacture its own brand of medicine from the drug Cimetidine and to market the resulting product in the Philippines. The petition was filed pursuant to the provisions of Section 34 of Republic Act No. 165 (An Act Creating a Patent Office Prescribing Its Powers and Duties, Regulating the Issuance of Patents, and Appropriating Funds Therefor), which provides for the compulsory licensing of a particular patent after the expiration of two years from the grant of the latter if the patented invention relates to, inter alia, medicine or that which is necessary for public health or public safety. Private respondent alleged that the grant of Philippine Letters Patent No. 12207 was issued on 29 November 1978; that the petition was filed beyond the two-year protective period provided in Section 34 of R.A. No. 165; and that it had the capability to work the patented product or make use of it in its manufacture of medicine. Petitioner opposed, arguing that private respondent had no cause of action and lacked the capability to work the patented product; the petition failed to specifically divulge how private respondent would use or improve the patented product; and that private respondent was motivated by the pecuniary gain attendant to the grant of a compulsory license. Petitioner also maintained that it was capable of satisfying the demand of the local market in the manufacture and marketing of the medicines covered by the patented product. Finally, petitioner challenged the constitutionality of Sections 34 and 35 of R.A. No. 165 for violating the due process and equal protection clauses of the Constitution. After appropriate proceedings, the BPTTT handed down its decision on 14 February 1994, with the dispositive portion thereof providing: NOW, THEREFORE, by virtue of the powers vested in this Office by Republic Act No. 165, as amended by Presidential Decree No. 1263, there is hereby issued a license in favor of the herein [private respondent], United Laboratories, Inc., [sic] under Letters Patent No. 12207 issued on November 29, 1978, subject to the following terms and conditions: 1. That [private respondent] be hereby granted a non-exclusive and non-transferable license to manufacture, use and sell in the Philippines its own brands of pharmaceutical products containing [petitioner's] patented invention which is disclosed and claimed in Letters Patent No. 12207; 2. That the license granted herein shall be for the remaining life of said Letters Patent No. 12207 unless this license is terminated in the manner hereinafter provided and that no right or license is hereby granted to [private respondent] under any patent to [petitioner] or [sic] other than recited herein; 5. By virtue of this license, [private respondent] shall pay [petitioner] a royalty on all license products containing the patented substance made and sold by [private respondent] in the amount equivalent to TWO AND ONE HALF PERCENT (2.5%) of the net sales in Philippine currency. The term "net scale" [sic] means the gross amount billed for the product pertaining to Letters Patent No. 12207, less (a) Transportation charges or allowances, if any, included in such amount; (b) Trade, quantity or cash discounts and broker's or agent's or distributor's commissions, if any, allowed or paid; (c) Credits or allowances, if any, given or made on account of rejection or return of the patented product previously delivered; and

(d) Any tax, excise or government charge included in such amount, or measured by the production sale, transportation, use of delivery of the products. In case [private respondent's] product containing the patented substance shall contain one or more active ingredients admixed therewith, said product hereinafter identified as admixed product, the royalty to be paid shall be determined in accordance with the following formula: Net Sales on Value of Patented ROYALTY = Admixed Product x 0.025 x Substance Value of Patented Value of Other Substance Active Ingredients 4. The royalties shall be computed after the end of each calendar quarter to all goods containing the patented substance herein involved, made and sold during the precedent quarter and to be paid by [private respondent] at its place of business on or before the thirtieth day of the month following the end of each calendar quarter. Payments should be made to [petitioner's] authorized representative in the Philippines; 5. [Private respondent] shall keep records in sufficient detail to enable [petitioner] to determine the royalties payable and shall further permit its books and records to be examined from time to time at [private respondent's] premises during office hours, to the extent necessary to be made at the expense of [petitioner] by a certified public accountant appointed by [petitioner] and acceptable to [private respondent]. 6. [Private respondent] shall adopt and use its own trademark or labels on all its products containing the patented substance herein involved; 7. [Private respondent] shall comply with the laws on drugs and medicine requiring previous clinical tests and approval of proper government authorities before selling to the public its own products manufactured under the license; 8. [Petitioner] shall have the right to terminate the license granted to [private respondent] by giving the latter thirty (30) days notice in writing to that effect, in the event that [private respondent] default [sic] in the payment of royalty provided herein or if [private respondent] shall default in the performance of other convenants or conditions of this agreement which are to be performed by [private respondent]: (a) [Private respondent] shall have the right provided it is not in default to

payment or royalties or other obligations under this agreement, to terminate the license granted to its, [sic] giving [petitioner] thirty (30) daysnotice in writing to that effect; (b) Any termination of this license as provided for above shall not in any way operate to deny [petitioner] its rights or remedies, either at laws [sic] or equity, or relieve [private respondent] of the payment of royalties or satisfaction of other obligations incurred prior to the effective date of such termination; and (c) Notice of termination of this license shall be filed with the Bureau of Patents, Trademarks and Technology Transfer. 9. In case of dispute as to the enforcement of the provisions of this license, the matter shall be submitted for arbitration before the Director of Bureau of Patents, Trademarks and Technology Transfer or any ranking official of the Bureau of Patents, Trademarks and Technology Transfer duly delegated by him. 10. This License shall inure to the benefit of each of the parties herein, to the subsidiaries and assigns of [petitioner] and to the successors and assigns of [private respondent]; and 11. This license take [sic] effect immediately. 4 Petitioner then appealed to the Court of Appeals by way of a petition for review, which was docketed as CA-G.R. SP No. 33520. Petitioner claimed that the appealed decision was erroneous because: 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 In its decision of 4 November 1994, 6 the Court of Appeals affirmed in toto the challenged decision. We quote its findings and conclusion upon which the affirmance is anchored, viz.: An assiduous scrutiny of the impugned decision of the public respondent reveals that the same is supported by substantial evidence. It appears that at the time of the filing of the petition for compulsory license on March 24, 1987, the subject letters Patent No. 12207 issued on November 29, 1978 has been in effect for more than two (2) years. The patented invention relates to compound and compositions used in inhibiting certain actions of the histamine, hence, it relates to medicine. Moreover, after hearing and careful consideration of the evidence presented, the Director of Patents ruled that "there is ample evidence to show that [private respondent] possesses such capability, having competent personnel, machines and equipment as well as permit to manufacture different drugs containing patented active ingredients such as ethambutol of American Cyanamid and Ampicillin and Amoxicillin of Beecham Groups, Ltd." As to the claim by the petitioner that it has the capacity to work the patented product although it was not shown that any pretended abuse has been committed, thus the reason for granting compulsory license "is intended not only to give a chance to others to supply the public with the quantity of the patented article but especially to prevent the building up of patent monopolities [sic]." [Parke Davis v. Doctors Pharmaceuticals, Inc., 14 SCRA 1053]. We find that the granting of compulsory license is not simply because Sec. 34 (1) e, RA 165 allows it in cases where the invention relates to food and medicine. The Director of Patents also considered in determining that the applicant has the capability to work or make use of the patented product in the manufacture of a useful product. In this case, the applicant was able to show that Cimetidine, (subject matter of latters Patent No. 12207) is necessary for the manufacture of an anti-ulcer drug/medicine, which is necessary for the promotion of public health. Hence, the award of compulsory license is a valid exercise of police power. We do not agree to [sic] petitioner's contention that the fixing of the royalty at 2.5% of the net wholesale price amounted to expropriation of private property without just compensation.

Paragraph 3, Section 35-B, R.A. No. 165, as amended by P.D. No. 1267, states: Sec. 35-B. Terms and Conditions of Compulsory License. (1) . . . (2) . . . (3) A compulsory license shall only be granted subject to the payment of adequate royalties commensurate with the extent to which the invention is worked. However, royalty payments shall not exceed five percent (5%) of the net wholesale price (as defined in Section 33-A) of the products manufactured under the license. If the product, substance, or process subject of the compulsory license is involved in an industrial project approved by the Board of Investments, the royalty payable to the patentee or patentees shall not exceed three percent (3%) of the net wholesale price (as defined in Section 34-A) of the patented commodity and/or commodity manufactured under the patented process, the same rate of royalty shall be distributed to the patentees in rates proportional to the extent of commercial use by the licensee giving preferential values to the holder of the oldest subsisting product patent. The foregoing provision grants the Director of Patents the use of his sound discretion in fixing the percentage for the royalty rate. In the instant case, the Director of Patents exercised his discretion and ruled that a rate of 2.5% of the net wholesale price is fair enough for the parties. In Parke Davis & Co. vs. DPI and Tiburcio, [L-27004, August 6, 1983, 124 SCRA 115] it was held that "liberal treatment in trade relations should be afforded to local industry for as reasoned out by respondent company, it is so difficult to compete with the industrial grants [sic] of the drug industry, among them being the petitioner herein, that it always is necessary that the local drug companies should sell at much lower (than) the prices of said foreign drug entities." Besides, foreign produce licensor can later on ask for an increase in percentage rate of royalty fixed by the Director of Patents if local sales of license should increase. Further, in Price vs. UNILAB, the award of royalty rate of 2.5% was deemed to be just and reasonable, to wit [166 SCRA 133]: Moreover, what UNILAB has with the compulsory license is the bare right to use the patented chemical compound in the manufacture of a special product, without any technical assistance from herein respondent-appellant. Besides, the special product to be manufactured by UNILAB will only be used, distributed, and disposed locally. Therefore, the royalty rate of 2.5% is just and reasonable.

It appearing that herein petitioner will be paid royalties on the sales of any products [sic] the licensee may manufacture using any or all of the patented compounds, the petitioner cannot complain of a deprivation of property rights without just compensation [Price v. UNILAB, L82542, September 19, 1988]. We take note of the well-crafted petition submitted by petitioner albeit the legal milieu and a good number of decided cases militate against the grounds posited by petitioner. In sum, considering the well-entrenched jurisprudence sustaining the position of respondents, We reiterate the rule in Basay Mining Corporation vs. SEC, to the effect that The legal presumption is that official duty has been performed. And it is particularly strong as regards administrative agencies vested with powers said to be quasi-judicial in nature, in connection with the enforcement of laws affecting particular fields of activity, the proper regulation and/or promotion of which requires a technical or special training, aside from a good knowledge and grasp of the overall conditions, relevant to said field, obtaining in the nations. The policy and practice underlying our Administrative Law is that courts of justice should respect the findings of fact of said administrative agencies, unless there is absolutely no evidence in support thereof or such evidence is clearly, manifestly and patently insubstantial. [G.R. No. 76695, October 3, 1988, Minute Resolution; Beautifont, Inc., et al. v. Court of Appeals, et al., G.R. No. 50141, January 29, 1988] Its motion for reconsideration having been denied in the resolution 7 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. We resolved to give due course to the petition and required the parties to submit their respective memoranda, which they did, with that of public respondent filed only on 7 February 1997. After a careful perusal of the pleadings and evaluation of the arguments adduced by the parties, we find this petition to be without merit. In its first assigned error, petitioner invokes Article 5 of the Paris Convention for the Protection of Industrial Property, 8 or "Paris Convention," for short, of which the Philippines became a party thereto only in 1965. 9 Pertinent portions of said Article 5, Section A, provide: A. . . . (2) Each country of the union shall have the right to take legislative measures providing for the grant of compulsory licenses to prevent the abuses which might result from the exercise of the exclusive rights conferred by the patent, for example, failure to work. xxx xxx xxx (4) A compulsory license may not be applied for on the ground of failure to work or insufficient working before the expiration of a period of four years from the date of filing of the patent application or three years from the date of the grant of the patent, whichever period expires last; it shall be refused if the patentee justifies his inaction by legitimate reasons. Such a compulsory license shall be non-exclusive and shall not be transferable, even

in the form of the grant of a sub-license, except with that part of the enterprise or goodwill which exploits such license. In is thus clear that Section A (2) of Article 5 above unequivocally and explicitly respects the right of member countries to adopt legislative measures to provide for the grant of compulsory licenses to prevent abuses which might result from the exercise of the exclusive rights conferred by the patent. An example provided of possible abuses is "failure to work;" however, as such is merely supplied by way of an example, it is plain that the treaty does not preclude the inclusion of other forms or categories of abuses. Section 34 of R.A. No. 165, even if the Act was enacted prior to the Philippines' adhesion to the Convention, fits well within the aforequoted provisions of Article 5 of the Paris Convention. In the explanatory note of Bill No. 1156 which eventually became R.A. No. 165, the legislative intent in the grant of a compulsory license was not only to afford others an opportunity to provide the public with the quantity of the patented product, but also to prevent the growth of monopolies. 10 Certainly, the growth of monopolies was among the abuses which Section A, Article 5 of the Convention foresaw, and which our Congress likewise wished to prevent in enacting R.A. No. 165. R.A. No. 165, as amended by Presidential Decree No. 1263, promulgated on 14 December 1977, provides for a system of compulsory licensing under a particular patent. Sections 34 and 35, Article Two, of Chapter VIII read as follows: Sec. 34. Grounds for Compulsory Licensing (1) Any person may apply to the Director for the grant of a license under a particular patent at any time after the expiration of two years from the date of the grant of the patent, under any of the following circumstances: (a) If the patented invention is not being worked within the Philippines on a commercial scale, although capable of being so worked, without satisfactory reason; (b) If the demand for the patented article in the Philippines is not being met to an adequate extent and on reasonable terms; (c) If, by reason of refusal of the patentee to grant a license or licenses on reasonable terms, or by reason of the conditions attached by the patentee to licensee or to the purchase, lease or use of the patented article or working of the patented process or machine for production, the establishment of any new trade or industry in the Philippines is prevented, or the trade or industry therein is unduly restrained; (d) If the working of the invention within the country is being prevented or hindered by the importation of the patented article; or (e) If the patented invention or article relates to food or medicine or manufactured products or

substances which can be used as food or medicine, or is necessary for public health or public safety. (2) In any of the above cases, a compulsory license shall be granted to the petitioner provided that he has proved his capability to work the patented product or to make use of the patented product in the manufacture of a useful product, or to employ the patented process. (3) The term "worked" or "working" as used in this section means the manufacture and sale of the patented article, of the patented machine, or the application of the patented process for production, in or by means of a definite and substantial establishment or organization in the Philippines and on a scale which is reasonable and adequate under the circumstances. Importation shall not constitute "working." xxx xxx xxx Sec. 35. Grant of License. (1) If the Director finds that a case for the grant is a license under Section 34 hereof has been made out, he shall, within one hundred eighty days from the date the petition was filed, order the grant of an appropriate license. The order shall state the terms and conditions of the license which he himself must fix in default of an agreement on the matter manifested or submitted by the parties during the hearing. (2) A compulsory license sought under Section 34B shall be issued within one hundred twenty days from the filing of the proponent's application or receipt of the Board of Investment's endorsement. The case at bar refers more particularly to subparagraph (e) of paragraph 1 of Section 34 the patented invention or article relates to food or medicine or manufactured products or substances which can be used as food or medicine, or is necessary for public health or public safety. And it may not be doubted that the aforequoted provisions of R.A. No. 165, as amended, are not in derogation of, but are consistent with, the recognized right of treaty signatories under Article 5, Section A (2) of the Paris Convention. Parenthetically, it must be noted that paragraph (4) of Section A, Article 5 of the Paris Convention setting time limitations in the application for a compulsory license refers only to an instance where the ground therefor is "failure to work or insufficient working," and not to any ground or circumstance as the treaty signatories may reasonably determine. Neither may petitioner validly invoke what it designates as the GATT Treaty, Uruguay Round. This act is better known as the Uruguay Final Act signed for the Philippines on 15 April 1994 by Trade and Industry Secretary Rizalino Navarro. 11 Forming integral parts thereof are the Agreement Establishing the World Trade Organization, the Ministerial Declarations and Decisions, and the Understanding on Commitments in Financial Services. 12 The Agreement establishing the World Trade Organization includes various agreements and associated legal instruments. It was only on

14 December 1994 that the Philippine Senate, in the exercise of its power under Section 21 of Article VII of the Constitution, adopted Senate Resolution No. 97 concurring in the ratification by the President of the Agreement. The President signed the instrument of ratification on 16 December 1994. 13 But plainly, this treaty has no retroactive effect. Accordingly, since the challenged BPTTT decision was rendered on 14 February 1994, petitioner cannot avail of the provisions of the GATT treaty. The second and third assigned errors relate more to the factual findings of the Court of Appeals. Well-established is the principle that the findings of facts of the latter are conclusive, unless: (1) the conclusion is a finding grounded entirely on speculation or conjecture; (2) the inference made is manifestly absurd; (3) there is grave abuse of discretion in the appreciation of facts; (4) the judgment is premised on a misapprehension of facts; (5) the findings of fact are conflicting; and (6) the Court of Appeals, in making its findings, went beyond the issues of the case and the same is contrary to the admissions of both the appellant and appellee. 14 Petitioner has not convinced us that the instant case falls under any of the exceptions. On the contrary, we find the findings of fact and conclusions of respondent Court of Appeals and that of the BPTTT to be fully supported by the evidence and the applicable law and jurisprudence on the matter. Petitioner's claim of violations of the due process and eminent domain clauses of the Bill of Rights are mere conclusions which it failed to convincingly support. As to due the process argument, suffice it to say that full-blown adversarial proceedings were conducted before the BPTTT pursuant to the Patent Law. We agree with the Court of Appeals that the BPTTT exhaustively studied the facts and its findings were fully supported by substantial evidence. It cannot likewise be claimed that petitioner was unduly deprived of its property rights, as R.A. No. 165 not only grants the patent holder a protective period of two years to enjoy his exclusive rights thereto; but subsequently, the law recognizes just compensation in the form of royalties. 15 In Parke, Davis & Co. v. Doctors' Pharmaceuticals, Inc., 16 we held:

The right to exclude others from the manufacturing, using, or vending an invention relating to, food or medicine should be conditioned to allowing any person to manufacture, use, or vend the same after a period of three [now two] years from the date of the grant of the letters patent. After all, the patentee is not entirely deprived of any proprietary right. In fact, he has been given the period of three years [now two years] of complete monopoly over the patent. Compulsory licensing of a patent on food or medicine without regard to the other conditions imposed in Section 34 [now Section 35] is not an undue deprivation of proprietary interests over a patent right because the law sees to it that even after three years of complete monopoly something is awarded to the inventor in the form of bilateral and workable licensing agreement and a reasonable royalty to be agreed upon by the parties and in default of such an agreement, the Director of Patents may fix the terms and conditions of the license. As to the fourth assigned error, we hold that petitioner can no longer assail the jurisdiction of the BPTTT, raising this issue only for the first time on appeal. In Pantranco North Express, Inc. v. Court of Appeals, 17 we ruled that where the issue of jurisdiction is raised for the first time on appeal, the party invoking it is so barred on the ground of laches or estoppel under the circumstances therein stated. It is now settled that this rule applies with equal force to quasijudicial bodies 18 such as the BPTTT. Here, petitioner have not furnished any cogent reason to depart from this rule. WHEREFORE, the petition is hereby DENIED and the challenged decision of the Court of Appeals in CA-G.R. SP No. 33520 is AFFIRMED in toto. Costs against petitioner. SO ORDERED. Narvasa, C.J., Melo, Francisco and Panganiban, JJ., concur.

G.R. No. 158589 June 27, 2006 PHILIP MORRIS, INC., BENSON & HEDGES (CANADA), INC., and FABRIQUES DE TABAC REUNIES, S.A., (now known as PHILIP MORRIS PRODUCTS S.A.), Petitioners, vs. FORTUNE TOBACCO CORPORATION, Respondent. D EC ISIO N GARCIA, J.: Via this petition for review under Rule 45 of the Rules of Court, herein petitioners Philip Morris, Inc., Benson & Hedges (Canada) Inc., and Fabriques de Tabac Reunies, S.A. (now Philip Morris Products S.A.) seek the reversal and setting aside of the following issuances of the Court of Appeals (CA) in CA-G.R. CV No. 66619, to wit: 1. Decision dated January 21, 20031 affirming an earlier decision of the Regional Trial Court of Pasig City, Branch 166, in its Civil Case No. 47374, which dismissed the complaint for trademark infringement and damages thereat commenced by the petitioners against respondent Fortune Tobacco Corporation; and 2. Resolution dated May 30, 20032 denying petitioners motion for reconsideration.

Petitioner Philip Morris, Inc., a corporation organized under the laws of the State of Virginia, United States of America, is, per Certificate of Registration No. 18723 issued on April 26, 1973 by the Philippine Patents Office (PPO), the registered owner of the trademark "MARK VII" for cigarettes. Similarly, petitioner Benson & Hedges (Canada), Inc., a subsidiary of Philip Morris, Inc., is the registered owner of the trademark "MARK TEN" for cigarettes as evidenced by PPO Certificate of Registration No. 11147. And as can be seen in Trademark Certificate of Registration No. 19053, another subsidiary of Philip Morris, Inc., the Swiss company Fabriques de Tabac Reunies, S.A., is the assignee of the trademark "LARK," which was originally registered in 1964 by Ligget and Myers Tobacco Company. On the other hand, respondent Fortune Tobacco Corporation, a company organized in the Philippines, manufactures and sells cigarettes using the trademark "MARK." The legal dispute between the parties started when the herein petitioners, on the claim that an infringement of their respective trademarks had been committed, filed, on August 18, 1982, a Complaint for Infringement of Trademark and Damages against respondent Fortune Tobacco Corporation, docketed as Civil Case No. 47374 of the Regional Trial Court of Pasig, Branch 166. The decision under review summarized what happened next, as follows: In the Complaint xxx with prayer for the issuance of a preliminary injunction, [petitioners] alleged that they are foreign corporations not doing business in the Philippines and are suing on an isolated transaction. xxx they averred that the countries in which they are domiciled grant xxx to corporate or juristic persons of the Philippines the privilege to bring action for infringement, xxx without need of a license to do business in those countries. [Petitioners] likewise manifested [being registered owners of the trademark "MARK VII" and "MARK TEN" for cigarettes as evidenced by the corresponding certificates of registration and an applicant for the registration of the trademark "LARK MILDS"]. xxx. [Petitioners] claimed that they have registered the aforementioned trademarks in their respective countries of origin and that, by virtue of the long and extensive usage of the same, these trademarks have already gained international fame and acceptance. Imputing bad faith on the part of the [respondent], petitioners claimed that the [respondent], without any previous consent from any of the [petitioners], manufactured and sold cigarettes bearing the identical and/or confusingly similar trademark "MARK" xxx Accordingly, they argued that [respondents] use of the trademark "MARK" in its cigarette products have caused and is likely to cause confusion or mistake, or would deceive purchasers and the public in general into buying these products under the impression and mistaken belief that they are buying [petitioners] products. Invoking the provisions of the Paris Convention for the Protection of Industrial and Intellectual Property (Paris Convention, for brevity), to which the Philippines is a signatory xxx, [petitioners] pointed out that upon the request of an interested party, a country of the Union may prohibit the use of a trademark which constitutes a reproduction, imitation, or translation of a mark already belonging to a person entitled to the benefits of the said Convention. They

likewise argued that, in accordance with Section 21-A in relation to Section 23 of Republic Act 166, as amended, they are entitled to relief in the form of damages xxx [and] the issuance of a writ of preliminary injunction which should be made permanent to enjoin perpetually the [respondent] from violating [petitioners] right to the exclusive use of their aforementioned trademarks. [Respondent] filed its Answer xxx denying [petitioners] material allegations and xxx averred [among other things] xxx that "MARK" is a common word, which cannot particularly identify a product to be the product of the [petitioners] xxx xxx lawphil.net xxx xxx.

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

After the termination of the trial on the merits xxx trial court rendered its Decision xxx dated November 3, 1999 dismissing the complaint and counterclaim after making a finding that the [respondent] did not commit trademark infringement against the [petitioners]. Resolving first the issue of whether or not [petitioners] have capacity to institute the instant action, the trial court opined that [petitioners] failure to present evidence to support their allegation that their respective countries indeed grant Philippine corporations reciprocal or similar privileges by law xxx justifies the dismissal of the complaint xxx. It added that the testimonies of [petitioners] witnesses xxx essentially declared that [petitioners] are in fact doing business in the Philippines, but [petitioners] failed to establish that they are doing so in accordance with the legal requirement of first securing a license. Hence, the court declared that [petitioners] are barred from maintaining any action in Philippine courts pursuant to Section 133 of the Corporation Code. The issue of whether or not there was infringement of the [petitioners] trademarks by the [respondent] was likewise answered xxx in the negative. It expounded that "in order for a name, symbol or device to constitute a trademark, it must, either by itself or by association, point distinctly to the origin or ownership of the article to which it is applied and be of such nature as to permit an exclusive appropriation by one person". Applying such principle to the instant case, the trial court was of the opinion that the words "MARK", "TEN", "LARK" and the Roman Numerals "VII", either alone or in combination of each other do not by themselves or by association point distinctly to the origin or ownership of the cigarettes to which they refer, such that the buying public could not be deceived into believing that [respondents] "MARK" cigarettes originated either from the USA, Canada, or Switzerland.

Emphasizing that the test in an infringement case is the likelihood of confusion or deception, the trial court stated that the general rule is that an infringement exists if the resemblance is so close that it deceives or is likely to deceive a customer exercising ordinary caution in his dealings and induces him to purchase the goods of one manufacturer in the belief that they are those of another. xxx. The trial court ruled that the [petitioners] failed to pass these tests as it neither presented witnesses or purchasers attesting that they have bought [respondents] product believing that they bought [petitioners] "MARK VII", "MARK TEN" or "LARK", and have also failed to introduce in evidence a specific magazine or periodical circulated locally, which promotes and popularizes their products in the Philippines. It, moreover, elucidated that the words consisting of the trademarks allegedly infringed by [respondent] failed to show that they have acquired a secondary meaning as to identify them as [petitioners] products. Hence, the court ruled that the [petitioners] cannot avail themselves of the doctrine of secondary meaning. As to the issue of damages, the trial court deemed it just not to award any to either party stating that, since the [petitioners] filed the action in the belief that they were aggrieved by what they perceived to be an infringement of their trademark, no wrongful act or omission can be attributed to them. xxx. 3 (Words in brackets supplied) Maintaining to have the standing to sue in the local forum and that respondent has committed trademark infringement, petitioners went on appeal to the CA whereat their appellate recourse was docketed as CA-G.R. CV No. 66619. Eventually, the CA, in its Decision dated January 21, 2003, while ruling for petitioners on the matter of their legal capacity to sue in this country for trademark infringement, nevertheless affirmed the trial courts decision on the underlying issue of respondents liability for infringement as it found that: xxx the appellants [petitioners] trademarks, i.e., "MARK VII", "MARK TEN" and "LARK", do not qualify as wellknown marks entitled to protection even without the benefit of actual use in the local market and that the similarities in the trademarks in question are insufficient as to cause deception or confusion tantamount to infringement. Consequently, as regards the third issue, there is likewise no basis for the award of damages prayed for by the appellants herein. 4 (Word in bracket supplied) With their motion for reconsideration having been denied by the CA in its equally challenged Resolution of May 30, 2003, petitioners are now with this Court via this petition for review essentially raising the following issues: (1) whether or not petitioners, as Philippine registrants of trademarks, are entitled to enforce trademark rights in this country; and (2) whether or not respondent has committed trademark infringement against petitioners by its use of the mark "MARK" for its cigarettes, hence liable for damages. In its Comment, 5 respondent, aside from asserting the correctness of the CAs finding on its liability for trademark infringement and damages, also puts in issue the propriety of the petition as it allegedly raises questions of fact.

The petition is bereft of merit. Dealing first with the procedural matter interposed by respondent, we find that the petition raises both questions of fact and law contrary to the prescription against raising factual questions in a petition for review on certiorari filed before the Court. A question of law exists when the doubt or difference arises as to what the law is on a certain state of facts; there is a question of fact when the doubt or difference arises as to the truth or falsity of alleged facts.6 Indeed, the Court is not the proper venue to consider factual issues as it is not a trier of facts.7 Unless the factual findings of the appellate court are mistaken, absurd, speculative, conflicting, tainted with grave abuse of discretion, or contrary to the findings culled by the court of origin,8 we will not disturb them. It is petitioners posture, however, that their contentions should be treated as purely legal since they are assailing erroneous conclusions deduced from a set of undisputed facts. Concededly, when the facts are undisputed, the question of whether or not the conclusion drawn therefrom by the CA is correct is one of law.9 But, even if we consider and accept as pure questions of law the issues raised in this petition, still, the Court is not inclined to disturb the conclusions reached by the appellate court, the established rule being that all doubts shall be resolved in favor of the correctness of such conclusions.10 Be that as it may, we shall deal with the issues tendered and determine whether the CA ruled in accordance with law and established jurisprudence in arriving at its assailed decision. A "trademark" is any distinctive word, name, symbol, emblem, sign, or device, or any combination thereof adopted and used by a manufacturer or merchant on his goods to identify and distinguish them from those manufactured, sold, or dealt in by others.11 Inarguably, a trademark deserves protection. For, as Mr. Justice Frankfurter observed in Mishawaka Mfg. Co. v. Kresge Co.:12 The protection of trademarks is the laws recognition of the psychological function of symbols. If it is true that we live by symbols, it is no less true that we purchase goods by them. A trade-mark is a merchandising short-cut which induces a purchaser to select what he wants, or what he has been led to believe what he wants. The owner of a mark exploits this human propensity by making every effort to impregnate the atmosphere of the market with the drawing power of a congenial symbol. Whatever the means employed, the aim is the same - to convey through the mark, in the minds of potential customers, the desirability of the commodity upon which it appears. Once this is attained, the trade-mark owner has something of value. If another poaches upon the commercial magnetism of the symbol he has created, the owner can obtain legal redress. It is thus understandable for petitioners to invoke in this recourse their entitlement to enforce trademark rights in this country, specifically, the right to sue for trademark infringement in Philippine courts and be accorded protection

against unauthorized use of their Philippine-registered trademarks. In support of their contention respecting their right of action, petitioners assert that, as corporate nationals of membercountries of the Paris Union, they can sue before Philippine courts for infringement of trademarks, or for unfair competition, without need of obtaining registration or a license to do business in the Philippines, and without necessity of actually doing business in the Philippines. To petitioners, these grievance right and mechanism are accorded not only by Section 21-A of Republic Act (R.A.) No. 166, as amended, or the Trademark Law, but also by Article 2 of the Paris Convention for the Protection of Industrial Property, otherwise known as the Paris Convention. In any event, petitioners point out that there is actual use of their trademarks in the Philippines as evidenced by the certificates of registration of their trademarks. The marks "MARK TEN" and "LARK" were registered on the basis of actual use in accordance with Sections 2-A13 and 5(a)14 of R.A. No. 166, as amended, providing for a 2-month preregistration use in local commerce and trade while the registration of "MARK VII" was on the basis of registration in the foreign country of origin pursuant to Section 37 of the same law wherein it is explicitly provided that prior use in commerce need not be alleged.15 Besides, petitioners argue that their not doing business in the Philippines, if that be the case, does not mean that cigarettes bearing their trademarks are not available and sold locally. Citing Converse Rubber Corporation v. Universal Rubber Products, Inc., 16 petitioners state that such availability and sale may be effected through the acts of importers and distributors. Finally, petitioners would press on their entitlement to protection even in the absence of actual use of trademarks in the country in view of the Philippines adherence to the Trade Related Aspects of Intellectual Property Rights or the TRIPS Agreement and the enactment of R.A. No. 8293, or the Intellectual Property Code (hereinafter the "IP Code"), both of which provide that the fame of a trademark may be acquired through promotion or advertising with no explicit requirement of actual use in local trade or commerce. Before discussing petitioners claimed entitlement to enforce trademark rights in the Philippines, it must be emphasized that their standing to sue in Philippine courts had been recognized, and rightly so, by the CA. It ought to be pointed out, however, that the appellate court qualified its holding with a statement, following G.R. No. 91332, entitled Philip Morris, Inc., et al. v. The Court of Appeals and Fortune Tobacco Corporation, 17 that such right to sue does not necessarily mean protection of their registered marks in the absence of actual use in the Philippines. Thus clarified, what petitioners now harp about is their entitlement to protection on the strength of registration of their trademarks in the Philippines. As we ruled in G.R. No. 91332, 18 supra, so it must be here.

Admittedly, the registration of a trademark gives the registrant, such as petitioners, advantages denied nonregistrants or ordinary users, like respondent. But while petitioners enjoy the statutory presumptions arising from such registration,19 i.e., as to the validity of the registration, ownership and the exclusive right to use the registered marks, they may not successfully sue on the basis alone of their respective certificates of registration of trademarks. For, petitioners are still foreign corporations. As such, they ought, as a condition to availment of the rights and privileges vis--vis their trademarks in this country, to show proof that, on top of Philippine registration, their country grants substantially similar rights and privileges to Filipino citizens pursuant to Section 21-A20 of R.A. No. 166. In Leviton Industries v. Salvador,21 the Court further held that the aforementioned reciprocity requirement is a condition sine qua non to filing a suit by a foreign corporation which, unless alleged in the complaint, would justify dismissal thereof, a mere allegation that the suit is being pursued under Section 21-A of R.A. No. 166 not being sufficient. In a subsequent case,22 however, the Court held that where the complainant is a national of a Paris Convention- adhering country, its allegation that it is suing under said Section 21-A would suffice, because the reciprocal agreement between the two countries is embodied and supplied by the Paris Convention which, being considered part of Philippine municipal laws, can be taken judicial notice of in infringement suits.23 As well, the fact that their respective home countries, namely, the United States, Switzerland and Canada, are, together with the Philippines, members of the Paris Union does not automatically entitle petitioners to the protection of their trademarks in this country absent actual use of the marks in local commerce and trade. True, the Philippines adherence to the Paris Convention24 effectively obligates the country to honor and enforce its provisions25 as regards the protection of industrial property of foreign nationals in this country. However, any protection accorded has to be made subject to the limitations of Philippine laws.26 Hence, despite Article 2 of the Paris Convention which substantially provides that (1) nationals of member-countries shall have in this country rights specially provided by the Convention as are consistent with Philippine laws, and enjoy the privileges that Philippine laws now grant or may hereafter grant to its nationals, and (2) while no domicile requirement in the country where protection is claimed shall be required of persons entitled to the benefits of the Union for the enjoyment of any industrial property rights,27 foreign nationals must still observe and comply with the conditions imposed by Philippine law on its nationals. Considering that R.A. No. 166, as amended, specifically Sections 228 and 2-A29 thereof, mandates actual use of the marks and/or emblems in local commerce and trade before they may be registered and ownership thereof acquired, the petitioners cannot, therefore, dispense with the element of actual use. Their being nationals of member-countries of the Paris Union does not alter the legal situation. In Emerald Garment Mfg. Corporation v. Court of Appeals,30 the Court reiterated its rulings in Sterling

Products International, Inc. v. Farbenfabriken Bayer Aktiengesellschaft, 31 Kabushi Kaisha Isetan v. Intermediate Appellate Court, 32 and Philip Morris v. Court of Appeals and Fortune Tobacco Corporation 33 on the importance of actual commercial use of a trademark in the Philippines notwithstanding the Paris Convention: The provisions of the 1965 Paris Convention relied upon by private respondent and Sec. 21-A of the Trademark Law were sufficiently expounded upon and qualified in the recent case of Philip Morris, Inc., et. al. vs. Court of Appeals: xxx xxx xxx

Petitioners reliance on Converse Rubber Corporation38 is quite misplaced, that case being cast in a different factual milieu. There, we ruled that a foreign owner of a Philippine trademark, albeit not licensed to do, and not so engaged in, business in the Philippines, may actually earn reputation or goodwill for its goods in the country. But unlike in the instant case, evidence of actual sales of Converse rubber shoes, such as sales invoices, receipts and the testimony of a legitimate trader, was presented in Converse. This Court also finds the IP Code and the TRIPS Agreement to be inapplicable, the infringement complaint herein having been filed in August 1982 and tried under the aegis of R.A. No. 166, as amended. The IP Code, however, took effect only on January 1, 1998 without a provision as to its retroactivity.39 In the same vein, the TRIPS Agreement was inexistent when the suit for infringement was filed, the Philippines having adhered thereto only on December 16, 1994. With the foregoing perspective, it may be stated right off that the registration of a trademark unaccompanied by actual use thereof in the country accords the registrant only the standing to sue for infringement in Philippine courts. Entitlement to protection of such trademark in the country is entirely a different matter. This brings us to the principal issue of infringement. Section 22 of R.A. No. 166, as amended, defines what constitutes trademark infringement, as follows: Sec. 22. Infringement, what constitutes. Any person who shall use, without the consent of the registrant, any reproduction, counterfeit, copy or colorable imitation of any registered mark or tradename in connection with the sale, offering for sale, or advertising of any goods, business or services on or in connection with which such use is likely to cause confusion or mistake or to deceive purchasers or others as to the source or origin of such goods or services, or identity of such business; or reproduce, counterfeit, copy of color ably imitate any such mark or tradename and apply such reproduction, counterfeit, copy or colorable imitation to labels, signs, prints, packages, wrappers, receptacles or advertisements intended to be used upon or in connection with such goods, business, or services, shall be liable to a civil action by the registrant for any or all of the remedies herein provided. Petitioners would insist on their thesis of infringement since respondents mark "MARK" for cigarettes is confusingly or deceptively similar with their duly registered "MARK VII," "MARK TEN" and "LARK" marks likewise for cigarettes. To them, the word "MARK" would likely cause confusion in the trade, or deceive purchasers, particularly as to the source or origin of respondents cigarettes. The "likelihood of confusion" is the gravamen of trademark infringement.40 But likelihood of confusion is a relative concept, the particular, and sometimes peculiar, circumstances of each case being determinative of its existence. Thus, in trademark infringement cases, more than in other kinds of litigation, precedents must be evaluated in the light of each particular case.41

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

In other words, (a foreign corporation) may have the capacity to sue for infringement but the question of whether they have an exclusive right over their symbol as to justify issuance of the controversial writ will depend on actual use of their trademarks in the Philippines in line with Sections 2 and 2-A of the same law. It is thus incongruous for petitioners to claim that when a foreign corporation not licensed to do business in the Philippines files a complaint for infringement, the entity need not be actually using its trademark in commerce in the Philippines. Such a foreign corporation may have the personality to file a suit for infringement but it may not necessarily be entitled to protection due to absence of actual use of the emblem in the local market. Contrary to what petitioners suggest, the registration of trademark cannot be deemed conclusive as to the actual use of such trademark in local commerce. As it were, registration does not confer upon the registrant an absolute right to the registered mark. The certificate of registration merely constitutes prima facie evidence that the registrant is the owner of the registered mark. Evidence of non-usage of the mark rebuts the presumption of trademark ownership, 34 as what happened here when petitioners no less admitted not doing business in this country. 35 Most importantly, we stress that registration in the Philippines of trademarks does not ipso facto convey an absolute right or exclusive ownership thereof. To borrow from Shangri-La International Hotel Management, Ltd. v. Development Group of Companies, Inc. 36 trademark is a creation of use and, therefore, actual use is a pre-requisite to exclusive ownership; registration is only an administrative confirmation of the existence of the right of ownership of the mark, but does not perfect such right; actual use thereof is the perfecting ingredient. 37

In determining similarity and likelihood of confusion, jurisprudence has developed two tests: the dominancy test and the holistic test. 42 The dominancy test43 sets sight on the similarity of the prevalent features of the competing trademarks that might cause confusion and deception, thus constitutes infringement. Under this norm, the question at issue turns on whether the use of the marks involved would be likely to cause confusion or mistake in the mind of the public or deceive purchasers.44 In contrast, the holistic test45 entails a consideration of the entirety of the marks as applied to the products, including the labels and packaging, in determining confusing similarity. Upon consideration of the foregoing in the light of the peculiarity of this case, we rule against the likelihood of confusion resulting in infringement arising from the respondents use of the trademark "MARK" for its particular cigarette product. For one, as rightly concluded by the CA after comparing the trademarks involved in their entirety as they appear on the products, 46 the striking dissimilarities are significant enough to warn any purchaser that one is different from the other. Indeed, although the perceived offending word "MARK" is itself prominent in petitioners trademarks "MARK VII" and "MARK TEN," the entire marking system should be considered as a whole and not dissected, because a discerning eye would focus not only on the predominant word but also on the other features appearing in the labels. Only then would such discerning observer draw his conclusion whether one mark would be confusingly similar to the other and whether or not sufficient differences existed between the marks. 47 This said, the CA then, in finding that respondents goods cannot be mistaken as any of the three cigarette brands of the petitioners, correctly relied on the holistic test. But, even if the dominancy test were to be used, as urged by the petitioners, but bearing in mind that a trademark serves as a tool to point out distinctly the origin or ownership of the goods to which it is affixed,48 the likelihood of confusion tantamount to infringement appears to be farfetched. The reason for the origin and/or ownership angle is that unless the words or devices do so point out the origin or ownership, the person who first adopted them cannot be injured by any appropriation or imitation of them by others, nor can the public be deceived. 49 Since the word "MARK," be it alone or in combination with the word "TEN" and the Roman numeral "VII," does not point to the origin or ownership of the cigarettes to which they apply, the local buying public could not possibly be confused or deceived that respondents "MARK" is the product of petitioners and/or originated from the U.S.A., Canada or Switzerland. And lest it be overlooked, no actual commercial use of petitioners marks in local commerce was proven. There can thus be no occasion for the public in this country, unfamiliar in the first place with petitioners marks, to be confused. For another, a comparison of the trademarks as they appear on the goods is just one of the appreciable circumstances in

determining likelihood of confusion. Del Monte Corp. v. CA50 dealt with another, where we instructed to give due regard to the "ordinary purchaser," thus: The question is not whether the two articles are distinguishable by their label when set side by side but whether the general confusion made by the article upon the eye of the casual purchaser who is unsuspicious and off his guard, is such as to likely result in his confounding it with the original. As observed in several cases, the general impression of the ordinary purchaser, buying under the normally prevalent conditions in trade and giving the attention such purchasers usually give in buying that class of goods is the touchstone. When we spoke of an "ordinary purchaser," the reference was not to the "completely unwary customer" but to the "ordinarily intelligent buyer" considering the type of product involved.51 It cannot be over-emphasized that the products involved are addicting cigarettes purchased mainly by those who are already predisposed to a certain brand. Accordingly, the ordinary buyer thereof would be all too familiar with his brand and discriminating as well. We, thus, concur with the CA when it held, citing a definition found in Dy Buncio v. Tan Tiao Bok,52 that the "ordinary purchaser" in this case means "one accustomed to buy, and therefore to some extent familiar with, the goods in question." Pressing on with their contention respecting the commission of trademark infringement, petitioners finally point to Section 22 of R.A. No. 166, as amended. As argued, actual use of trademarks in local commerce is, under said section, not a requisite before an aggrieved trademark owner can restrain the use of his trademark upon goods manufactured or dealt in by another, it being sufficient that he had registered the trademark or trade-name with the IP Office. In fine, petitioners submit that respondent is liable for infringement, having manufactured and sold cigarettes with the trademark "MARK" which, as it were, are identical and/or confusingly similar with their duly registered trademarks "MARK VII," "MARK TEN" and "LARK". This Court is not persuaded. In Mighty Corporation v. E & J Gallo Winery, 53 the Court held that the following constitute the elements of trademark infringement in accordance not only with Section 22 of R.A. No. 166, as amended, but also Sections 2, 2-A, 9-A54 and 20 thereof: (a) a trademark actually used in commerce in the Philippines and registered in the principal register of the Philippine Patent Office, (b) is used by another person in connection with the sale, offering for sale, or advertising of any goods, business or services or in connection with which such use is likely to cause confusion or mistake or to deceive purchasers or others as to the source or origin of such goods or services, or identity of such business; or such trademark is reproduced, counterfeited, copied or colorably imitated by another person and such reproduction, counterfeit,

copy or colorable imitation is applied to labels, signs, prints, packages, wrappers, receptacles or advertisements intended to be used upon or in connection with such goods, business or services as to likely cause confusion or mistake or to deceive purchasers, (c) the trademark is used for identical or similar goods, and (d) such act is done without the consent of the trademark registrant or assignee.lawphil.net As already found herein, while petitioners have registered the trademarks "MARK VII," "MARK TEN" and "LARK" for cigarettes in the Philippines, prior actual commercial use thereof had not been proven. In fact, petitioners judicial admission of not doing business in this country effectively belies any pretension to the contrary. Likewise, we note that petitioners even failed to support their claim that their respective marks are well-known and/or have acquired goodwill in the Philippines so as to be entitled to protection even without actual use in this country in accordance with Article 6bis55 of the Paris Convention. As correctly found by the CA, affirming that of the trial court: xxx the records are bereft of evidence to establish that the appellants [petitioners] products are indeed well-known in the Philippines, either through actual sale of the product or through different forms of advertising. This finding is supported by the fact that appellants admit in their Complaint that they are not doing business in the Philippines, hence, admitting that their products are not being sold in the local market. We likewise see no cogent reason to disturb the trial courts finding that the appellants failed to establish that their products are widely known by local purchasers as "(n)o specific magazine or periodical published in the Philippines, or in other countries but circulated locally" have been presented by the appellants during trial. The appellants also were not able to show the length of time or the extent of the promotion or advertisement made to popularize their products in the Philippines. 56 Last, but not least, we must reiterate that the issue of trademark infringement is factual, with both the trial and appellate courts having peremptorily found allegations of infringement on the part of respondent to be without basis. As we said time and time again, factual determinations of the trial court, concurred in by the CA, are final and binding on this Court. 57 For lack of convincing proof on the part of the petitioners of actual use of their registered trademarks prior to

respondents use of its mark and for petitioners failure to demonstrate confusing similarity between said trademarks, the dismissal of their basic complaint for infringement and the concomitant plea for damages must be affirmed. The law, the surrounding circumstances and the equities of the situation call for this disposition. WHEREFORE, the petition is hereby DENIED. Accordingly, the assailed decision and resolution of the Court of Appeals are AFFIRMED. Costs against the petitioners. SO ORDERED. CANCIO C. GARCIA Associate Justice WE CONCUR: REYNATO S. PUNO Associate Justice Chairperson ANGELINA SANDOVALGUTIERREZ Associate Justice ADOLFO S. AZCUNA Associate Justice ATTESTATION I attest that the conclusions in the above decision were reached in consultation before the case was assigned to the writer of the opinion of the Courts Division. REYNATO S. PUNO Associate Justice Chairperson, Second Division C ERTIF IC ATION Pursuant to Article VIII, Section 13 of the Constitution, and the Division Chairperson's Attestation, it is hereby certified that the conclusions in the above decision were reached in consultation before the case was assigned to the writer of the opinion of the Court. ARTEMIO V. PANGANIBAN Chief Justice

RENATO C. CORONA Asscociate Justice

G.R. No. 120900 July 20, 2000 CANON KABUSHIKI KAISHA, petitioner, vs. COURT OF APPEALS and NSR RUBBER CORPORATION, respondents. GONZAGA-REYES, J.: Before us is a petition for review that seeks to set aside the Decision 1 dated February 21, 1995 of the Court of Appeals

in CA-GR SP No. 30203, entitled "Canon Kabushiki Kaisha vs. NSR Rubber Corporation" and its Resolution dated June 27, 1995 denying the motion for reconsideration of herein petitioner Canon Kabushiki Kaisha (petitioner). On January 15, 1985, private respondent NSR Rubber Corporation (private respondent) filed an application for registration of the mark CANON for sandals in the Bureau of Patents, Trademarks, and Technology Transfer (BPTTT). A Verified Notice of Opposition was filed by petitioner, a foreign corporation duly organized and existing under the laws of Japan, alleging that it will be damaged by the registration of the trademark CANON in the name of private respondent. The case was docketed as Inter Partes Case No. 3043. Petitioner moved to declare private respondent in default for its failure to file its answer within the prescribed period. The BPTTT then declared private respondent in default and allowed petitioner to present its evidence ex-parte. Based on the records, the evidence presented by petitioner consisted of its certificates of registration for the mark CANON in various countries covering goods belonging to class 2 (paints, chemical products, toner, and dye stuff). Petitioner also submitted in evidence its Philippine Trademark Registration No. 39398, showing its ownership over the trademark CANON also under class 2. On November 10, 1992, the BPTTT issued its decision dismissing the opposition of petitioner and giving due course to private respondent's application for the registration of the trademark CANON. On February 16, 1993, petitioner appealed the decision of the BPTTT with public respondent Court of Appeals that eventually affirmed the decision of BPTTT. Hence, this petition for review. Petitioner anchors this instant petition on these grounds: A) PETITIONER IS ENTITLED TO EXCLUSIVE USE OF THE MARK CANON BECAUSE IT IS ITS TRADEMARK AND IS USED ALSO FOR FOOTWEAR. B) TO ALLOW PRIVATE RESPONDENT TO REGISTER CANON FOR FOOTWEAR IS TO PREVENT PETITIONER FROM USING CANON FOR VARIOUS KINDS OF FOOTWEAR, WHEN IN FACT, PETITIONER HAS EARLIER USED SAID MARK FOR SAID GOODS. C) PETITIONER IS ALSO ENTITLED TO THE RIGHT TO EXCLUSIVELY USE CANON TO PREVENT CONFUSION OF BUSINESS. D) PETITIONER IS ALSO ENTITLED TO THE EXCLUSIVE USE OF CANON BECAUSE IT FORMS PART OF ITS CORPORATE NAME, PROTECTED BY THE PARIS CONVENTION. 2

The BPTTT and the Court of Appeals share the opinion that the trademark "CANON" as used by petitioner for its paints, chemical products, toner, and dyestuff, can be used by private respondent for its sandals because the products of these two parties are dissimilar. Petitioner protests the appropriation of the mark CANON by private respondent on the ground that petitioner has used and continues to use the trademark CANON on its wide range of goods worldwide. Allegedly, the corporate name or tradename of petitioner is also used as its trademark on diverse goods including footwear and other related products like shoe polisher and polishing agents. To lend credence to its claim, petitioner points out that it has branched out in its business based on the various goods carrying its trademark CANON3, including footwear which petitioner contends covers sandals, the goods for which private respondent sought to register the mark CANON. For petitioner, the fact alone that its trademark CANON is carried by its other products like footwear, shoe polisher and polishing agents should have precluded the BPTTT from giving due course to the application of private respondent. We find the arguments of petitioner to be unmeritorious. Ordinarily, the ownership of a trademark or tradename is a property right that the owner is entitled to protect4 as mandated by the Trademark Law.5 However, when a trademark is used by a party for a product in which the other party does not deal, the use of the same trademark on the latter's product cannot be validly objected to.6 A review of the records shows that with the order of the BPTTT declaring private respondent in default for failure to file its answer, petitioner had every opportunity to present ex-parte all of its evidence to prove that its certificates of registration for the trademark CANON cover footwear. The certificates of registration for the trademark CANON in other countries and in the Philippines as presented by petitioner, clearly showed that said certificates of registration cover goods belonging to class 2 (paints, chemical products, toner, dyestuff). On this basis, the BPTTT correctly ruled that since the certificate of registration of petitioner for the trademark CANON covers class 2 (paints, chemical products, toner, dyestuff), private respondent can use the trademark CANON for its goods classified as class 25 (sandals). Clearly, there is a world of difference between the paints, chemical products, toner, and dyestuff of petitioner and the sandals of private respondent. Petitioner counters that notwithstanding the dissimilarity of the products of the parties, the trademark owner is entitled to protection when the use of by the junior user "forestalls the normal expansion of his business".7 Petitioner's opposition to the registration of its trademark CANON by private respondent rests upon petitioner's insistence that it would be precluded from using the mark CANON for various kinds of footwear, when in fact it has earlier used said mark for said goods. Stretching this argument, petitioner claims that it is possible that the public could presume that petitioner would also produce a wide variety of footwear considering the diversity of its products marketed worldwide. We do not agree. Even in this instant petition, except for its bare assertions, petitioner failed to attach evidence that would convince this Court that petitioner has also embarked in the production of footwear products. We quote with approval the observation of the Court of Appeals that:

"The herein petitioner has not made known that it intends to venture into the business of producing sandals. This is clearly shown in its Trademark Principal Register (Exhibit "U") where the products of the said petitioner had been clearly and specifically described as "Chemical products, dyestuffs, pigments, toner developing preparation, shoe polisher, polishing agent". It would be taxing one's credibility to aver at this point that the production of sandals could be considered as a possible "natural or normal expansion" of its business operation". 8 In Faberge, Incorporated vs. Intermediate Appellate Court,9 the Director of patents allowed the junior user to use the trademark of the senior user on the ground that the briefs manufactured by the junior user, the product for which the trademark BRUTE was sought to be registered, was unrelated and non-competing with the products of the senior user consisting of after shave lotion, shaving cream, deodorant, talcum powder, and toilet soap. The senior user vehemently objected and claimed that it was expanding its trademark to briefs and argued that permitting the junior user to register the same trademark would allow the latter to invade the senior user's exclusive domain. In sustaining the Director of Patents, this Court said that since "(the senior user) has not ventured in the production of briefs, an item which is not listed in its certificate of registration, (the senior user), cannot and should not be allowed to feign that (the junior user) had invaded (the senior user's) exclusive domain."10 We reiterated the principle that the certificate of registration confers upon the trademark owner the exclusive right to use its own symbol only to those goods specified in the certificate, subject to the conditions and limitations stated therein.11 Thus, the exclusive right of petitioner in this case to use the trademark CANON is limited to the products covered by its certificate of registration. Petitioner further argues that the alleged diversity of its products all over the world makes it plausible that the public might be misled into thinking that there is some supposed connection between private respondent's goods and petitioner. Petitioner is apprehensive that there could be confusion as to the origin of the goods, as well as confusion of business, if private respondent is allowed to register the mark CANON. In such a case, petitioner would allegedly be immensely prejudiced if private respondent would be permitted to take "a free ride on, and reap the advantages of, the goodwill and reputation of petitioner Canon".12 In support of the foregoing arguments, petitioner invokes the rulings in Sta. Ana vs. Maliwat13 , Ang vs. Teodoro14 and Converse Rubber Corporation vs. Universal Rubber Products, Inc. 15. The likelihood of confusion of goods or business is a relative concept, to be determined only according to the particular, and sometimes peculiar, circumstances of each case. 16 Indeed, in trademark law cases, even more than in other litigation, precedent must be studied in the light of the facts of the particular case. 17 Contrary to petitioner's supposition, the facts of this case will show that the cases of Sta. Ana vs. Maliwat,, Ang vs. Teodoro and Converse Rubber Corporation vs. Universal Rubber Products, Inc. are hardly in point. The just cited cases involved goods that

were confusingly similar, if not identical, as in the case of Converse Rubber Corporation vs. Universal Rubber Products, Inc. Here, the products involved are so unrelated that the public will not be misled that there is the slightest nexus between petitioner and the goods of private respondent. In cases of confusion of business or origin, the question that usually arises is whether the respective goods or services of the senior user and the junior user are so related as to likely cause confusion of business or origin, and thereby render the trademark or tradenames confusingly similar.18 Goods are related when they belong to the same class or have the same descriptive properties; when they possess the same physical attributes or essential characteristics with reference to their form, composition, texture or quality.19 They may also be related because they serve the same purpose or are sold in grocery stores.20 Thus, in Esso Standard Eastern, Inc. vs. Court of Appeals, this Court ruled that the petroleum products on which the petitioner therein used the trademark ESSO, and the product of respondent, cigarettes are "so foreign to each other as to make it unlikely that purchasers would think that petitioner is the manufacturer of respondent's goods"21. Moreover, the fact that the goods involved therein flow through different channels of trade highlighted their dissimilarity, a factor explained in this wise: "The products of each party move along and are disposed through different channels of distribution. The (petitioner's) products are distributed principally through gasoline service and lubrication stations, automotive shops and hardware stores. On the other hand, the (respondent's) cigarettes are sold in sarisari stores, grocery store, and other small distributor outlets. (Respondnet's) cigarettes are even peddled in the streets while (petitioner's) 'gasul' burners are not. Finally, there is a marked distinction between oil and tobacco, as well as between petroleum and cigarettes. Evidently, in kind and nature the products of (respondent) and of (petitioner) are poles apart."22 Undoubtedly, the paints, chemical products, toner and dyestuff of petitioner that carry the trademark CANON are unrelated to sandals, the product of private respondent. We agree with the BPTTT, following the Esso doctrine, when it noted that the two classes of products in this case flow through different trade channels. The products of petitioner are sold through special chemical stores or distributors while the products of private respondent are sold in grocery stores, sari-sari stores and department stores. 23 Thus, the evident disparity of the products of the parties in the case at bar renders unfounded the apprehension of petitioner that confusion of business or origin might occur if private respondent is allowed to use the mark CANON. In its bid to bar the registration of private respondent of the mark CANON, petitioner invokes the protective mantle of the Paris Convention. Petitioner asserts that it has the

exclusive right to the mark CANON because it forms part of its corporate name or tradename, protected by Article 8 of the Paris Convention, to wit: "A tradename shall be protected in all the countries of the Union without the obligation of filing or registration, whether or not it forms part of a trademark." Public respondents BPTTT and the Court of Appeals allegedly committed an oversight when they required petitioner to prove that its mark is a well-known mark at the time the application of private respondent was filed. Petitioner questions the applicability of the guidelines embodied in the Memorandum of then Minister of Trade and Industry Roberto Ongpin (Ongpin) dated October 25, 1983 which according to petitioner implements Article 6bis of the Paris Convention, the provision referring to the protection of trademarks. The memorandum reads: "a) the mark must be internationally known; b) the subject of the right must be a trademark, not a patent or copyright or anything else; c) the mark must be for use in the same or similar class of goods; d) the person claiming must be the owner of the mark." According to petitioner, it should not be required to prove that its trademark is well-known and that the products are not similar as required by the quoted memorandum. Petitioner emphasizes that the guidelines in the memorandum of Ongpin implement Article 6bis of the Paris Convention, the provision for the protection of trademarks, not tradenames. Article 6bis of the Paris Convention states: (1) The countries of the Union undertake, either administratively if their legislation so permits, or at the request of an interested party, to refuse or to cancel the registration and to prohibit the use of a trademark which constitutes a reproduction, imitation or translation, liable to create confusion, of a mark considered by the competent authority of the country of registration or use to be well-known in that country as being already the mark of a person entitled to the benefits of the present Convention and used for identical or similar goods. These provisions shall also apply when the essential part of the mark constitutes a reproduction of any such well-known mark or an imitation liable to create confusion therewith. (2) A period of at least five years from the date of registration shall be allowed for seeking the cancellation of such a mark. The countries of the Union may provide

for a period within which the prohibition of use must be sought. (3) No time limit shall be fixed for seeking the cancellation or the prohibition of the use of marks or used in bad faith." Petitioner insists that what it seeks is the protection of Article 8 of the Paris Convention, the provision that pertains to the protection of tradenames. Petitioner believes that the appropriate memorandum to consider is that issued by the then Minister of Trade and Industry, Luis Villafuerte, directing the Director of patents to: "reject all pending applications for Philippine registration of signature and other world famous trademarks by applicants other than the original owners or users." As far as petitioner is concerned, the fact that its tradename is at risk would call for the protection granted by Article 8 of the Paris Convention. Petitioner calls attention to the fact that Article 8, even as embodied in par. 6, sec. 37 of RA 166, mentions no requirement of similarity of goods. Petitioner claims that the reason there is no mention of such a requirement, is "because there is a difference between the referent of the name and that of the mark"24 and that "since Art. 8 protects the tradename in the countries of the Union, such as Japan and the Philippines, Petitioner's tradename should be protected here."25 We cannot uphold petitioner's position. The term "trademark" is defined by RA 166, the Trademark Law, as including "any word, name, symbol, emblem, sign or device or any combination thereof adopted and used by a manufacturer or merchant to identify his goods and distinguish them for those manufactured, sold or dealt in by others."26 Tradename is defined by the same law as including "individual names and surnames, firm names, tradenames, devices or words used by manufacturers, industrialists, merchants, agriculturists, and others to identify their business, vocations, or occupations; the names or titles lawfully adopted and used by natural or juridical persons, unions, and any manufacturing, industrial, commercial, agricultural or other organizations engaged in trade or commerce."27 Simply put, a trade name refers to the business and its goodwill; a trademark refers to the goods.28 The Convention of Paris for the Protection of Industrial Property, otherwise known as the Paris Convention, of which both the Philippines and Japan, the country of petitioner, are signatories29, is a multilateral treaty that seeks to protect industrial property consisting of patents, utility models, industrial designs, trademarks, service marks, trade names and indications of source or appellations of origin, and at the same time aims to repress unfair competition.30 We agree with public respondents that the controlling doctrine with respect to the applicability of Article 8 of the Paris Convention is that established in Kabushi Kaisha Isetan vs. Intermediate Appellate Court.31 As pointed out by the BPTTT:

"Regarding the applicability of Article 8 of the Paris Convention, this Office believes that there is no automatic protection afforded an entity whose tradename is alleged to have been infringed through the use of that name as a trademark by a local entity. In Kabushiki Kaisha Isetan vs. The Intermediate Appellate Court, et. al., G.R. No. 75420, 15 November 1991, the Honorable Supreme Court held that: 'The Paris Convention for the Protection of Industrial Property does not automatically exclude all countries of the world which have signed it from using a tradename which happens to be used in one country. To illustrate if a taxicab or bus company in a town in the United Kingdom or India happens to use the tradename "Rapid Transportation", it does not necessarily follow that "Rapid" can no longer be registered in Uganda, Fiji, or the Philippines. This office is not unmindful that in the Treaty of Paris for the Protection of Intellectual Property regarding wellknown marks and possible application thereof in this case. Petitioner, as this office sees it, is trying to seek refuge under its protective mantle, claiming that the subject mark is well known in this country at the time the then application of NSR Rubber was filed. However, the then Minister of Trade and Industry, the Hon. Roberto V. Ongpin, issued a memorandum dated 25 October 1983 to the Director of Patents, a set of guidelines in the implementation of Article 6bis (sic) of the Treaty of Paris. These conditions are: a) the mark must internationally known; be

c) the mark must be for use in the same or similar kinds of goods; and d) the person claiming must be the owner of the mark (The Parties Convention Commentary on the Paris Convention. Article by Dr. Bogsch, Director General of the World Intellectual Property Organization, Geneva, Switzerland, 1985)' From the set of facts found in the records, it is ruled that the Petitioner failed to comply with the third requirement of the said memorandum that is the mark must be for use in the same or similar kinds of goods. The Petitioner is using the mark "CANON" for products belonging to class 2 (paints, chemical products) while the Respondent is using the same mark for sandals (class 25). Hence, Petitioner's contention that its mark is well-known at the time the Respondent filed its application for the same mark should fail. "32 Petitioner assails the application of the case of Kabushi Kaisha Isetan vs. Intermediate Appellate Court to this case. Petitioner points out that in the case of Kabushi Kaisha Isetan vs. Intermediate Appellate Court, petitioner therein was found to have never at all conducted its business in the Philippines unlike herein petitioner who has extensively conducted its business here and also had its trademark registered in this country. Hence, petitioner submits that this factual difference renders inapplicable our ruling in the case of Kabushi Kaisha Isetan vs. Intermediate Appellate Court that Article 8 of the Paris Convention does not automatically extend protection to a tradename that is in danger of being infringed in a country that is also a signatory to said treaty. This contention deserves scant consideration. Suffice it to say that the just quoted pronouncement in the case of Kabushi Kaisha Isetan vs. Intermediate Appellate Court, was made independent of the factual finding that petitioner in said case had not conducted its business in this country. WHEREFORE, in view of the foregoing, the instant petition for review on certiorari is DENIED for lack of merit. SO ORDERED. Melo, (Chairman), Vitug, Panganiban, and Pursima, JJ., concur.

b) the subject of the right must be a trademark, not a patent or copyright or anything else;

G.R. No. 112012 April 4, 2001 SOCIETE DES PRODUITS NESTLE, S.A. and NESTLE PHILIPPINES, INC., petitioners, vs. COURT OF APPEALS and CFC CORPORATION., respondents. YNARES-SANTIAGO, J.: This is a petition for review assailing the Decision of the Court of Appeals in CA-G.R. SP No. 24101, 1 reversing and

setting aside the decision of the Bureau of Patents, Trademarks and Technology Transfer (BPTTT), 2 which denied private respondents application for registration of the trade-mark, FLAVOR MASTER. On January 18, 1984, private respondent CFC Corporation filed with the BPTTT an application for the registration of the trademark "FLAVOR MASTER" for instant coffee, under Serial No. 52994. The application, as a matter of due course, was published in the July 18, 1988 issue of the BPTTTs Official Gazette. Petitioner Societe Des Produits Nestle, S.A., a Swiss company registered under Swiss laws and domiciled in Switzerland, filed an unverified Notice of Opposition,3 claiming that the trademark of private respondents product is "confusingly similar to its trademarks for coffee and coffee extracts, to wit: MASTER ROAST and MASTER BLEND." Likewise, a verified Notice of Opposition was filed by Nestle Philippines, Inc., a Philippine corporation and a licensee of Societe Des Produits Nestle S.A., against CFCs application for registration of the trademark FLAVOR MASTER. 4 Nestle claimed that the use, if any, by CFC of the trademark FLAVOR MASTER and its registration would likely cause confusion in the trade; or deceive purchasers and would falsely suggest to the purchasing public a connection in the business of Nestle, as the dominant word present in the three (3) trademarks is "MASTER"; or that the goods of CFC might be mistaken as having originated from the latter. In answer to the two oppositions, CFC argued that its trademark, FLAVOR MASTER, is not confusingly similar with the formers trademarks, MASTER ROAST and MASTER BLEND, alleging that, "except for the word MASTER (which cannot be exclusively appropriated by any person for being a descriptive or generic name), the other words that are used respectively with said word in the three trademarks are very different from each other in meaning, spelling, pronunciation, and sound". CFC further argued that its trademark, FLAVOR MASTER, "is clearly very different from any of Nestles alleged trademarks MASTER ROAST and MASTER BLEND, especially when the marks are viewed in their entirety, by considering their pictorial representations, color schemes and the letters of their respective labels." In its Decision No. 90-47 dated December 27, 1990, the BPTTT denied CFCs application for registration.5 CFC elevated the matter to the Court of Appeals, where it was docketed as CA-G.R. SP No. 24101. The Court of Appeals defined the issue thus: "Does appellant CFCs trade dress bear a striking resemblance with appellees trademarks as to create in the purchasing publics mind the mistaken impression that both coffee products come from one and the same source?" As stated above, the Court of Appeals, in the assailed decision dated September 23, 1993, reversed Decision No. 90-47 of the BPTTT and ordered the Director of Patents to approve CFCs application. The Court of Appeals ruled:

Were We to take even a lackadaisical glance at the overall appearance of the contending marks, the physical discrepancies between appellant CFCs and appellees respective logos are so ostensible that the casual purchaser cannot likely mistake one for the other. Appellant CFCs label (Exhibit "4") is predominantly a blend of dark and lighter shade of orange where the words "FLAVOR MASTER", "FLAVOR" appearing on top of "MASTER", shaded in mocha with thin white inner and outer sidings per letter and identically lettered except for the slightly protruding bottom curve of the letter "S" adjoining the bottom tip of the letter "A" in the word "MASTER", are printed across the top of a simmering red coffee cup. Underneath "FLAVOR MASTER" appears "Premium Instant Coffee" printed in white, slim and slanted letters. Appellees "MASTER ROAST" label (Exhibit "7"), however, is almost double the width of appellant CFCs. At the top is printed in brown color the word "NESCAFE" against a white backdrop. Occupying the center is a square-shaped configuration shaded with dark brown and picturing a heap of coffee beans, where the word "MASTER" is inscribed in the middle. "MASTER" in appellees label is printed in taller capital letters, with the letter "M" further capitalized. The letters are shaded with red and bounded with thin gold-colored inner and outer sidings. Just above the word "MASTER" is a red window like portrait of what appears to be a coffee shrub clad in gold. Below the "MASTER" appears the word "ROAST" impressed in smaller, white print. And further below are the inscriptions in white: "A selection of prime Arabica and Robusta coffee." With regard to appellees "MASTER BLEND" label (Exhibit "6") of which only a xeroxed copy is submitted, the letters are bolder and taller as compared to appellant CFCs and the word "MASTER" appears on top of the word "BLEND" and below it are the words "100% pure instant coffee" printed in small letters. From the foregoing description, while the contending marks depict the same product, the glaring dissimilarities in their presentation far outweigh and dispel any aspect of similitude. To borrow the words of the Supreme Court in American Cyanamid Co. v. Director of Patents (76 SCRA 568), appellant CFCs and appellees labels are entirely different in size, background, colors, contents and pictorial arrangement; in short, the general appearances of the labels bearing the respective trademarks are so distinct from each other that appellees cannot assert that

the dominant features, if any, of its trademarks were used or appropriated in appellant CFCs own. The distinctions are so well-defined so as to foreclose any probability or likelihood of confusion or deception on the part of the normally intelligent buyer when he or she encounters both coffee products at the grocery shelf. The answer therefore to the query is a clear-cut NO.6 Petitioners are now before this Court on the following assignment of errors: 1. RESPONDENT COURT GRAVELY ERRED IN REVERSING AND SETTING ASIDE THE DECISION (NO. 90-47) OF THE DIRECTOR OF THE BUREAU OF PATENTS, TRADEMARKS AND TECHNOLOGY TRANSFER (BPTTT) DATED DECEMBER 27, 1990. 2. RESPONDENT COURT ERRED IN FINDING THAT APPELLANT CFCS TRADE DRESS IS BEYOND THE SCOPE OF THE PROSCRIPTION LAID DOWN BY JURISPRUDENCE AND THE TRADEMARK LAW. 3. RESPONDENT COURT ERRED IN HOLDING THAT THE TOTALITY RULE, RATHER THAN THE TEST OF DOMINANCY, APPLIES TO THE CASE. 4. RESPONDENT COURT ERRED IN INVOKING THE TOTALITY RULE APPLIED IN THE CASES OF BRISTOL MYERS V. DIRECTOR OF PATENTS, ET AL. (17 SCRA 128), MEAD JOHNSON & CO. V. NVJ VAN DORF LTD., (7 SCRA 768) AND AMERICAN CYANAMID CO. V. DIRECTOR OF PATENTS (76 SCRA 568). The petition is impressed with merit. A trademark has been generally defined as "any word, name, symbol or device adopted and used by a manufacturer or merchant to identify his goods and distinguish them from those manufactured and sold by others."7 A manufacturers trademark is entitled to protection. As Mr. Justice Frankfurter observed in the case of Mishawaka Mfg. Co. v. Kresge Co.:8 The protection of trade-marks is the laws recognition of the psychological function of symbols. If it is true that we live by symbols, it is no less true that we purchase goods by them. A trade-mark is a merchandising short-cut which induces a purchaser to select what he wants, or what he has been led to believe he wants. The

owner of a mark exploits this human propensity by making every effort to impregnate the atmosphere of the market with the drawing power of a congenial symbol. Whatever the means employed, the aim is the same --- to convey through the mark, in the minds of potential customers, the desirability of the commodity upon which it appears. Once this is attained, the trade-mark owner has something of value. If another poaches upon the commercial magnetism of the symbol he has created, the owner can obtain legal redress. Section 4 (d) of Republic Act No. 166 or the Trademark Law, as amended, which was in force at the time, provides thus: Registration of trade-marks, trade-names and service-marks on the principal register. - There is hereby established a register of trade-marks, trade-names and service marks which shall be known as the principal register. The owner of a trademark, trade-name or service-mark used to distinguish his goods, business or services from the goods, business or services of others shall have the right to register the same on the principal register, unless it: xxx xxx xxx

(d) Consists of or comprises a mark or trade-name which so resembles a mark or trade-name registered in the Philippines or a mark or trade-name previously used in the Philippines by another and not abandoned, as to be likely, when applied to or used in connection with the goods, business or services of the applicant, to cause confusion or mistake or to deceive purchasers; xxx xxx xxx

(Emphasis supplied) The law prescribes a more stringent standard in that there should not only be confusing similarity but that it should not likely cause confusion or mistake or deceive purchasers. Hence, the question in this case is whether there is a likelihood that the trademark FLAVOR MASTER may cause confusion or mistake or may deceive purchasers that said product is the same or is manufactured by the same company. In other words, the issue is whether the trademark FLAVOR MASTER is a colorable imitation of the trademarks MASTER ROAST and MASTER BLEND. Colorable imitation denotes such a close or ingenious imitation as to be calculated to deceive ordinary persons, or such a resemblance to the original as to deceive an ordinary purchaser giving such attention as a purchaser usually gives, as to cause him to purchase the one supposing it to be the

other. 9 In determining if colorable imitation exists, jurisprudence has developed two kinds of tests - the Dominancy Test and the Holistic Test.10 The test of dominancy focuses on the similarity of the prevalent features of the competing trademarks which might cause confusion or deception and thus constitute infringement. On the other side of the spectrum, the holistic test mandates that the entirety of the marks in question must be considered in determining confusing similarity.11 In the case at bar, the Court of Appeals held that: The determination of whether two trademarks are indeed confusingly similar must be taken from the viewpoint of the ordinary purchasers who are, in general, undiscerningly rash in buying the more common and less expensive household products like coffee, and are therefore less inclined to closely examine specific details of similarities and dissimilarities between competing products. The Supreme Court in Del Monte Corporation v. CA, 181 SCRA 410, held that: "The question is not whether the two articles are distinguishable by their labels when set side by side but whether the general confusion made by the article upon the eye of the casual purchaser who is unsuspicious and off his guard, is such as to likely result in his confounding it with the original. As observed in several cases, the general impression of the ordinary purchaser, buying under the normally prevalent conditions in trade and giving the attention such purchasers usually give in buying that class of goods, is the touchstone." From this perspective, the test of similarity is to consider the two marks in their entirety, as they appear in the respective labels, in relation to the goods to which they are attached (Bristol Myers Company v. Director of Patents, et al., 17 SCRA 128, citing Mead Johnson & Co. v. NVJ Van Dorp, Ltd., et al., 7 SCRA 768). The mark must be considered as a whole and not as dissected. If the buyer is deceived, it is attributable to the marks as a totality, not usually to any part of it (Del Monte Corp. v. CA, supra), as what appellees would want it to be when they essentially argue that much of the confusion springs from appellant CFCs use of the word "MASTER" which appellees claim to be the dominant feature of their own trademarks that captivates the prospective consumers. Be it further emphasized that the discerning eye of the observer must focus not only on the

predominant words but also on the other features appearing in both labels in order that he may draw his conclusion whether one is confusingly similar to the other (Mead Johnson & Co. v. NVJ Van Dorp, Ltd., supra).12 The Court of Appeals applied some judicial precedents which are not on all fours with this case. It must be emphasized that in infringement or trademark cases in the Philippines, particularly in ascertaining whether one trademark is confusingly similar to or is a colorable imitation of another, no set rules can be deduced. Each case must be decided on its own merits.13 In Esso Standard, Inc. v. Court of Appeals, 14 we ruled that the likelihood of confusion is a relative concept; to be determined only according to the particular, and sometimes peculiar, circumstances of each case. In trademark cases, even more than in any other litigation, precedent must be studied in light of the facts of the particular case. The wisdom of the likelihood of confusion test lies in its recognition that each trademark infringement case presents its own unique set of facts. Indeed, the complexities attendant to an accurate assessment of likelihood of confusion require that the entire panoply of elements constituting the relevant factual landscape be comprehensively examined.15 The Court of Appeals application of the case of Del Monte Corporation v. Court of Appeals16 is, therefore, misplaced. In Del Monte, the issue was about the alleged similarity of Del Montes logo with that of Sunshine Sauce Manufacturing Industries. Both corporations market the catsup product which is an inexpensive and common household item. Since Del Monte alleged that Sunshines logo was confusingly similar to or was a colorable imitation of the formers logo, there was a need to go into the details of the two logos as well as the shapes of the labels or marks, the brands printed on the labels, the words or lettering on the labels or marks and the shapes and colors of the labels or marks. The same criteria, however, cannot be applied in the instant petition as the facts and circumstances herein are peculiarly different from those in the Del Monte case. In the same manner, the Court of Appeals erred in applying the totality rule as defined in the cases of Bristol Myers v. Director of Patents;17 Mead Johnson & Co. v. NVJ Van Dorf Ltd.;18 and American Cyanamid Co. v. Director of Patents.19 The totality rule states that "the test is not simply to take their words and compare the spelling and pronunciation of said words. In determining whether two trademarks are confusingly similar, the two marks in their entirety as they appear in the respective labels must be considered in relation to the goods to which they are attached; the discerning eye of the observer must focus not only on the predominant words but also on the other features appearing on both labels."20 As this Court has often declared, each case must be studied according to the peculiar circumstances of each case. That is the reason why in trademark cases, jurisprudential precedents should be applied only to a case if they are specifically in point.

In the above cases cited by the Court of Appeals to justify the application of the totality or holistic test to this instant case, the factual circumstances are substantially different. In the Bristol Myers case, this Court held that although both BIOFERIN and BUFFERIN are primarily used for the relief of pains such as headaches and colds, and their names are practically the same in spelling and pronunciation, both labels have strikingly different backgrounds and surroundings. In addition, one is dispensable only upon doctors prescription, while the other may be purchased over-the-counter. In the Mead Johnson case, the differences between ALACTA and ALASKA are glaring and striking to the eye. Also, ALACTA refers to "Pharmaceutical Preparations which Supply Nutritional Needs," falling under Class 6 of the official classification of Medicines and Pharmaceutical Preparations to be used as prescribed by physicians. On the other hand, ALASKA refers to "Foods and Ingredients of Foods" falling under Class 47, and does not require medical prescription. In the American Cyanamid case, the word SULMET is distinguishable from the word SULMETINE, as the former is derived from a combination of the syllables "SUL" which is derived from sulfa and "MET" from methyl, both of which are chemical compounds present in the article manufactured by the contending parties. This Court held that the addition of the syllable "INE" in respondents label is sufficient to distinguish respondents product or trademark from that of petitioner. Also, both products are for medicinal veterinary use and the buyer will be more wary of the nature of the product he is buying. In any case, both products are not identical as SULMETs label indicates that it is used in a drinking water solution while that of SULMETINE indicates that they are tablets. It cannot also be said that the products in the above cases can be bought off the shelf except, perhaps, for ALASKA. The said products are not the usual "common and inexpensive" household items which an "undiscerningly rash" buyer would unthinkingly buy.In the case at bar, other than the fact that both Nestles and CFCs products are inexpensive and common household items, the similarity ends there. What is being questioned here is the use by CFC of the trademark MASTER. In view of the difficulty of applying jurisprudential precedents to trademark cases due to the peculiarity of each case, judicial fora should not readily apply a certain test or standard just because of seeming similarities. As this Court has pointed above, there could be more telling differences than similarities as to make a jurisprudential precedent inapplicable. Nestle points out that the dominancy test should have been applied to determine whether there is a confusing similarity between CFCs FLAVOR MASTER and Nestles MASTER ROAST and MASTER BLEND. We agree. As the Court of Appeals itself has stated, "[t]he determination of whether two trademarks are indeed confusingly similar must be taken from the viewpoint of the ordinary purchasers who are, in general, undiscerningly rash in buying the more common and less expensive household

products like coffee, and are therefore less inclined to closely examine specific details of similarities and dissimilarities between competing products."21 The basis for the Court of Appeals application of the totality or holistic test is the "ordinary purchaser" buying the product under "normally prevalent conditions in trade" and the attention such products normally elicit from said ordinary purchaser. An ordinary purchaser or buyer does not usually make such scrutiny nor does he usually have the time to do so. The average shopper is usually in a hurry and does not inspect every product on the shelf as if he were browsing in a library.22 The Court of Appeals held that the test to be applied should be the totality or holistic test reasoning, since what is of paramount consideration is the ordinary purchaser who is, in general, undiscerningly rash in buying the more common and less expensive household products like coffee, and is therefore less inclined to closely examine specific details of similarities and dissimilarities between competing products. This Court cannot agree with the above reasoning. If the ordinary purchaser is "undiscerningly rash" in buying such common and inexpensive household products as instant coffee, and would therefore be "less inclined to closely examine specific details of similarities and dissimilarities" between the two competing products, then it would be less likely for the ordinary purchaser to notice that CFCs trademark FLAVOR MASTER carries the colors orange and mocha while that of Nestles uses red and brown. The application of the totality or holistic test is improper since the ordinary purchaser would not be inclined to notice the specific features, similarities or dissimilarities, considering that the product is an inexpensive and common household item. It must be emphasized that the products bearing the trademarks in question are "inexpensive and common" household items bought off the shelf by "undiscerningly rash" purchasers. As such, if the ordinary purchaser is "undiscerningly rash", then he would not have the time nor the inclination to make a keen and perceptive examination of the physical discrepancies in the trademarks of the products in order to exercise his choice. While this Court agrees with the Court of Appeals detailed enumeration of differences between the respective trademarks of the two coffee products, this Court cannot agree that totality test is the one applicable in this case. Rather, this Court believes that the dominancy test is more suitable to this case in light of its peculiar factual milieu. Moreover, the totality or holistic test is contrary to the elementary postulate of the law on trademarks and unfair competition that confusing similarity is to be determined on the basis of visual, aural, connotative comparisons and overall impressions engendered by the marks in controversy as they are encountered in the realities of the marketplace.23 The totality or holistic test only relies on visual comparison between two trademarks whereas the dominancy test relies not only on the visual but also on the aural and connotative comparisons and overall impressions between the two trademarks.

For this reason, this Court agrees with the BPTTT when it applied the test of dominancy and held that: From the evidence at hand, it is sufficiently established that the word MASTER is the dominant feature of opposers mark. The word MASTER is printed across the middle portion of the label in bold letters almost twice the size of the printed word ROAST. Further, the word MASTER has always been given emphasis in the TV and radio commercials and other advertisements made in promoting the product. This can be gleaned from the fact that Robert Jaworski and Atty. Ric Puno Jr.., the personalities engaged to promote the product, are given the titles Master of the Game and Master of the Talk Show, respectively. In due time, because of these advertising schemes the mind of the buying public had come to learn to associate the word MASTER with the opposers goods. x x x. It is the observation of this Office that much of the dominance which the word MASTER has acquired through Opposers advertising schemes is carried over when the same is incorporated into respondent-applicants trademark FLAVOR MASTER. Thus, when one looks at the label bearing the trademark FLAVOR MASTER (Exh. 4) ones attention is easily attracted to the word MASTER, rather than to the dissimilarities that exist. Therefore, the possibility of confusion as to the goods which bear the competing marks or as to the origins thereof is not farfetched. x x x. 24 In addition, the word "MASTER" is neither a generic nor a descriptive term. As such, said term can not be invalidated as a trademark and, therefore, may be legally protected. Generic terms 25 are those which constitute "the common descriptive name of an article or substance," or comprise the "genus of which the particular product is a species," or are "commonly used as the name or description of a kind of goods," or "imply reference to every member of a genus and the exclusion of individuating characters," or "refer to the basic nature of the wares or services provided rather than to the more idiosyncratic characteristics of a particular product," and are not legally protectable. On the other hand, a term is descriptive26 and therefore invalid as a trademark if, as understood in its normal and natural sense, it "forthwith conveys the characteristics, functions, qualities or ingredients of a product to one who has never seen it and does not know what it is," or "if it forthwith conveys an immediate idea of the ingredients, qualities or characteristics of the goods," or if it clearly denotes what goods or services are provided in such a way that the consumer does not have to exercise powers of perception or imagination. Rather, the term "MASTER" is a suggestive term brought about by the advertising scheme of Nestle. Suggestive terms27 are those which, in the phraseology of one court,

require "imagination, thought and perception to reach a conclusion as to the nature of the goods." Such terms, "which subtly connote something about the product," are eligible for protection in the absence of secondary meaning. While suggestive marks are capable of shedding "some light" upon certain characteristics of the goods or services in dispute, they nevertheless involve "an element of incongruity," "figurativeness," or " imaginative effort on the part of the observer." This is evident from the advertising scheme adopted by Nestle in promoting its coffee products. In this case, Nestle has, over time, promoted its products as "coffee perfection worthy of masters like Robert Jaworski and Ric Puno Jr." In associating its coffee products with the term "MASTER" and thereby impressing them with the attributes of said term, Nestle advertised its products thus: Robert Jaworski. Living Legend. A true hard court hero. Fast on his feet. Sure in every shot he makes. A master strategist. In one word, unmatched. MASTER ROAST. Equally unmatched. Rich and deeply satisfying. Made from a unique combination of the best coffee beans - Arabica for superior taste and aroma, Robusta for strength and body. A masterpiece only NESCAFE, the worlds coffee masters, can create. MASTER ROAST. Coffee perfection worthy of masters like Robert Jaworski. 28 In the art of conversation, Ric Puno Jr. is master. Witty. Well-informed. Confident. In the art of coffee-making, nothing equals Master Roast, the coffee masterpiece from Nescafe, the worlds coffee masters. A unique combination of the best coffee beans - Arabica for superior taste and aroma, Robusta for strength and body. Truly distinctive and rich in flavor. Master Roast. Coffee perfection worthy of masters like Ric Puno Jr.29 The term "MASTER", therefore, has acquired a certain connotation to mean the coffee products MASTER ROAST and MASTER BLEND produced by Nestle. As such, the use by CFC of the term "MASTER" in the trademark for its coffee product FLAVOR MASTER is likely to cause confusion or mistake or even to deceive the ordinary purchasers. In closing, it may not be amiss to quote the case of American Chicle Co. v. Topps Chewing Gum, Inc., 30 to wit: Why it should have chosen a mark that had long been employed by [plaintiff] and had become known to the trade instead of adopting some other means of identifying

its goods is hard to see unless there was a deliberate purpose to obtain some advantage from the trade that [plaintiff] had built up. Indeed, it is generally true that, as soon as we see that a second comer in a market has, for no reason that he can assign, plagiarized the "make-up" of an earlier comer, we need no more; . . . [W]e feel bound to compel him to exercise his ingenuity in quarters further afield.

WHEREFORE, in view of the foregoing, the decision of the Court of Appeals in CA-G.R. SP No. 24101 is REVERSED and SET ASIDE and the decision of the Bureau of Patents, Trademarks and Technology Transfer in Inter Partes Cases Nos. 3200 and 3202 is REINSTATED. SO ORDERED. Davide, Jr., C.J. (Chairman), Kapunan, and Pardo, JJ., concur. Puno J., on official leave.

G.R. No. L-26676 July 30, 1982 PHILIPPINE REFINING CO., INC., petitioner, vs. NG SAM and THE DIRECTOR OF PATENTS, respondents. Ponce Enrile, Siguion Reyna, Montecillo & Bello and Associates for petitioner. Primitivo C. Bucasas for respondents. ESCOLIN, J.: The sole issue raised in this petition for review of the decision of the Director of patents is whether or not the product of respondent, Ng Sam, which is ham, and those of petitioner consisting of lard, butter, cooking oil and soap are so related that the use of the same trademark "CAMIA" on said goods would likely result in confusion as to their source or origin. The trademark "CAMIA" was first used ill the Philippines by petitioner on its products in 1922. In 1949, petitioner caused the registration of said trademark with the Philippine Patent Office under certificates of registration Nos. 1352-S and 1353-S, both issued on May 3, 1949. Certificate of Registration No. 1352-S covers vegetable and animal fats, particularly lard, butter and cooking oil, all classified under Class 47 (Foods and Ingredients of Food) of the Rules of Practice of the Patent Office, while certificate of registration No. 1353-S applies to abrasive detergents, polishing materials and soap of all kinds (Class 4). On November 25, 1960, respondent Ng Sam, a citizen residing in Iloilo City, filed an application with the Philippine Patent office for registration of the Identical trademark "CAMIA" for his product, ham, which likewise falls under Class 47. Alleged date of first use of the trademark by respondent was on February 10, 1959. After due publication of the application, petitioner filed an opposition, in accordance with Section 8 of Republic Act No. 166, otherwise known as the Trademark Law, as amended. Basis of petitioner's opposition was Section 4(d) of said law, which provides as unregistrable: a mark which consists of or comprises a mark or tradename which so resembles a mark or tradename registered in the Philippines or a mark or tradename previously used in the Philippines by another and not abandoned, as to be likely, when applied to or used in connection with the goods, business services of the applicant, to cause confusion or mistake or to deceive purchasers. The parties submitted the case for decision without presenting any evidence: thereafter the Director of patents rendered a decision allowing registration of the trademark "CAMIA" in favor of Ng Sam. Petitioner moved for a reconsideration, but the same was denied. Hence, this petition. A rudimentary precept in trademark protection is that "the right to a trademark is a limited one, in the sense that others may used the same mark on unrelated goods." 1 Thus, as pronounced by the United States Supreme Court in the case of American Foundries vs. Robertson 2, "the mere fact that one person has adopted and used a trademark on his goods does not prevent the adoption and use of the same trademark by others on articles of a different description." Such restricted right over a trademark is likewise reflected in our Trademark law. Under Section 4(d) of the law, registration of a trademark which so resembles another already registered or in use should be denied, where to allow such registration could likely result in confusion, mistake or deception to the consumers. Conversely, where no confusion is likely to arise, as in this case, registration of a similar or even Identical mark may be allowed. The term "CAMIA" is descriptive of a whole genus of garden plants with fragrant white flowers. Some people call the "CAMIA" the "white ginger plant" because of its tuberous roots, while children refer to it as the butterfly flower because of its shape. Being a generic and common term, its appropriation as a trademark, albeit in a fanciful manner in that it bears no relation to the product it Identifies, is valid. However, the degree of exclusiveness accorded to each user is closely restricted. 3 The records of this case disclose that the term "CAMIA" has been registered as a trademark not only by petitioner but by two (2) other concerns, as follows: 1. CAMIA Application No. 280 Registration No. SR-320 Date Registered May 26, 1960 Owner

Everbright Development Company Business Address 310 M. H. del Pilar Grace Park, Caloocan City Class 4 Thread and Yarn 2. CAMIA and Representation Application No. 538 Date Filed August 10, 1945 Date Registered - April 20, 1946 Owner F.E. Zuellig, Inc. Business Address 55 Rosario St., Manila Class 43 Particular Good on which mark is used: Textiles, Embroideries laces, etc. A trademark is designed to Identify the user. But it should be so distinctive and sufficiently original as to enable those who come into contact with it to recognize instantly the Identity of the user. " It must be affirmative and definite, significant and distinctive, capable to indicate origin." 4 It is evident that "CAMIA" as a trademark is far from being distinctive. By itself, it does not Identify petitioner as the manufacturer or producer of the goods upon which said mark is used, as contra-distinguished to trademarks derived from coined words such as "Rolex", "Kodak" or "Kotex". It has been held that if a mark is so commonplace that it cannot be readily distinguished from others, then it is apparent that it cannot Identify a particular business; and he who first adopted it cannot be injured by any subsequent appropriation or imitation by others, and the public will not be deceived." 5 The trademark "CAMIA" is used by petitioner on a wide range of products: lard, butter, cooking oil, abrasive detergents, polishing materials and soap of all kinds. Respondent desires to use the same on his product, ham. While ham and some of the products of petitioner are classified under Class 47 (Foods and Ingredients of Food), this alone cannot serve as the decisive factor in the resolution of whether or not they are related goods. Emphasis should be on the similarity of the products involved and not on the arbitrary classification or general description of their properties or characteristics. In his decision, the Director of Patents enumerated the factors that set respondent's product apart from the goods of petitioner. He opined and We quote: I have taken into account such factors as probable purchaser attitude and habits, marketing activities, retail outlets, and commercial impression likely to be conveyed by the trademarks if used in conjunction with the respective goods of the parties. I believe that ham on one hand, and lard, butter, oil, and soap on the other are products that would not move in the same manner through the same channels of trade. They pertain to unrelated fields of manufacture, might be distributed and marketed under dissimilar conditions, and are displayed separately even though they frequently may be sold through the same retail food establishments. Opposer's products are ordinary day-to-day household items whereas ham is not necessarily so. Thus, the goods of the parties are not of a character which purchasers would be likely to attribute to a common origin. (p. 23, Rollo).

The observation and conclusion of the Director of Patents are correct. The particular goods of the parties are so unrelated that consumers would not in any probability mistake one as the source or origin of the product of the other. "Ham" is not a daily food fare for the average consumer. One purchasing ham would exercise a more cautious inspection of what he buys on account of it price. Seldom, if ever, is the purchase of said food product delegated to household helps, except perhaps to those who, like the cooks, are expected to know their business. Besides, there can be no likelihood for the consumer of respondent's ham to confuse its source as anyone but respondent. The facsimile of the label attached by him on his product, his business name "SAM'S HAM AND BACON FACTORY" written in bold white letters against a reddish orange background 6, is certain to catch the eye of the class of consumers to which he caters. In addition, the goods of petitioners are basically derived from vegetable oil and animal fats, while the product of respondent is processed from pig's legs. A consumer would not reasonably assume that, petitioner has so diversified its business as to include the product of respondent. Mr. Runolf Callman, in Section 80.3, VOL. I, p. 1121 of his book, Unfair Competition and Trade Marks, declare: While confusion of goods can only be evident, where the litigants are actually in competition, confusion of business may arise between noncompetitive interests as well. This is true whether or not the trademarks are registered. Sec. 16 of the Trademark Act, in referring to 'merchandise of substantially the same descriptive properties, embraces competitive and non-competitive trademark infringement but it is not so extensive as to be applicable to cases where the public would not reasonably expect the plaintiff to make or sell the same class of goods as those made or sold by the defendant. (Emphasis supplied). In fine, We hold that the businesss of the parties are noncompetitive and their products so unrelated that the use of Identical trademarks is not likely to give rise to confusion, much less cause damage to petitioner. WHEREFORE, the instant petition is hereby dismissed and the decision of the Director of Patents in Inter Partes Case No. 231 affirmed in toto. Costs against petitioner. SO ORDERED. Barredo (Chairman), Aquino, Concepcion, Jr., Guerrero, Abad Santos and De Castro, JJ., concur. Separate Opinions DE CASTRO, J., dissenting: I vote to grant the petition of the Philippine Refining Co. Inc. As the registered owner and prior user of the trademark, "CAMIA" on a wide variety of products such as lard, butter, cooking oil, abrasive detergents, polishing materials and soap of all kinds, the respondent's ham which comes under

the same classification of "Food and Ingredients of Foods" under which petitioner has registered its trademark, if given the same trademark, "CAMIA" is likely to confuse the public that the source of the ham is the petitioner. if the respondent's ham is of poor quality, petitioner's business may thus be affected adversely as a result, while from the standpoint of the purchasers, some measure of deception may take effect upon them. Thus, the use of the same trademark on the ham would likely result in confusion as to the source or origin thereof, to the damage or detriment of the petitioner. The purpose of the law will be served better by not allowing the registration of the trademark "CAMIA" for respondent's ham, with such a limitless number of other words respondent may choose from, as trademark for his product. Separate Opinions DE CASTRO, J., dissenting:

I vote to grant the petition of the Philippine Refining Co. Inc. As the registered owner and prior user of the trademark, "CAMIA" on a wide variety of products such as lard, butter, cooking oil, abrasive detergents, polishing materials and soap of all kinds, the respondent's ham which comes under the same classification of "Food and Ingredients of Foods" under which petitioner has registered its trademark, if given the same trademark, "CAMIA" is likely to confuse the public that the source of the ham is the petitioner. if the respondent's ham is of poor quality, petitioner's business may thus be affected adversely as a result, while from the standpoint of the purchasers, some measure of deception may take effect upon them. Thus, the use of the same trademark on the ham would likely result in confusion as to the source or origin thereof, to the damage or detriment of the petitioner. The purpose of the law will be served better by not allowing the registration of the trademark "CAMIA" for respondent's ham, with such a limitless number of other words respondent may choose from, as trademark for his product.

G.R. No. L-14761 January 28, 1961 ARCE SONS AND COMPANY, petitioner, vs. SELECTA BISCUIT COMPANY, INC., ET AL., respondents. x---------------------------------------------------------x G.R. No. L-17981 January 28, 1961 milk and ice cream from the time of its organization and even prior thereto by its predecessor-in-interest, Ramon Arce; (2) that the mark "SELECTA" has already become identified with name of the petitioner and its business; (3) that petitioner had warned respondent not to use said mark because it was already being used by the former, but that the latter ignored said warning; (4) that respondent is using the word "SELECTA" as a trade-mark as bakery products in unfair competition with the products of petitioner thus resulting in confusion in trade; (5) that the mark to which the application of respondent refers has striking resemblance, both in appearance and meaning, to petitioner's mark as to be mistaken therefor by the public and cause respondent's goods to be sold as petitioner's; and (6) that actually a complaint has been filed by the petitioner against respondent for unfair competition in the Court of First Instance of Manila asking for damages and for the issuance of a writ of injunction against respondent enjoining the latter for continuing with the use of said mark. On September 28, 1958, the Court of First Instance of Manila rendered decision in the unfair competition case perpetually enjoining respondent from using the name "SELECTA" as a trade-mark on the goods manufactured and/or sold by it and ordering it to pay petitioner by way of damages all the profits it may have realized by the use of said name, plus the sum of P5,000.00 as attorney's fee and costs of suit. From this decision, respondent brought the matter on appeal to the Court of Appeals wherein the case was docketed as CA-G.R. No. 24017-R. Inasmuch as the issues of the facts in the case of unfair competition are substantially identical with those raised before the Patent Office, the parties at the hearing thereof, agreed to submit the evidence they introduced before the Court of First Instance of Manila to said office, and on the strength thereof, the Director of Patents, on December 7, 1958, rendered decision dismissing petitioner's opposition

ARCE SONS AND COMPANY, plaintiff-appellee, vs. SELECTA BISCUIT COMPANY, INC., defendantappellant. Manuel O. Chan and Ramon S. Ereeta for plaintiffappellee. E. Voltaire Garcia for defendant-appellant. BAUTISTA ANGELO, J.: On August 31, 1955, Selecta Biscuit Company, Inc., hereinafter referred to as respondent, filed with the Philippine Patent Office a petition for the registration of the word "SELECTA" as trade-mark to be use in its bakery products alleging that it is in actual use thereof for not less than two months before said date and that "no other persons, partnership, corporation or association ... has the right to use said trade-mark in the Philippines, either in the identical form or in any such near resemblance thereto, as might be calculated to deceive." Its petition was referred to an examiner for study who found that the trade-mark sought to be registered resembles the word "SELECTA" used by the Acre and Sons and Company, hereinafter referred to as petitioner, in its milk and ice cream products so that its use by respondent will cause confusion as to the origin of their respective goods. Consequently, he recommended that the application be refused. However, upon reconsideration, the Patent Office ordered the publication of the application for purposes of opposition. In due time, petitioner filed its opposition thereto on several grounds, among which are: (1) that the mark "SELECTA" had been continuously used by petitioner in the manufacture and sale of its products, including cakes, bakery products,

and stating that the registration of the trade-mark "SELECTA" in favor of applicant Selecta Biscuits Company, Inc. will not cause confusion or mistake nor will deceive the purchasers as to the cause damage to petitioner. Hence, petitioner interposed the present petition for review. On September 7, 1960, this Court issued a resolution of the following tenor: In G.R. No. L-14761 (Arce Sons and Company vs. Selecta Biscuits Company, Inc., et al.), considering that the issue raised and evidence presented in this appeal are the same as those involved and presented in Civil Case No. 32907, entitled Arce Sons and Company vs. Selecta Biscuit Company, Inc. of the Court of First Instance of Manila, presently pending appeal in the Court of Appeals, docketed as CA-G.R. No. 24017-R, the Court resolved to require the parties, or their counsel, to inform this Court why the appeal pending before the Court of Appeals should not be forwarded to this Court in order that the two cases may be consolidated and jointly decided, to avoid any conflicting decision, pursuant to the provisions of section 17, paragraph 5, of the Judiciary Act of 1948 (Republic Act No. 296). And having both petitioner and respondent manifested in writing that they do not register any objection that the case they submitted on appeal to the Court of Appeals be certified to this Court so that it may be consolidated with the present case, the two cases are now before us for consolidated decision. The case for petitioner is narrated in the decision of the court a quo as follows: . "In 1933, Ramon Arce, predecessor in interest of the plaintiff, started a milk business in Novaliches, Rizal, using the name 'SELECTA' as a trade-name as well as a trade-mark. He begun selling and distributing his products to different residences, restaurants and offices, in bottles on the caps of which were inscribed the words 'SELECTA FRESH MILK.' As his business prospered, he thought of expanding and, in facts, he expanded his business by establishing a store at Nos. 711-713 Lepanto Street. While there, he began to cater, in addition to milk, ice cream, sandwiches and other food products. As his catering and ice cream business prospered in a big way, he placed a sign signboard in his establishment with the name 'SELECTA' inscribed thereon. This signboard was place right in front of the said store. For the sake of efficiency, the Novaliches place was made the pasteurizing plant and its products were distributed through the Lepanto store. Special containers made of tin cans with the words 'SELECTA' written on their covers and 'embossed or blown' on the bottles themselves were used. Similarly, exclusive bottles for milk products were ordered from Getz Brothers with the word 'SELECTA 'blown on them. The

sandwiches which were sold and distributed were wrapped in carton boxes with covers bearing the name 'SELECTA.' To the ordinary cars being used for the delivery of his products to serve outside orders were added to a fleet of five (5) delivery trucks with the word 'SELECTA ' prominently painted on them. Sales were made directly at the Lepanto store or by means of deliveries to specified addresses, restaurants and offices inside Manila and its suburbs and sometimes to customers in the provinces. As time passed, new products were produced for sale, which as cheese (cottage cheese) with special containers especially ordered from the Philippine Education Company with the 'SELECTA ' written on their covers. The war that broke out on December 8, 1941, did not stop Ramon Arce from continuing with his business. After a brief interruption of about a mouth, that is, during the end of January, 1942, and early February, 1942, he resumed his business using the same trade-name and trademark, but this time, on a large scale. He entered the restaurant business. Dairy products ice cream, milk, sandwiches continued to be sold and distributed by him. However, Ramon Arce was again forced to discontinue the business on October, 1944, because time was beginning to be precarious. American planes started to bomb Manila and one of his sons, Eulalio Arce, who was managing the business, was seized by the Japanese. Liberation came and immediately thereafter. Ramon Arce once more resumed his business, even more actively, by adding another store located at the corner of Lepanto and Azcarraga Streets. Continuing to use the name 'Selecta,' he added bakery products to his line of business. With a firewood type of oven, about one-half the size of the courtroom, he made his own bread, cookies, pastries and assorted bakery products. Incidentally, Arce's bakery was transferred to Balintawak, Quezon City another expansion of his business where the bakery products are now being baked thru the use of firewood, electric and gas oven. These bakery products, like his other products, are being sold the store itself and /or delivered to people ordering them in Manila and even Baguio. Like the other products, special carton boxes in different sizes, according to the bakery products, with the name 'Selecta' on top of the covers are provided for these bakery products. For the cakes, special boxes and labels reading 'Selecta Cakes for all occasions' are made. For the milk products, special bottle caps and bottles with the colored words 'Quality Always Selecta Fresh Milk, One Pint' inscribed and blown on the sides of the bottles - an innovation from the old bottles and caps used formerly. Similar, special boxes with the name 'Selecta 'are provided for fried chicken sold to customers. Business being already well established, Ramon Arce decided to retire, so that his children can go on with the business. For this purpose, he

transferred and leased to them all his rights, interest and participations in the business, including the use of the name of 'Selecta,' sometime in the year 1950, at a monthly rental of P10,000.00, later reduced to P6,500.00. He further wrote the Bureau of Commerce letter dated February 10, 1950, requesting cancellation of the business name 'Selecta Restaurant' to give way to the registration of the same 'Selecta' and asked that the same be registered in the name of Arce Sons & Company, a co-partnership entered into by and among his children on February 10, 1950. Said co-partnership was organized, so its articles of co-partnership state, 'conduct a first class restaurant business; to engage in the manufacture and sale of ice cream, milk, cakes and other dairy and bakery products; and to carry on such other legitimate business as may produce profit'; Arce Sons & Company has thus continued the lucrative business of their predecessor in interest. It is now, and has always been, engaged in the restaurant business, the sale of milk, and the production and sale of cakes, dairy products and bakery products. Arce Sons & Company are now making bakery products like bread rolls, pan de navaro, pan de sal, and other types, of cookies and biscuit of the round, hard and other types, providing thereof special boxes with the same "Selecta'. Pursuing the policy of expansion adopted by their predecessor, Arce Sons & Company established another store the now famous 'Selecta Dewey Boulevard', with seven (7) delivery trucks with the 'Selecta ' conspicuously painted on them, to serve, deliver, and cater to customers in and outside of Manila." . The case for respondent on the other hand, is expressed as follows: Defendant was organized and registered as a corporation under the name and style of Selecta Biscuit Company, Inc. on March 2, 1955 (Exhibit 2-A; p. 3, April 17, 1958) but started operation as a biscuit factory on June 20 1955 (t.s.n. p.3, id). The name 'Selecta' was chosen by the organizers of defendant who are Chinese citizens as a translation of the Chinese word 'Ching Suan' which means 'mapili' in Tagalog, and Selected' in English (t.s.n. p, id.). Thereupon, the Articles of Incorporation of Selecta Biscuit Company, Inc. were registered with the Securities and Exchange Commission (t.s.n. P.5. id.), and at the same time registered as a business name with the Bureau of Commerce which issued certificate of registration No. 55594 (Exhibit 3; Exhibit 3-A). The same name Selecta Biscuit Company, Inc. was also subsequently registered with the Bureau of Internal Revenue which issued Registration Certificate No. 35764 (Exhibit 4, t.s.n., p. id.). Inquiries were also made with the Patent Office of 'Selecta'; after an official of the Patent referred to index cards information was furnished to the effect that defendant could register the name 'Selecta' with

the Bureau of Patents (t.s.n. ,p.7, id). Accordingly, the corresponding petition for registration of trade-mark was filed (Exhs. 5,5-A, Exhibit 5-B). Defendant actually operated its business factory on June 20, 1955, while the petition for registration of trade-mark 'Selecta' was filed with the Philippine Patent Office only on September 1, 1955, for the Philippine Patent Office informed the defendant that the name should first be used before registration (t.s.n. p.8 ,id.). The factory of defendant is located at Tuazon Avenue, Northern Hills, Malabon, Rizal, showing plainly on its wall facing the streets the name 'SELECTA BISCUIT COMPANY, INC.' (Exhs. 6, 6-a 6-B, t.s.n., p. 9, id.). It is significant to note that Eulalio Arce, Managing Partner of the plaintiff resided and resides near the defendant's factory, only around 150 meters away ; in fact, Arce use to pass in front of the factory of defendant while still under construction and up to the present time (t.s.n., pp. 9, 10, id.). Neither Eulalio Arce nor any other person in representation of the plaintiff complained to the defendant about the use of the name 'Selecta Biscuit' until of the present complaint. There are other factories using 'Selecta as trademark for biscuit (t.s.n., p. 12; Exhs. 7, 7-A,7-B; Exhibit 8, 8-A, 8-B; Exhibits Exhibit 9, 9-A, 9B); defendant in fact uses different kinds of trade-mark (Exhibit 10, 10-A, to 10-W, t.s.n., p. 17). The biscuits, cookies, and crackers manufactured and sold by defendant are wrapped in cellophane pouches and place inside tin can (Exh. 11; t.s.n. p. 19); the products of defendant are sold through the length and breadth of the Philippines through agents with more than one hundred 600 stores as customers buying on credit (t.s.n.) pp. 19, 20, Exh. 12; t.s.n., p. 10, June 20, 1958). Defendant employs more than one hundred (100) laborers and employees presently although it started with around seventy (70) employees and laborers (t.s.n. p. 24); its present capitalization fully paid is Two Hundred Thirty Four Thousand Pesos (P234,000.00.)additional capitalization's were duly authorized by the Securities and Exchange Commission (Exhs. 13, 13-A) there was no complaint whatsoever from plaintiff saw defendant's business growing bigger and bigger and flourishing (t.s.n., p. 21); when plaintiff filed its complaint. Defendant advertises its products through radio broadcast and spot announcement (Exhs. 14, 14A to 14-L; inclusive Exhs. 15, 15-A, 15-B, 15-C; Exh. 16, 16-A, 16-B to 16-E, inclusive; Exhs. 17, 17-B to 17-L, inclusive); the broadcasts scripts announced therein through the radio clearly show, among others, that Selecta Biscuit are manufactured by Selecta Company, Inc. at Tuazon Avenue, Northern Hills, Malabon, Rizal, with Telephone ]No. 2-13-27 (Exhs. 23-A 23-B, 23-D, 23-E, 23-F).

Besides the signboard, 'Selecta Biscuit Company, Inc.' on the building itself, defendant has installed signboard along the highways to indicate the location of the factory of defendant (Exhs. 18, 18-A); delivery trucks defendant are plainly carrying signboards Selecta Biscuit Company, Inc., Tuazon Avenue, Northern Hills Malabon, Rizal, Telephone No. 2-13-27 (Exhs. 19, 19-A, 19-B, 19-C 19-D,19-E,19-F). Defendant is using modern machineries in its biscuit factory (Exhs. 20, 20-A, 20-B, 19-C, 20D, 20-E). The defendant sells its products thoughout 20-C, 20-D,20-E). The defendant sells its product throughout the Philippines, including Luzon , Visayas, Mindanao; its customers count, among others, 600 stores buying on credit; its stores buying on cash number around 50 (t.s.n.), p. 10). Sales in Manila and suburbs are minimal, (Exh. 12). Defendant is a wholesaler and not a retailer of biscuits, cookies and crackers. This is the nature of the operation of the business of the defendant." At the outset one cannot but note that in the two cases appealed before us which involve the same parties and the same issues of fact and law, the Court a quo and the Director of Patents have rendered contradictory decisions. While the former is of the opinion that the word 'SELECTA' has been used by the petitioner, or its predecessor-ininterest, as a trade-mark in the sale and distribution of its dairy and bakery products as early as 1933 to the extent that it has acquired a proprietary connotation so that to allow respondent to use it now as a trade-mark in its business would be an usurpation of petitioner's goodwill and an infringement of its property right, the Director of Patents entertained a contrary opinion. He believes that the word as used by the petitioner functions only to point to the place of business or location of its restaurant while the same word as used by respondent points to the origin of the products its manufactures and sells and he predicates this distinction upon the fact that while the goods of petitioner are only served within its restaurant or sold only on special orders in the City of Manila, respondent's goods are ready-made and are for sale throughout the length and breadth of the country. He is of the opinion that the use of said trade-mark by respondent has not resulted in confusion in trade contrary to the finding of the court a quo. Which of this opinions is correct is the issue now for determination. It appears that Ramon Arce, predecessor-in-interest of petitioner, started his milk business as early as 1933. He sold his milk products in bottles covered with caps on which the words 'SELECTA FRESH MILK' were inscribed. Expanding his business, he established a store at Lepanto Street, City of Manila, where he sold, in addition to his products, ice cream, sandwiches and other food products, placing right in front of his establishment a signboard with the name 'SELECTA' inscribed thereon. Special containers made of tin cans with the word 'SELECTA' written on their covers were used for his products. Bottle with the same word embossed on their sides were used for his milk products. The sandwiches he sold and distributed were wrapped in carton boxes with covers bearing the same name. He used several cars and trucks for delivery purposes on the sides of which were written the same word. As new products were produced for sale, the same were placed in

containers with the same name written on their covers. After the war, he added to his business such items as cakes, bread, cookies, pastries, and assorted bakery products. Then his business was acquired by petitioner, a co-partnership organized by his sons, the purposes of which are "to conduct a first class restaurant business; to engage in the manufacture and sale of ice cream, milk, cakes and other products; and to carry on such other legitimate business as may produce profit." The foregoing unmistakably show that petitioner, through its predecessor-in-interest, had made use of the word "SELECTA" not only as a trade-name indicative of the location of the restaurant where it manufactures and sells its products, but as trade-mark is used. This is not only in accordance with its general acceptation but with our law on the matter. " Trade-mark' or trade-name', distinction being highly technical, is sign, device, or mark by which articles produced are dealt in by particular person or organization are distinguished or distinguishable from those produced or dealt in by other." (Church of God v. Tomlinson Church of God, 247 SW 2d, 63,64)" A 'trade-mark' is a distinctive mark of authenticity through which the merchandise of a particular producer or manufacturer may be distinguished from that of others, and its sole function is to designate distinctively the origin of the products to which it is attached." (Reynolds & Reynolds Co. v. Nordic, et. al., 114F 2d, 278) " The term 'trade-mark' includes any word, name, symbol, emblem, sign or device or any combination thereof adopted and used by a manufacturer or merchant to identify his goods and distinguish them from those manufactured, sold or dealt in by others." (Section 38, Republic Act No. 166). Verily, the word 'SELECTA' has been chosen by petitioner and has been inscribed on all its products to serve not only as a sign or symbol that may indicate that they are manufactured and sold by it but as a mark of authenticity that may distinguish them from the products manufactured and sold by other merchants or businessmen. The Director of Patents, therefore, erred in holding that petitioner made use of that word merely as a trade-name and not as a trademark within the meaning of the law.1 The word 'SELECTA', it is true, may be an ordinary or common word in the sense that may be used or employed by any one in promoting his business or enterprise, but once adopted or coined in connection with one's business as an emblem, sign or device to characterize its products, or as a badge of authenticity, it may acquire a secondary meaning as to be exclusively associated with its products and business.2 In this sense, its used by another may lead to confusion in trade and cause damage to its business. And this is the situation of petitioner when it used the word 'SELECTA' as a trade-mark. In this sense, the law gives its protection and guarantees its used to the exclusion of all

others a (G. & C. Merriam Co. v. Saalfield, 198 F. 369, 373). And it is also in the sense that the law postulates that "The ownership or possession of a trade-mark, . . . shall be recognized and protected in the same manner and to the same extent, as are other property rights known to the law," thereby giving to any person entitled to the exclusive use of such trade-mark the right to recover damages in a civil action from any person who may have sold goods of similar kind bearing such trade-mark (Sections 2-A and 23, Republic Act No. 166, as amended). The term 'SELECTA' may be placed at par with the words "Ang Tibay" which this Court has considered not merely as a descriptive term within the meaning of the Trade-mark Law but as a fanciful or coined phrase, or a trade-mark. In that case, this Court found that respondent has constantly used the term "Ang Tibay" , both as a trade-mark and a trade-name, in the manufacture and sale of slippers, shoes and indoor baseballs for twenty-two years before petitioner registered it as a trade-name for pants and shirts so that it has performed during that period the function of a trademark to point distinctively, or by its own meaning or by association, to the origin or ownership of the wares to which it applies. And holding that respondent was entitled to protection in the use of that trade-mark, this Court made the following comment: The function of a trade-mark is to point distinctively, either by its own meaning or by association, to the origin or ownership of the wares to which it is applied. 'Ang Tibay' as used by the respondent to designate his wares, had exactly performed that function for twenty-two years before the petitioner adopted it as a trademark in her own business. 'Ang Tibay' shoes and slippers are, by association, known throughout the Philippines as products of the 'Ang Tibay" factory owned and operated by the respondent. Even if 'AngTibay', therefore, were not capable of exclusive appropriation as a trade-mark, the application of the doctrine of secondary meaning could nevertheless be fully sustained because, in any event, by respondent's long and exclusive appropriation with reference to an article on the market, because geographically or otherwise descriptive, might nevertheless have been used so long and exclusively by one producer with reference to his article that, in that trade and to that branch of the purchasing public, the word or phrase has come to mean that article was his product." (Ang v. Teodoro, supra.). The rationale in the Ang Tibay case applies on all fours to the case of petitioner. But respondent claims that it adopted the trade-mark 'SELECTA' in good faith and not precisely to engage in unfair competition with petitioner. It tried to establish that respondent was organized as a corporation under the name of Selecta Biscuit Company, Inc. on March 2, 1955 and started operations as a biscuit factory on June 20, 1955; that the name 'SELECTA' was chosen by the organizers of respondent who are Chinese citizens as a translation of the Chinese word "Ching Suan" which means "mapili" in Tagalog, and "Selected" in English; that , thereupon, it registered its articles of incorporation with the Securities

and Exchange Commission and the name 'SELECTA' as a business name with the Bureau of Commerce which issued to it Certificate of Registration No. 55594; and that it also registered the same trade-name with the Bureau of Internal Revenue and took steps to obtain a patent from the Patent Office by filing with it as application for the registration of said trade-name. The suggestion that the name 'SELECTA' was chosen by the organizers of respondent merely as a translation from a Chinese word "Ching Suan" meaning "mapili" in the dialect is betrayed by the very manner of its selection, for if the only purpose is to make an English translation of that word and not to compete with the business of petitioner, why chose the word 'SELECTA', a Spanish word, and not "Selected", the English equivalent thereof, as was done by other well-known enterprises? In the words of petitioner's counsel, "Why with all the words in the English dictionary and all the words in the Spanish dictionary and all the phrases that could be coined, should defendant-appellant (respondent) choose 'SELECTA' if its purpose was not and is not to fool the people and to damage plaintiff-appellee?" In this respect, we find appropriate the following comment of the trial court: Eventually, like the plaintiff, one is tempted to ask as to why with the richness in words of the English language and with the affluence of the Spanish vocabulary or, for that matter, of our own dialects, should the defendant choose the controverted word "Selecta", which has already acquired a secondary meaning by virtue of plaintiff's prior and continued use of the same as a trade-mark or trade-name of its products? The explanation given by Sy Hap, manager of the defendant, that the word 'Selecta' was chosen for its bakery products by the organizers of said company from the Chinese word 'Ching Suan' meaning 'mapili', which in English translation , is to say the least, very weak and untenable. Sy Hap himself admitted that he had known Eulalio Arce, the person managing plaintiff's business, since 1954; that since he began to reside at 10th Avenue, Grace Park, he had known the Selecta Restaurant on Azcarraga Street and Dewey Blvd. and that he even had occasion to eat in one of the restaurants of the plaintiff. All of these circumstances tend to conspire in inducing one to doubt defendant's motive for using the same word "Selecta" for its bakery products. To allow the defendant here to use the word "Selecta" in spite of the fact that this word has already been adopted and exploited by Ramon Arce and by his family thru the organization of Arce Sons and Company, for the maintenance of its goodwill, for which said plaintiff and its predecessor have spent time, effort and fortune, is to permit business pirates and buccaneers to appropriate for themselves and to their profit and advantage the trade names and trade marks of well established merchants with all their attendant good will and commercial benefit. Certainly, this cannot be allowed, and it becomes the duty of the court to protect the legitimate owners of said trade-names and trade-marks, for under the law,

the same constitute one kind of property right entitled to the necessary legal protection. Other points raised by respondent to show that the trial court erred in holding that the adoption by it of the word 'SELECTA' is tantamount to unfair competition are: (1) that its products are biscuits, crackers, and cookies, wrapped in cellophane packages, place in tin containers, and that its products may last a year with out spoilage, while the ice cream, milk, cakes and other bakery products which petitioner manufactures last only for two or three days; (2) that the sale and distribution of petitioner's products are on retail basis, limited to the City of Manila and suburbs, and its place of business is localized at Azcarraga, corner of Lepanto Street and at Dewey Blvd., Manila, while that of respondent is on a wholesale basis, extending throughout the length and breadth of the Philippines; (3) that petitioner's signboard on its place of business reads 'SELECTA' and on its delivery trucks "Selecta, Quality Always, Restaurant and Caterer, Azcarraga, Dewey Blvd., Balintawak and Telephone number," in contrast with respondent's signboard on its factory which reads "Selecta Biscuit Company, Inc.," and on its delivery trucks "Selecta Biscuit Company, Inc., Tuason Avenue, Malabon, Rizal, Telephone No. 2-13-27; (4) that the business name of petitioner is different from the business name of respondent; (5) that petitioner has only a capital investment of P25,000.00 whereas respondent has a fully paid-up stock in the amount of P234,000.00 out of the P500,000.00 authorized capital, (6) that the use of the name 'SELECTA' by respondent cannot lead to confusion in the business operation of the parties. G.R. No. L-27906 January 8, 1987 CONVERSE RUBBER CORPORATION, petitioner, vs. UNIVERSAL RUBBER PRODUCTS, INC. and TIBURCIO S. EVALLE, DIRECTOR OF PATENTS, respondents. Parades, Poblador, Nazareno, Azada & Tomacruz for petitioner. RESOLUTION FERNAN, J.: The undisputed facts of the case are as follows: Respondent Universal Rubber Products, Inc. filed an application with the Philippine Patent office for registration of the trademark "UNIVERSAL CONVERSE AND DEVICE" used on rubber shoes and rubber slippers. Petitioner Converse Rubber Corporation filed its opposition to the application for registration on grounds that: a] The trademark sought to be registered is confusingly similar to the word "CONVERSE" which is part of petitioner's corporate name "CONVERSE RUBBER CORPORATION" as to likely deceive purchasers of products on which it is to be used to an extent that said products may be mistaken by the unwary public to be manufactured by the petitioner; and,

We have read carefully the reasons advanced in support of the points raised by counsel in an effort to make inroads into the findings of the court a quo on unfair competition, but we believe them to be substantial and untenable. They appear to be well answered and refuted by counsel for petitioner in his brief, which refutation we do not need to repeat here. Suffice it to state that we agree with the authorities and reasons advanced therein which incidentally constitute the best support of the decision of the court a quo. With regard to the claim that petitioner failed to present sufficient evidence on the contract of lease of the business from its predecessor-in-interest, we find that under the circumstances secondary evidence is admissible. In view of the foregoing, we hold that the Director of Patents committed an error in dismissing the opposition of petitioner and in holding that the registration of the trademark 'SELECTA' in favor of respondent will not cause damage to petitioner, and consequently, we hereby reverse his decision. Consistently with this finding, we hereby affirm the decision of the court a quo rendered in G.R. No. L-17981. No costs. Paras, C.J., Bengzon, Labrador, Reyes, J.B.L. Barrera, Gutierrez David, Paredes and Dizon., JJ., concur. Padilla, and Concepcion, JJ., took no part.

b] The registration of respondent's trademark will cause great and irreparable injury to the business reputation and goodwill of petitioner in the Philippines and would cause damage to said petitioner within the, meaning of Section 8, R.A. No. 166, as amended. Thereafter, respondent filed its answer and at the pre-trial, the parties submitted the following partial stipulation of facts: 1] The petitioner's corporate name is "CONVERSE RUBBER CORPORATION" and has been in existence since July 31, 1946; it is duly organized under the laws of Massachusetts, USA and doing business at 392 Pearl St., Malden, County of Middle sex, Massachusetts; 2] Petitioner is not licensed to do business in the Philippines and it is not doing business on its own in the Philippines; and, 3] Petitioner manufacturers rubber shoes and uses thereon the trademarks "CHUCK TAYLOR "and "ALL STAR AND DEVICE". 1 At the trial, petitioner's lone witness, Mrs. Carmen B. Pacquing, a duly licensed private merchant with stores at the Sta. Mesa Market and in Davao City, testified that she had been selling CONVERSE rubber shoes in the local market since 1956 and that sales of petitioner's rubber shoes in her stores averaged twelve to twenty pairs a month purchased mostly by basketball players of local private educational institutions like Ateneo, La Salle and San Beda.

Mrs. Pacquing, further stated that she knew petitioner's rubber shoes came from the United States "because it says there in the trademark Converse Chuck Taylor with star red or blue and is a round figure and made in U.S.A. " 2 In the invoices issued by her store, the rubber shoes were described as "Converse Chuck Taylor", 3 "Converse All Star," 4 "All Star Converse Chuck Taylor," 5 or "Converse Shoes Chuck Taylor." 6 She also affirmed that she had no business connection with the petitioner. Respondent, on the other hand, presented as its lone witness the secretary of said corporation who testified that respondent has been selling on wholesale basis "Universal Converse" sandals since 1962 and "Universal Converse" rubber shoes since 1963. Invoices were submitted as evidence of such sales. The witness also testified that she had no Idea why respondent chose "Universal Converse" as a trademark and that she was unaware of the name "Converse" prior to her corporation's sale of "Universal Converse" rubber shoes and rubber sandals. Eventually, the Director of Patents dismissed the opposition of the petitioner and gave due course to respondent's application. His decision reads in part: ... the only question for determination is whether or not the applicant's partial appropriation of the Opposer's [petitioner'] corporate name is of such character that in this particular case, it is calculated to deceive or confuse the public to the injury of the corporation to which the name belongs ... I cannot find anything that will prevent registration of the word 'UNIVERSAL CONVERSE' in favor of the respondent. In arriving at this conclusion, I am guided by the fact that the opposer failed to present proof that the single word "CONVERSE' in its corporate name has become so Identified with the corporation that whenever used, it designates to the mind of the public that particular corporation. The proofs herein are sales made by a single witness who had never dealt with the petitioner . . . the entry of Opposer's [petitioner's] goods in the Philippines were not only effected in a very insignificant quantity but without the opposer [petitioner] having a direct or indirect hand in the transaction so as to be made the basis for trademark pre- exemption. Opposer's proof of its corporate personality cannot establish the use of the word "CONVERSE" in any sense, as it is already stipulated that it is not licensed to do business in the Philippines, and is not doing business of its own in the Philippines. If so, it will be futile for it to establish that "CONVERSE" as part of its corporate name Identifies its rubber shoes. Besides, it was also stipulated that opposer [petitioner], in manufacturing rubber shoes uses thereon the trademark "CHUCK TAYLOR" and "ALL STAR and DEVICE" and none other.

Furthermore, inasmuch as the Opposer never presented any label herein, or specimen of its shoes, whereon the label may be seen, notwithstanding its witness' testimony touching upon her Identification of the rubber shoes sold in her stores, no determination can be made as to whether the word 'CONVERSE' appears thereon. . . .the record is wanting in proof to establish likelihood of confusion so as to cause probable damage to the Opposer. 7 Its motion for reconsideration having been denied by the respondent Director of Patents, petitioner instituted the instant petition for review. As correctly phrased by public respondent Director of Patents, the basic issue presented for our consideration is whether or not the respondent's partial appropriation of petitioner's corporate name is of such character that it is calculated to deceive or confuse the public to the injury of the petitioner to which the name belongs. A trade name is any individual name or surname, firm name, device or word used by manufacturers, industrialists, merchants and others to Identify their businesses, vocations or occupations. 8 As the trade name refers to the business and its goodwill ... the trademark refers to the goods." 9 The ownership of a trademark or tradename is a property right which the owner is entitled to protect "since there is damage to him from confusion or reputation or goodwill in the mind of the public as well as from confusion of goods. The modern trend is to give emphasis to the unfairness of the acts and to classify and treat the issue as fraud. 10 From a cursory appreciation of the petitioner's corporate name "CONVERSE RUBBER CORPORATION,' it is evident that the word "CONVERSE" is the dominant word which Identifies petitioner from other corporations engaged in similar business. Respondent, in the stipulation of facts, admitted petitioner's existence since 1946 as a duly organized foreign corporation engaged in the manufacture of rubber shoes. This admission necessarily betrays its knowledge of the reputation and business of petitioner even before it applied for registration of the trademark in question. Knowing, therefore, that the word "CONVERSE" belongs to and is being used by petitioner, and is in fact the dominant word in petitioner's corporate name, respondent has no right to appropriate the same for use on its products which are similar to those being produced by petitioner. A corporation is entitled to the cancellation of a mark that is confusingly similar to its corporate name."11 "Appropriation by another of the dominant part of a corporate name is an infringement."12 Respondent's witness had no Idea why respondent chose "UNIVERSAL CONVERSE" as trademark and the record discloses no reasonable explanation for respondent's use of the word "CONVERSE" in its trademark. Such unexplained use by respondent of the dominant word of petitioner's

corporate name lends itself open to the suspicion of fraudulent motive to trade upon petitioner's reputation, thus: A boundless choice of words, phrases and symbols is available to one who wishes a trademark sufficient unto itself to distinguish his product from those of others. When, however, there is no reasonable explanation for the defendant's choice of such a mark though the field for his selection was so broad, the inference is inevitable that it was chosen deliberately to deceive. 13 The testimony of petitioner's witness, who is a legitimate trader as well as the invoices evidencing sales of petitioner's products in the Philippines, give credence to petitioner's claim that it has earned a business reputation and goodwill in this country. The sales invoices submitted by petitioner's lone witness show that it is the word "CONVERSE" that mainly Identifies petitioner's products, i.e. "CONVERSE CHUCK TAYLOR, 14 "CONVERSE ALL STAR," 15 ALL STAR CONVERSE CHUCK TAYLOR," 16 or "CONVERSE SHOES CHUCK and TAYLOR." 17 Thus, contrary to the determination of the respondent Director of Patents, the word "CONVERSE" has grown to be Identified with petitioner's products, and in this sense, has acquired a second meaning within the context of trademark and tradename laws. Furthermore, said sales invoices provide the best proof that there were actual sales of petitioner's products in the country and that there was actual use for a protracted period of petitioner's trademark or part thereof through these sales. "The most convincing proof of use of a mark in commerce is testimony of such witnesses as customers, or the orders of buyers during a certain period. 18 Petitioner's witness, having affirmed her lack of business connections with petitioner, has testified as such customer, supporting strongly petitioner's move for trademark pre-emption. The sales of 12 to 20 pairs a month of petitioner's rubber shoes cannot be considered insignificant, considering that they appear to be of high expensive quality, which not too many basketball players can afford to buy. Any sale made by a legitimate trader from his store is a commercial act establishing trademark rights since such sales are made in due course of business to the general public, not only to limited individuals. It is a matter of public knowledge that all brands of goods filter into the market, indiscriminately sold by jobbers dealers and merchants not necessarily with the knowledge or consent of the manufacturer. Such actual sale of goods in the local market establishes trademark use which serves as the basis for any action aimed at trademark pre- exemption. It is a corollary logical deduction that while Converse Rubber Corporation is not licensed to do business in the country and is not actually doing business here, it does not mean that its goods are not being sold here or that it has not earned a reputation or goodwill as regards its products. The Director of Patents was, therefore, remiss in ruling that the proofs of sales presented "was made by a single witness who had never dealt with nor had never known opposer [petitioner] x x x without Opposer having a direct or indirect hand in the transaction to be the basis of trademark pre- exemption."

Another factor why respondent's applications should be denied is the confusing similarity between its trademark "UNIVERSAL CONVERSE AND DEVICE" and petitioner's corporate name and/or its trademarks "CHUCK TAYLOR" and "ALL STAR DEVICE" which could confuse the purchasing public to the prejudice of petitioner, The trademark of respondent "UNIVERSAL CONVERSE and DEVICE" is imprinted in a circular manner on the side of its rubber shoes. In the same manner, the trademark of petitioner which reads "CONVERSE CHUCK TAYLOR" is imprinted on a circular base attached to the side of its rubber shoes. The deteminative factor in ascertaining whether or not marks are confusingly similar to each other "is not whether the challenged mark would actually cause confusion or deception of the purchasers but whether the use of such mark would likely cause confusion or mistake on the part of the buying public. It would be sufficient, for purposes of the law, that the similarity between the two labels is such that there is a possibility or likelihood of the purchaser of the older brand mistaking the new brand for it." 19 Even if not an the details just mentioned were identical, with the general appearance alone of the two products, any ordinary, or even perhaps even [sic] a not too perceptive and discriminating customer could be deceived ... " 20 When the law speaks co-purchaser," the reference is to ordinary average purchaser. 21 It is not necessary in either case that the resemblance be sufficient to deceive experts, dealers, or other persons specially familiar with the trademark or goods involve." 22 The similarity y in the general appearance of respondent's trademark and that of petitioner would evidently create a likelihood of confusion among the purchasing public. But even assuming, arguendo, that the trademark sought to be registered by respondent is distinctively dissimilar from those of the petitioner, the likelihood of confusion would still subsists, not on the purchaser's perception of the goods but on the origins thereof. By appropriating the word "CONVERSE," respondent's products are likely to be mistaken as having been produced by petitioner. "The risk of damage is not limited to a possible confusion of goods but also includes confusion of reputation if the public could reasonably assume that the goods of the parties originated from the same source. 23 It is unfortunate that respondent Director of Patents has concluded that since the petitioner is not licensed to do business in the country and is actually not doing business on its own in the Philippines, it has no name to protect iN the forum and thus, it is futile for it to establish that "CONVERSE" as part of its corporate name identifies its rubber shoes. That a foreign corporation has a right to maintain an action in the forum even if it is not licensed to do business and is not actually doing business on its own therein has been enunciated many times by this Court. In La Chemise Lacoste, S.A. vs. Fernandez, 129 SCRA 373, this Court, reiterating Western Equipment and Supply Co. vs. Reyes, 51 Phil. 115, stated that: ... a foreign corporation which has never done any business in the Philippines and which is unlicensed and unregistered to do business here, but is widely and favorably known in the

Philippines through the use therein of its products bearing its corporate and tradename, has a legal right to maintain an action in the Philippines to restrain the residents and inhabitants thereof from organizing a corporation therein bearing the same name as the foreign corporation, when it appears that they have personal knowledge of the existence of such a foreign corporation, and it is apparent that the purpose of the proposed domestic corporation is to deal and trade in the same goods as those of the foreign corporation. We further held: xxx xxx xxx That company is not here seeking to enforce any legal or control rights arising from or growing out of, any business which it has transacted in the Philippine Islands. The sole purpose of the action: Is to protect its reputation, its corporate name, its goodwill whenever that reputation, corporate name or goodwill have, through the natural development of its trade, established themselves.' And it contends that its rights to the use of its corporate and trade name: Is a property right, a right in recess which it may assert and protect against all the world, in any of the courts of the world even in jurisdictions where it does not transact business-just the same as it may protect its tangible property, real or personal against trespass, or conversion. Citing sec. 10, Nims on Unfair Competition and Trademarks and cases cited; secs. 21-22, Hopkins on Trademarks, Trade Names and Unfair Competition and cases cited That point is sustained by the authorities, and is well stated in Hanover Star Milling Co. vs. Allen and Wheeler Co. [208 Fed., 5131, in which the syllabus says:

trademark acknowledges no territorial boundaries of municipalities or states or nations, but extends to every market where the trader's goods have become known and Identified by the use of the mark. The ruling in the aforecited case is in consonance with the Convention of the Union of Paris for the Protection of Industrial Property to which the Philippines became a party on September 27, 1965. Article 8 thereof provides that "a trade name [corporate name] shall be protected in all the countries of the Union without the obligation of filing or registration, whether or not it forms part of the trademark. " [emphasis supplied] The object of the Convention is to accord a national of a member nation extensive protection "against infringement and other types of unfair competition" [Vanitary Fair Mills, Inc. vs. T. Eaton Co., 234 F. 2d 6331. The mandate of the aforementioned Convention finds implementation in Sec. 37 of RA No. 166, otherwise known as the Trademark Law: Sec. 37. Rights of Foreign Registrants-Persons who are nationals of, domiciled or have a bona fide or effective business or commercial establishment in any foreign country, which is a party to an international convention or treaty relating to marks or tradenames on the repression of unfair competition to which the Philippines may be a party, shall be entitled to the benefits and subject to the provisions of this Act . . . ... Tradenames of persons described in the first paragraph of this section shall be protected without the obligation of filing or registration whether or not they form parts of marks. [emphasis supplied] WHEREFORE, the decision of the Director of Patents is hereby set aside and a new one entered denying Respondent Universal Rubber Products, Inc.'s application for registration of the trademark "UNIVERSAL CONVERSE AND DEVICE" on its rubber shoes and slippers. SO ORDERED. Feria (Chairman), Alampay, Gutierrez, Jr. and Paras, JJ., concur.

Since it is the trade and not the mark that is to be protected, a G.R. No. 75067 February 26, 1988 PUMA SPORTSCHUHFABRIKEN RUDOLF DASSLER, K.G., petitioner vs. THE INTERMEDIATE APPELLATE COURT and MIL-ORO MANUFACTURING CORPORATION, respondents. GUTIERREZ, JR., J.: This is a petition for review by way of certiorari of the Court of Appeals' decision which reversed the order of the Regional Trial Court and dismissed the civil case filed by the petitioner on the grounds of litis pendentia and lack of legal capacity to sue. On July 25, 1985, the petitioner, a foreign corporation duly organized and existing under the laws of the Federal

Republic of Germany and the manufacturer and producer of "PUMA PRODUCTS," filed a complaint for infringement of patent or trademark with a prayer for the issuance of a writ of preliminary injunction against the private respondent before the Regional Trial Court of Makati. Prior to the filing of the said civil suit, three cases were pending before the Philippine Patent Office, namely: Inter Partes Case No. 1259 entitled 'PUMA SPORTSCHUHFABRIKEN v. MIL-ORO MANUFACTURING CORPORATION, respondent-applicant which is an opposition to the registration of petitioner's trademark 'PUMA and DEVICE' in the PRINCIPAL REGISTER; Inter Partes Case No. 1675 similarly entitled, 'PUMA SPORTSCHUHFABRIKEN RUDOLF DASSLER, K.G., petitioner, versus MIL-ORO MANUFACTURING CORPORATION, respondent-registrant,' which is a case for the cancellation of the trademark registration of the petitioner; and Inter Partes Case No. 1945 also between the same parties this time the petitioner praying for the cancellation of private respondent's Certificate of Registration No. 26875 (pp. 40-41, 255, Rollo) (pp. 51 -52, Rollo) On July 31, 1985, the trial court issued a temporary restraining order, restraining the private respondent and the Director of Patents from using the trademark "PUMA' or any reproduction, counterfeit copy or colorable imitation thereof, and to withdraw from the market all products bearing the same trademark. On August 9, 1985, the private respondent filed a motion to dismiss on the grounds that the petitioners' complaint states no cause of action, petitioner has no legal personality to sue, and litis pendentia. On August 19, 1985, the trial court denied the motion to dismiss and at the same time granted the petitioner's application for a writ of injunction. The private respondents appealed to the Court of Appeals. On June 23, 1986, the Court of Appeals reversed the order of the trial court and ordered the respondent judge to dismiss the civil case filed by the petitioner. In reversing the order of the trial court, the Court of Appeals ruled that the requisites of lis pendens as ground for the motion to dismiss have been met. It said: Obviously, the parties are Identical. They are the same protagonists. As to the second requisite, which is Identity of rights and reliefs prayed for, both sides maintain that they are the rightful owners of the trademark "PUMA" for socks and belts such that both parties seek the cancellation of the trademark of the other (see prayer in private respondent's complaint, pp, 54-55, Rollo, Annex "A" to the Petition). Inevitably, in either

the lower court or in the Patent Office, there is a need to resolve the issue as to who is the rightful owner of the TRADEMARK 'PUMA' for socks and belts.After all,the right to register a trademark must be based on ownership thereof (Operators Inc. v. Director of Patents, L-17910, Oct. 29,1965,15 SCRA 147). Ownership of the trademark is an essential requisite to be proved by the applicant either in a cancellation case or in a suit for infringement of trademark. The relief prayed for by the parties in Inter Partes Cases Nos. 1259, 1675 and 1945 and Civil Case No. 11189 before respondent court seek for the cancellation of usurper's trademark, and the right of the legal owner to have exclusive use of said trademark. From the totality of the obtaining circumstances, the rights of the respective parties are dependent upon the resolution of a single issue, that is, the rightful ownership of the trademark in question. The second requisite needed to justify a motion to dismiss based on lis pendens is present. As to the third requisite, the decisions and orders of administrative agencies rendered pursuant to their quasi-judicial authority have upon their finality the character of res judicata (Brilliantes v. Castro, 99 Phil. 497). The rule which forbids the re-opening of a matter once judicially determined by competent authority applies as well to judicial acts of public executive and administrative officers and boards acting within their jurisdiction as to the judgments of Courts having general judicial powers (Brilliantes vs. Castro, supra). It may be recalled that the resolution and determination of the issue on ownership are both within the jurisdiction of the Director of Patents and the Regional Trial Court (Sec 25, RA 166). It would thus be confusing for two (2) different forums to hear the same case and resolve a main and determinative issue with both forums risking the possibility of arriving at different conclusions. In the construction of laws and statutes regarding jurisdiction, one must interpret them in a complementary manner for it is presumed that the legislature does not intend any absurdity in the laws it makes (Statutory Construction, Martin, p. 133). Ms is precisely the reason why both decisions of the Director of Patents and Regional Trial Court are appealable to the Intermediate Appellate Court (Sec. 9, BP 129), as both are co-equal in rank regarding the cases that may fall within their jurisdiction. The record reveals that on March 31, 1986, the Philippine Patent Office rendered a decision in Inter Partes Cases Nos. 1259 and 1675 whereby it concluded that petitioner is the prior and actual adaptor of the trademark 'PUMA and DEVICE used on sports socks and belts, and that MILORO CORPORATION is the rightful owner thereof. ... (pp. 6-7, CA decision, pp. 51-52, Rollo)

With regard to the petitioner's legal capacity to sue, the Court of Appeals likewise held that it had no such capacity because it failed to allege reciprocity in its complaint: As to private respondent's having no legal personality to sue, the record discloses that private respondent was suing under Sec. 21-A of Republic Act No. 166, as amended (p. 50, Annex "A", Petition). This is the exception to the general rule that a foreign corporation doing business in the Philippines must secure a license to do business before said foreign corporation could maintain a court or administrative suit (Sec. 133, Corporation Code, in relation to Sec. 21-A, RA 638, as amended). However, there are some conditions which must be met before that exception could be made to apply, namely: (a) the trademark of the suing corporation must be registered in the Philippines, or that it be the assignee thereof: and (b) that there exists a reciprocal treatment to Philippine Corporations either by law or convention by the country of origin of the foreign corporation (Sec. 21-A Trademark Law). Petitioner recognizes that private respondent is the holder of several certificates of registration, otherwise, the former would not have instituted cancellation proceedings in the Patent's Office. Petitioner actually zeroes on the second requisite provided by Section 21-A of the Trademark Law which is the private respondent's failure to allege reciprocity in the complaint. ... Citing the case of Leviton Industries v. Salvador (114 SCRA 420), it further ruled: Failure to allege reciprocity, it being an essential fact under the trademark law regarding its capacity to sue before the Philippine courts, is fatal to the foreign corporations' cause. The Concurring Opinion of Chief Justice Aquino on the same case is more emphatic when he said: Respondent Leviton Manufacturing Co. Inc., alleged in par. 2 of its complaint for unfair competition that its action 'is being filed under the provisions of Section 21-A of Republic Act No. 166, as amended.' Respondent is bound by the allegation in its complaint. It cannot sue under Section 21-A because it has not complied with the requirements hereof that (1) its trademark Leviton has been registered with the Patent Office and (2) that it should show that the State of New York grants to Philippine Corporations the privilege to bring an action for unfair competition in that state. Respondent 'Leviton has to comply with those requirements before it can be allowed to maintain an action for unfair competition. (p. 9, CA decision). (p. 55, Rollo).

The Court of Appeals further ruled that in issuing the writ of preliminary injunction, the trial court committed grave abuse of discretion because it deprived the private respondent of its day in court as the latter was not given the chance to present its counter-evidence. In this petition for review, the petitioner contends that the Court of appeals erred in holding that: (1) it had no legal capacity to sue; (2) the doctrine of lis pendens is applicable as a ground for dismissing the case and (3) the writ of injunction was improperly issued. Petitioner maintains that it has substantially complied with the requirements of Section 21-A of Republic Act R.A. No. 166, as amended. According to the petitioner, its complaint specifically alleged that it is not doing business in the Philippines and is suing under the said Repulbic Act; that Section 21-A thereof provides that "the country of which the said corporation or juristic person is a citizen, or in which it is domiciled, by treaty, convention or law, grants a similar privilege to corporate or juristic persons of the Philippines" but does not mandatorily require that such reciprocity between the Federal Republic of Germany and the Philippines be pleaded; that such reciprocity arrangement is embodied in and supplied by the Union Convention for the Protection of Industrial Property Paris Convention) to which both the Philippines and Federal Republic of Germany are signatories and that since the Paris 'Convention is a treaty which, pursuant to our Constitution, forms part of the law of the land, our courts are bound to take judicial notice of such treaty, and, consequently, this fact need not be averred in the complaint. We agree. In the leading case of La Chemise Lacoste, S.A .v. Fernandez, (129 SCRA 373), we ruled: But even assuming the truth of the private respondents allegation that the petitioner failed to allege material facto in its petition relative to capacity to sue, the petitioner may still maintain the present suit against respondent Hernandes. As early as 1927, this Court was, and it still is, of the view that a foreign corporation not doing business in the Philippines needs no license to sue before Philippine courts for infringement of trademark and unfair competition. Thus, in Western Equipment and Supply Co. v. Reyes (51 Phil. 11 5), this Court held that a foreign corporation which has never done any business in the Philippines and which is unlicensed and unregistered to do business here, but is widely and favorably known in the Philippines through the use therein of its products bearing its corporate and tradename, has a legal right to maintain an action in the Philippines to restrain the residents and inhabitants thereof from organizing a corporation therein bearing the same name as the foreign corporation, when it appears that they have personal knowledge of the existence of such a foreign corporation, and it is apparent that the purpose of the proposed domestic corporation is to deal and trade in the same goods as those of the foreign corporation.

Quoting the Paris Convention and the case of Vanity Fair Mills, Inc. v. T. Eaton, Co. (234 F. 2d 633), this Court further said: By the same token, the petitioner should be given the same treatment in the Philippines as we make available to our own citizens. We are obligated to assure to nationals of 'countries of the Union' an effective protection against unfair competition in the same way that they are obligated to similarly protect Filipino citizens and firms. Pursuant to this obligation, the Ministry of Trade on November 20,1980 issued a memorandum addressed to the Director of the Patents Office directing the latter -xxx xxx xxx ... [T]o reject all pending applications for Philippine registration of signature and other world famous trademarks by applicants other than its original owners or users. The conflicting claims over internationally known trademarks involve such name brands as Lacoste, Jordache, Gloria Vanderbilt, Sasson, Fila, Pierre Cardin, Gucci, Christian Dior, Oscar de la Renta, Calvin Klein, Givenchy, Ralph Lauren, Geoffrey Beene, Lanvin and Ted Lapidus. It is further directed that, in cases where warranted, Philippine registrants of such trademarks should be asked to surrender their certificates of registration, if any, to avoid suits for damages and other legal action by the trademarks' foreign or local owners or original users. The memorandum is a clear manifestation of our avowed adherence to a policy of cooperation and amity with an nations. It is not, as wrongly alleged by the private respondent, a personal policy of Minister Luis Villafuerte which expires once he leaves the Ministry of trade. For a treaty or convention is not a mere moral obligation to be enforced or not at the whims of an incumbent head of a Ministry. It creates a legally binding obligation on the parties founded on the generally accepted principle of international law of pacta sunt servanda which has been adopted as part of the law of our land. (Constitution, Art. II, Sec. 3). The memorandum reminds the Director of Patents of his legal duty to obey both law and treaty. It must also be obeyed. (at pp. 389-390, La Chemise Lacoste, S.A. v. Fernandez, supra). In the case of of Cerverse Rubber Corporation V. Universal Rubber Products, Inc. (174 SCRA 165), we likewise reaafirmed our adherence to the Paris Convention: The ruling in the aforecited case is in consonance with the Convention of Converse Rubber

Corporation v. Universal Rubber Products, Inc. (I 47 SCRA 165), we likewise re-affirmed our adherence to the Paris Convention: the Union of Paris for the Protection of Industrial Property to which the Philippines became a party on September 27, 1965. Article 8 thereof provides that 'a trade name [corporation name] shall be protected in all the countries of the Union without the obligation of filing or registration, whether or not it forms part of the trademark.' The object of the Convention is to accord a national of a member nation extensive protection 'against infringement and other types of unfair competition [Vanity Fair Mills, Inc. v. T. Eaton Co., 234 F. 2d 633]." (at p. 165) The mandate of the aforementioned Convention finds implementation in Section 37 of RA No. 166, otherwise known as the trademark Law: Rights of Foreign Registrants. Persons who are nationals of, domiciled in, or have a bona fide or effective business or commercial establishment in any foreign country, which is a party to an international convention or treaty relating to marks or tradenames on the represssion of unfair competition to which the Philippines may be party, shall be entitled to the benefits and subject to the provisions of this Act ... Tradenames of persons described in the first paragraph of this section shall be protected without the obligation of filing or registration whether or not they form part of marks. We, therefore, hold that the petitioner had the legal capacity to file the action below. Anent the issue of lis pendens as a ground for a motion to dismiss, the petitioner submits that the relief prayed for in its civil action is different from the relief sought in the Inter Partes cases. More important, however, is the fact that for lis pendens to be a valid ground for the dismissal of a case, the other case pending between the same parties and having the same cause must be a court action. As we have held in Solancho v. Ramos (19 SCRA 848): As noted above, the defendants contend that the pendency of an administrative between themselves and the plaintiff before the Bureau of Lands is a sufficient ground to dismiss the action. On the other hand, the plaintiff, believing that this ground as interposed by the defendants is a sufficient ground for the dismissal of his complaint, filed a motion to withdraw his free patent application No. 16649. This is not what is contemplated under the law because under section 1(d), Rule 16 (formerly Rule 8) of the Rules of Court, one of the grounds for the dismissal of an action is that "there is another action pending between the same parties for the same cause." Note that the Rule uses the

phrase another action. This phrase should be construed in line with Section 1 of Rule 2, which defines the word action, thus-Action means an ordinary suit in a court of justice by which one party prosecutes another for the enforcement or protection of alright, or the prevention or redress of a wrong. Every other remedy is a special proceeding. It is,therefore,very clear that the Bureau of Land is not covered under the aforementioned provisions of the Rules of Court. (at p. 851) Thus, the Court of Appeals likewise erred in holding that the requisites of lis pendens were present so as to justify the dismissal of the case below. As regards the propriety of the issuance of the writ of preliminary injunuction, the records show that herein private respondent was given the opportunity to present its counterevidence against the issuance thereof but it intentionally refused to do so to be consistent with its theory that the civil case should be dismissed in the first place. Considering the fact that "PUMA" is an internationally known brand name, it is pertinent to reiterate the directive to lower courts, which equally applies to administrative agencies, found in La Chemise Lacoste, S.A. v. Fernandez, supra):

exportations, our image abroad. No less than the President, in issuing Executive Order No. 913 dated October 7, 1983 to strengthen the powers of the Minister of Trade and Industry for the protection of consumers, stated that, among other acts, the dumping of substandard, imitated, hazardous, and cheap goods, the infringement of internationally known tradenames and trademarks, and the unfair trade Practices of business firms have reached such proportions as to constitute economic sabotage. We buy a kitchen appliance, a household tool, perfume, face powder, other toilet articles, watches, brandy or whisky, and items of clothing like jeans, T-shirts, neckties, etc. the list is quite lengthy pay good money relying on the brand name as guarantee of its quality and genuine nature only to explode in bitter frustration and helpless anger because the purchased item turns out to be a shoddy imitation, albeit a clever looking counterfeit, of the quality product. Judges all over the country are well advised to remember that court processes should not be used as instruments to, unwittingly or otherwise, aid counterfeiters and intellectual pirates, tie the hands of the law as it seeks to protect the Filipino consuming public and frustrate executive and administrative implementation of solemn commitments pursuant to international conventions and treaties. (at p. 403) WHEREFORE, the appealed decision of the Court of Appeals dated June 23, 1986 is REVERSED and SET ASIDE and the order of the Regional Trial Court of Makati is hereby Reinstated.

One final point. It is essential that we stress our concern at the seeming inability of law enforcement officials to stem the tide of fake and SO ORDERED. counterfeit consumer items flooding the Philippine market or exported abroad from our Fernan (Chairman), Feliciano, Bidin and Cortes, JJ., country. The greater victim is not so much the concur. manufacturer whose product is being faked but the Filipino consuming public and in the case of G.R. No. L-17901 October 29, 1965 OPERATORS, INCORPORATED, petitioner, vs. THE DIRECTOR OF PATENTS, ET AL., respondents. Rafael R. Lasam for petitioner. Ponce Enrile, Siguion Reyna, Montecillo & Belo for respondent National Biscuit Company. Office of the Solicitor General for respondent Director of Patents. MAKALINTAL, J.: Petitioner, a domestic corporation, applied to the Philippine Patent Office for registration of AMBISCO as a trademark for its locally manufactured candy products. It has been using said trademark since May 1956 by virtue of two contracts with the American Biscuit Company, also a domestic corporation. The National Biscuit Company opposed the application, having previously registered NABISCO as trademark for its own bakery goods, such as biscuits, crackers, cakes and wafers. The oppositor, a corporation organized in the United States, has had the said trademark registered in the Philippines since 1930, and renewed the registration in 1948 under the latest trademark law. In his decision of September 20, 1960 the Director of Patents defined the issues in this case to be: (1) whether or not the two trademarks aforesaid are so similar to each other as to cause confusion, mistake or deception of purchasers; and (2) whether or not the applicant had a right in the first place to apply for registration of AMBISCO as a trademark at all. And reaching an affirmative conclusion on the first issue, the Director denied the application without considering it necessary to resolve the second. Petitioner moved to reconsider, and upon denial of the motion brought up the case to this Court for review. The second issue commands first consideration. Under section 2 of Republic Act No. 166, as amended by section 1 of Republic Act No. 865, trademarks, tradenames, and service marks, owned by persons, corporations, partnerships

or associations domiciled in the Philippines or in any foreign country may be registered here provided certain conditions enumerated in the same section are complied with. The right to register, as may be noted, is based on ownership. In the case of the trademark AMBISCO, the evidence shows that it is owned by the American Biscuit Co., Inc., and not by petitioner Operators, Inc. Such evidence consists of the certification signed jointly by Jorge B. Vargas and by Eu Chua Leh, presidents of the said Corporations, respectively, as follows (Exh. 2): On September 26, 1953, and on June 12, 1954, the American Biscuit Co., Inc., and the Operators Incorporated, both corporations organized under the laws of the Philippines, entered into contracts, and under such contracts, the Operators Incorporated is authorized by the American Biscuit Co., Inc. to operate the candy business of the latter and among the various terms and stipulations in said contracts, the Operators Incorporated agreed to distinctly label and display all products manufactured and sold by it as products of the American Biscuit Co., Inc. and that all the trademarks contained in such labels shall be considered as property of the American Biscuits Co., Inc. Petitioner objects to the consideration of the question of ownership of the trademark as an issue on the ground that it was not raised by respondent either in its opposition or in its memorandum filed after the parties had adduced their evidence. In the first place respondent could not have known at the outset that petitioner was not the owner of the trademark it was seeking to register. That fact was brought out for the first time when the certification quoted above was presented. Secondly, it was incumbent upon petitioner, as applicant, to prove that it had a right to register the trademark applied for and consequently, to show compliance with all the legal requisites including ownership thereof. An application for registration under the Patent Law is not an ordinary litigious controversy between private parties. Public interest is involved and all questions as to whether or not the law is satisfied may be considered by the Patent Office or by the Court even though not specifically raised by either of the parties. On the other issue, we find no cogent reason to disagree with the Director of Patents that "considering the similarities in appearance and sound between the marks AMBISCO and NABISCO, the nature and similarity of the products of the parties together with the fact that opposer's NABISCO has been used in commerce in the Philippines for more than fifty five (55) years before AMBISCO was adopted by applicant, confusion of purchasers is likely. In the case of Co Tiong vs. Director of Patents, 95 Phil. 1, this Court said: ... If the competing trademark contains the main or essential or dominant features of another, and confusion and deception is likely to result, infringement takes place. Duplication or imitation is not necessary; nor is it necessary that the

infringing label should suggest an effort to imitate. (G. Heilman Brewing Co. vs. Independent Brewing, Co., 191 F. 489, 495, citing Eagle White Lead Co. vs. Pflugh [CC] 180 Fed. 579). ... ... The ordinary customer does not Scrutinize the details of the label; he forgets or overlooks these, but retains a general impression, or a central figure, or a dominant characteristic. The reason for the above has been explained in the following manner: "... This rule has a basis in experience. The average person usually will not, and often cannot, take in at a casual glance all, or even a large part of the details of what he looks at. What part or parts of two trademarks which are alleged to be similar does the average ordinary buyer see when he looks at them? What features of them are remembered by the average buyer? We do not really hear all that is spoken in our hearing. Far from all we see or hear casually is retained sufficiently clearly or in sufficient detail for us to get a lasting impression of it which we can remember when we encounter the mark again. The importance of this rule is emphasized by the increase of radio advertising in which we are deprived of the help of our eyes and must depend entirely on the ear. xxx xxx xxx

"The question of infringement is to be determined by the test of dominancy. The dissimilarity in size, form and color of the label and the place where applied are not conclusive. If the competing label contains the trademark of another, and confusion or deception is likely to result, infringement takes place, regardless of the fact that the accessories are dissimilar. Duplication or exact imitation is not necessary; nor is it necessary that the infringing label should suggest an effort to imitate. (G. Heilman Brewing Co. vs. Independent Brewing Co., 191 F. 489., 495, citing Eagle White Lead Co. vs. Pflugh (C.C.), 180 P. 579." Thus "Celdura" and "Corduara" were held to be confusingly similar in sound when applied to merchandise of the same descriptive properties (Celanese Corp. of America vs. Du Pont, 154 F. 2nd 146, 148); and "Lusolin" was considered as an infringement of the trademark "Sapolin" for the same reason (Sapolin Co. vs. Balmaceda, et al., 67 Phil. 705). On the whole we find no reversible error in the decision appealed from and therefore affirm the same, with costs. Bengzon, C.J., Bautista Angelo, Concepcion, Regale, Bengzon, J.P., and Zaldivar, JJ., concur. Reyes, J.B.L., is on leave. Dizon, J., took no part.

G.R. No. L-24075 January 31, 1974

CRISANTA Y. GABRIEL, petitioner, vs. DR. JOSE R. PEREZ and HONORABLE TIBURCIO EVALLE as Director of Patents, respondents. Paredes, Poblador, Cruz and Nazareno for petitioner. Jesus I. Santos for respondent Dr. Jose R. Perez. Office of the Solicitor General Antonio P. Barredo, Assistant Solicitor General Antonio G. Ibarra and Solicitor Alicia V. Sempio-Diy for respondent Director of Patents. MAKASIAR, J.:1wph1.t Petition for review of the decision dated July 18, 1964 of the respondent Director of Patents denying the petition of herein petitioner Crisanta Y. Gabriel to cancel and revoke certificate of registration No. SR-389 covering the trademark "WONDER" used on beauty soap issued on May 11, 1961 to herein private respondent Dr. Jose R. Perez.. On October 19, 1962, petitioner Crisanta Y. Gabriel filed with the Patent Office a petition for cancellation of the trademark "WONDER from the supplemental register alleging that the registrant was not entitled to register the said trademark at the time of his application for registration; that the trademark was not used and has not been actually used by registrant at the time he applied for its registration; that it was thru fraud and misrepresentation that the registration was procured by the registrant; and that it was she who has been actually using the said trademark since March, 1959, and as such is the rightful and recognized owner thereof and therefore entitled to its registration. In support of her petition, she further alleged the written contract between her and the registrant (respondent) wherein, according to her, the latter has recognized her right of use and ownership of said trademark; and that the labels submitted by the registrant are the very containers bearing the trademark "WONDER" which are owned by her and which she has been exclusively and continuously using in commerce (pp. 24-25, Vol. I, rec.). Respondent Dr. Jose R. Perez, in due time, duly filed his answer denying each and every ground for cancellation alleged in the said petition, and further averring that there is pending in the Court of First Instance of Bulacan a civil case (No. 2422) for unfair competition with injunction and damages filed by him against herein petitioner involving the manufacture of beauty soap and the use of the trademark "WONDER"; that a writ of preliminary injunction has been issued on September 7, 1961 by the said court against herein petitioner restraining her "from making, manufacturing and producing 'Wonder Bleaching Beauty Soap' with the same labels and chemical ingredients as those of the plaintiff, and from advertising, selling and distributing the same products"; and that no right of petitioner had been violated and therefore no cause of action exists in favor of petitioner (pp. 28-32, Vol. I, rec.). Issues having been joined, the case was heard and thereafter, respondent Director of Patents rendered his Petitioner filed a motion for reconsideration on the ground that the decision is contrary to law and the evidence; but the same was denied on January 15, 1965 by respondent Director of Patents for lack of merit (p. 158, Vol. rec.). Hence, this petition for review filed on January 28, 1965 by herein petitioner (pp. 1-5, Vol. IV, rec.). Respondents were required to answer the same, and respondent Director Tiburcio Evalle filed his answer on August 6, 1965 (pp. 2932, Vol. IV, rec.). Private respondent Dr. Jose R. Perez did not file an answer. Thereafter, both parties were required to file their respective briefs and petitioner filed one on September 28, 1965 (p. 38, Vol. IV, rec.), while respondent Director Evalle filed his brief on February 23, 1966 (p. 53, Vol. IV, rec.). Again, private respondent Perez did not file a brief as his counsel's motion for an extension of time within which to file one was denied by this Court for being late (pp. 41-42, Vol. IV, rec.). Consequently, the case was submitted for decision on May 22, 1966. On May 22, 1973, counsel for private respondent filed a motion for the early resolution of the case alleging among others that "respondent Dr. Jose R. Perez had died already and still Crisanta Y. Gabriel, the petitioner in this case, has been continuously harassing the rights of the late Dr. Jose R. Perez as far as the ownership and use of the trademark are concerned." (Pp. 59-61, Vol. IV, rec.) [No motion been filed for substitution of the heirs in lieu of the deceased private respondent.] By way of factual background, herein private respondent Dr. Jose R. Perez filed with the Patents Office on February 23, 1961 an application for registration of the trademark "WONDER" in the Supplemental Register. After due and proper proceedings, the said petition was approved and the trademark "WONDER" was registered, as prayed for, in the Supplemental Register. Thereafter, Certificate of Registration No. SR-389 was issued to and in the name of herein private respondent Dr. Jose R. Perez. Said trademark "WONDER" is used by said private respondent on bleaching beauty soap (Medicated and Special) which under the Official Classification of Merchandise (Rule 82) of the Board of Patents falls under Class 51. Private respondent Dr. Perez, in his petition for registration, claimed March 10, 1953 as the date of first use of said trademark and August 1, 1953 as the date of first use of said trademark in commerce in the Philippines (see pp. 17, Vol. I, rec.). Petitioner Crisanta Y. Gabriel on the other hand, earlier filed on October 3, 1960 with the Patent Office a petition to register the same trademark "WONDER" and claimed March 7, 1959 as the date of first use of said trademark in commerce. Said petition was dismissed on November 18, 1960 by the Patents Office (thru its examiner) on the ground that said petitioner was not the owner of the trademark sought to be registered, informing at the same time petitioner that "as shown on the labels submitted, it decision denying the petition to cancel the certificate of registration (pp. 139-150, Vol. 1, rec.).

appear that Dr. Jose R. Perez is the owner of the present mark ... ." Subsequently, on March 23, 1961, the said application was considered abandoned under Rules 97 and 98 of the Revised Rules of Practice in Trademark Cases for failure of petitioner to comply with Rule 93 of the same Revised Rules (see p. 8, Vol. I, rec.; pp. 79-86, Vol. III, rec.). Later, said applicant was revived, but further consideration thereof was suspended by the Patents Office until final determination of the present case wondering that the matter of ownership of the trademark "WONDER" is in dispute (see p. 9, Vol. I, rec.). The main facts of this case as substantially supported by the evidence on record, are related by respondent Director of Patents in the decision now under review, thus: ... Way back in 1953, the Respondent who claims to be a medical researcher and manufacturer, was experimenting on the creation of a beauty soap. Having discovered a workable formula he applied from the Bureau of Health for the issuance of a Certificate of Label Approval and on June 6, 1958 he was issued such certificate. It covers a beauty soap for bleaching, which whitens or sometimes softens the skin. (t.s.n., p. 48, Aug. 27, 1963). This certificate (Exh. "5") particularly describes and mentions "Dr. Perez" Wonder Beauty Soap. He continued experimenting until he was able to discover an improved soap formula which he claims that aside from bleaching or whitening the skin it also allegedly removes pimples, freckles, dandruff, scabies, itching, head lice(s), rashes, falling of hair, and shallow wrinkles (t.s.n. p. 49, Aug. 27, 1963). For such product he obtained another certificate of label approval from the Bureau of Health on August 10, 1959 (Exh. "6"). This document also particularly describes "Dr. Perez Wonder Beauty Soap (Improved Formula)." In January, 1959 he made an agreement with a certain company named "Manserco" for the distribution of his soap. It was then being managed by Mariano S. Yangga who happens to be the brother of the Petitioner Crisanta Y. Gabriel (t.s.n., pp. 3-4, Aug. 27, 1963). This was corroborated by Mr. August Cesar Espiritu who testified in favor of the Respondent. Mr. Espiritu claims to be the organizer and one of the incorporators of "Manserco," although really no document of its corporate existence was introduced as evidence in this case (t.s.n., pp. 55-57, Sept. 23, 1963). However, this fact had never been disputed by the Petitioner. Because the corporation was allegedly going bankrupt and the members were deserting, the Respondent terminated the agreement in July, 1959, and thereafter he asked the Petitioner to become the distributor of his products (t.s.n., pp. 4-5, Aug. 27, 1963) and on September 1, 1959, a contract of "Exclusive Distributorship" was executed between the Petitioner and the Respondent. (Exh. "7"; "F-l" to "F-2".) The agreement is hereunder reproduced, to wit:

EXCLUSIVE DISTRIBUTORSHIP AGREEMENT KNOW ALL PRESENT: MEN BY THESE

THIS AGREEMENT made and executed by and between DR. JOSE R. PEREZ, Filipino, of legal age, a resident of Sta. Maria, Bulacan, now and hereinafter called the Party of the First Part, AND CRISANTA Y. GABRIEL, likewise Filipino, of legal age, a resident of 1558 Camarines St., Manila, now and hereinafter called the Party of the Second Part, WITNE SSET H 1. That the Party of the First Part hereby agrees and binds himself to make the Party of the Second Part the sole and exclusive distributor of his product called and popularly known as "Dr. Perez" Wonder Medicated Beauty Soap' for the whole Philippines for a period of five (5) years from date of perfection of this agreement, renewable for another five (5) years at the mutual agreement of both parties; 2. That the Party of the First Part hereby agrees to sell to the Party of the Second Part the abovementioned merchandise at the rate of sixty (P.60) centavos a piece which shall have a minimum weight of eighty (80) grams; PROVIDED however that said price may be subject to change in cases of deflation and inflation of the peso; 3. That the Party of the First Part hereby binds himself to make delivery of the merchandise under contract at 1558 Camarines St., Manila, the cost of the same being for the account of the former; 4. That the Party of the First Part hereby agrees to extend to the Party of the Second Part a credit line of TWO THOUSAND (P2,000.00) PESOS with accounts due and payable on the 5th and 20th of each month with a maximum of sixty days from date of receipt of the merchandise by the Party of the Second Part; 5. That the Party of the First Part guarantees the production of the full

quantity of Dr. Perez Wonder Medicated Beauty Soap that the Party of the Second Part could sell and distribute; with the latter giving the former a written notice of the same; 6. That the Party of the Second Part has the exclusive right of ownership of the packages and that said party is responsible for the costs as well as the design and the manner of packing the same; 7. That the Party of the First Part hereby binds himself not to give or sell to any person or entity the same product or any similar product or products of the same name during the term and duration of this contract; 8. That this contract is binding upon the administrator, heirs and assigns of both parties during the term and duration of this agreement; 9. That this contract will take effect upon the signing thereof. IN WITNESS WHEREOF, the parties and their witnesses have hereunder set their hands at Manila this 1st day of September, 1959. (See pp. 11-13, Vol. IV, rec.). At this juncture, mention should be made of the Petitioner's commercial background, as it appears in the record. Her documentary exhibits show that she was registered as a bona fide Filipino retailer as of April 8, 1958 (Exh. "C"); that she was doing business under the name "Gabriel Grocery and Cold Store" as of March 20, 1958 (Exh. "A"); and that on September 24, 1959 she obtained another certificate of registration for the firm name "Wonder Commercial Co., Inc.," she being the Manager thereof (Exh. "B"). (Pp. 10-13, Vol. IV, rec.). Respondent Director of Patents set forth the evidence of the petitioner as follows: From the evidence presented by her, she endeavors to prove that even before the execution of the agreement (Exh "F-1") or particularly on March 11, 1959 she hired the services of Eriberto Flores (t.s.n., pp. 43-52, May 23, 1963) who allegedly designed the packages for which she paid him the sum of P50.00 (Exh. "FF"). Thereafter she allegedly started the sales promotion of the Respondent's product by extensive advertisement through some magazines (Exhs. "G"; "G-l"; and "H"), the radio (Exhs. "I"-"18"), and the cinema by means of projector "slides" (Exhs. "M" and "N") in

various neighborhood theatres in the Philippines (Exhs. "O" to "-48"). She also allegedly caused the printing of thousands of boxes and literature accompanying the soap with printing companies (Exhs. "P", "Q", "R", "S", "T", "U", "V", "W", and "X" to "X-8"). She also presented a few sales invoices, the earliest of which was issued on November 4, 1959 by the Wonder Commercial Co., Inc., showing sales of the "Wonder Soap." (Exh. "Y"). Another booklet of sales invoices under the firm name "C.Y. Gabriel" showing sales of the same soap, the earliest of which was August 13, 1960 was also presented (Exhs. "Z" and "AA"). All the while the packages (Exhs. "D" and "E") and literature (Exh. "W") indicate that the soap is known as "Dr. Perez Bleaching Beauty Soap" manufactured by Dr. Jose R. Perez Cosmetic Laboratory and that the exclusive distributor is "Crisanta Y. Gabriel (C.Y Gabriel)", the herein Petitioner. As further evidence of sale, the Petitioner presented as witness Pedro Alvero, a businessman from San Pablo City who, as alleged dealer in medicinal products, toiletries, etc., testified as having purchased from her "Wonder" soap in 1959 up to 1961 (t.s.n., pp. 43-52, May 23, 1963). (See pp. 13-14, Vol IV, rec.). I The determination that Dr. Perez is the rightful owner of the disputed trademark "WONDER" and the consequent denial by the respondent Director of Patents of the petition to cancel certificate of registration No. SR-389 covering said trademark issued to and in the name of Dr. Jose R. Perez, were based mainly on his finding that Dr. Perez had priority of adoption and use of the said trademark. And such finding of fact is conclusive on this Court. As stated by Justice Fernando in Lim Kiah vs. Kaynee Company (25 SCRA 485) and reiterated by him in the subsequent case of Sy Ching vs. Gaw Liu (44 SCRA 150-151): "It is wellsettled that we are precluded from making an inquiry as the finding of facts of the Director of Patents in the absence of any showing that there was grave abuse of discretion is binding on us. As set forth by Justice Makalintal in Chung Te vs. Ng Kian Giab (18 SCRA 747): 'The rule is that findings of facts by the Director of Patents are conclusive on the Supreme Court provided that they are supported by substantial evidence.' " In the present case, the findings of fact of the respondent Director of Patents are substantially supported by evidence and no grave abuse of discretion was committed by said respondent. 1. At the time of the analysis of the soap product of private respondent Dr. Jose R. Perez, there was already a label or trademark known as "Dr. Perez' WONDER Beauty Soap" as shown and supported by Exhibit "5" which is a Certificate of Label Approval dated June 6, 1958 (p. 103, Vol. III, rec.) and Exhibit "6" another Certificate of Label Approval dated August 10, 1959 (p. 104, Vol. III, rec.) both issued by the Bureau of Health to Dr. Jose R. Perez as manager of the Dr. Jose R. Perez Cosmetic Laboratory.

Both certificates identified the product covered as "Dr. Perez' Wonder Beauty Soap" and further indicated that said product emanated from the Dr. Jose R. Perez Cosmetic Laboratory. Furthermore, the certificates show that the Bureau of Health referred to and relied on the said label or trademark of the product as the basis for its certification that the same (product) "was found not adulterated nor misbranded." 2. It is not denied that private respondent Dr. Jose R. Perez was the originator, producer and manufacturer of the soap product identified as "DR. JOSE R. PEREZ WONDER BEAUTY SOAP." This fact, furthermore, is clearly shown in Exhibits "5" and "6" which, as already adverted to, point out that said product emanated from the Dr. Jose R. Perez Cosmetic Laboratory.<re||an1w> The very boxes-containers used in packing the said product also exhibit this fact (Exhs. "DD", "EE", "LL", "HH" also marked as Exh. "7", "JJ" and "KK", pp. 94-96, 98-101, Vol. III, rec.). On the other hand, petitioner Crisanta Y. Gabriel appears to be a mere distributor of the product by contract with the manufacturer, respondent Dr. Jose R. Perez (Exhs. "7", "F-1" to "F-2", p. 13, Vol. III, rec.) and the same was only for a term. This fact is also clearly shown by the containers-boxes used in packing the product (Exhs. "E", "D" and "II" also marked as Exh. "8", pp. 10, 11 and 99, Vol. III, rec.) which indicate and describe Crisanta Y. Gabriel as the exclusive distributor of the product. Thus, as stated in the decision under review: "Therefore, it cannot be denied that the Respondent is the originator and manufacturer of the so-called "Dr. Perez Wonder Beauty Soap," a phrase clearly coined by, and associated with, the Respondent. As such, the connotation in itself is sufficient to clothe the product as an item or a commodity emanating from a particularly identified source who is none other than Dr. Jose R. Perez. The words serve as an indication of origin, and the product identified by the words can never be regarded as having emanated or originated from another individual, typical of which is the Petitioner, mere distributor." (P. 15, Vol. IV, rec.). Under Section 2 and 2A of the Trademark Law, Republic Act No. 166, amended, the right to register trademark is based on ownership and a mere distributor of a product bearing a trademark, even if permitted to use said trademark, has right to and cannot register the said trademark (Marvex Commercial Co., Inc. vs. Petra Hawpia & Co., 18 SCR 1178; Operators, Inc. vs. Director of Patents, et al., 15 SCRA 148). II 1. Petitioner urges that the agreement of exclusive distributorship executed by and between her and respondent vested in her the exclusive ownership of the trademark "WONDER". But a scrutiny of the provisions of said contract does not yield any right in favor of petitioner other than that expressly granted to her to be the sole and exclusive distributor of respondent Dr. Perez' product. The fact that paragraph 6 (Exh. "F-2") of the agreement provides that the petitioner "has the exclusive right of ownership of the packages and that said party is

responsible for the costs as well as the design and manner of packing the same" did not necessarily grant her the right to the exclusive use of the trademark; because the agreement never mentioned transfer of ownership of the trademark. It merely empowers the petitioner as exclusive distributor to own the package and to create a design at her pleasure, but not the right to appropriate unto herself the sole ownership of the trademark so as to entitle her to registration in the Patent Office. In fact, the agreement does not even grant her the right to register the mark, as correctly stated in the appealed decision, which further held that: The statute provides that "the owner of a trademark use in commerce may register his trademark ... ." By statutory definition a trademark is "any word, name, symbol or device or any combination thereof adopted and used by a manufacture or merchant to identify his goods and distinguish them from those manufactured by others. (Emphasis added). There is nothing in the statute which remotely suggests that one who merely sells a manufacturer's goods bearing the manufacturer's mark acquires any rights in the mark; nor is there anything in the statute which suggests that such a person may register a mark which his supplier has adopted and used to identify his goods. Ex parte E. Leitz, Inc., (Comr Pats) 105 USPQ 480. (Pp. 16-17, Vol. IV, rec.). 2. The exclusive distributor does not acquire any proprietary interest in the principal's trademark. In the absence of any inequitable conduct on the part of the manufacturer, an exclusive distributor who employs the trademark of the manufacturer does not acquire proprietary rights of the manufacturer, and a registration of the trademark by the distributor as such belongs to the manufacturer, provided the fiduciary relationship does not terminate before application for registration is filed. (87 CJS 258-259, citing cases.) III It has been repeatedly said that the objects of a trademark are "to point out distinctly the origin or ownership of the goods to which it is affixed, to secure to him, who has been instrumental in bringing into market a superior article of merchandise, the fruit of his industry and skill, and to prevent fraud and imposition. 52 Am. Jur., p. 50, citing cases." (Etepha vs. Director of Patents, et al., 16 SCRA 495). Necessarily, therefore, a trademark can only be used in connection with the sale of the identical article that has been sold under the trademark or tradename to the extent necessary to establish them as such (Note 1 L.R.A. [N.S.] 704; A.I.M. Percolating Corporation vs. Ferrodine Chemical Corporation, et al., 124 S.E. 446). In this instant case, the trademark "WONDER" has long been identified and associated with the product manufactured and produced by the Dr. Jose R. Perez

Cosmetic Laboratory. It would thus appear that the decision under review is but in consonance with the sound purposes or objects of a trademark. Indeed, a contrary ruling would have resulted in the cancellation of the trademark in question and in granting the pending application of herein petitioner to register the same trademark in her favor to be used on her bleaching soap, which is of the same class as that of respondent (bleaching and beauty soap) [see pp. 222, 265-276, Vol. I, rec.; also Exh. "9", p. 105, Vol. III, rec.]. And the effect on the public as well as on respondent Dr. Jose R. Perez would have been disastrous. Such a situation would sanction a false implication that the product to be sold by her (petitioner) is still that manufactured by respondent. IV Petitioner would also anchor her claim of exclusive ownership of the trademark in question on the fact that she defrayed substantial expenses in the promotion of respondent's soap as covered by the trademark "WONDER" and the printing of the packages which she further claimed have been designed thru her efforts as she was the one who hired the services of an artist who created the designed of the said packages and trademark. Such claim was disposed correctly by respondent Director of Patents, thus: Petitioner's act in defraying substantial expenses in the promotion of the Respondent's goods and the printing of the packages are the necessary or essential consequences of Paragraph 6 of the agreement because, anyway, those activities are normal in the field of sale and distribution, as it would redound to her own benefit as distributor, and those acts are incumbent upon her to do. While it may be argued that sale by the Petitioner may be regarded as trademark use by her, nevertheless it should also be regarded that such sale is a consequence of the "Exclusive Distributorship Agreement" and it inured to the benefit of the Respondent because it was his trademark that was being used. But this does not result in the Respondent's surrender in her favor of the right to register the trademark in her own name. What would happen if the first five years' period terminates and the Respondent decide not to continue with the agreement under Paragraph 1 thereof? What trademark would he use if he himself assumes the distribution thereof or if he contracts with another, entity or person for exclusive distributorship? (P. 17, Vol. IV, rec.). It is true that she has been dealing with the product "Wonder Soap" even before the execution of the Exclusive Distributorship Agreement on September 1, 1959, evidence by her agreement with Grace Trading Co., Inc. dated June 23, 1959 for the printing of boxes-containers for the "Wonder Soap" and the literature accompanying the same (Exhs. "Q" and "W", pp. 58, 68, Vol. III, rec.), as well as by another contract dated July 22, 1959 with the Philippine Broadcasting Corporation for spot announcement of the product "Wonder Soap" showing her as the sponsor (Exh. "I-1" or "5-A", p. 18, Vol. III,

rec.). But this was because Manserco, Inc., which handled first the distribution of the product "Wonder Soap" from January, 1959 to July, 1959, employed her (petitioner) to help precisely in the marketing and distribution of the said product, she being the sister of Mariano Yangga who was then the general manager of said Manserco, Inc., as testified to by Mr. Augusto Cesar Espiritu, who, as earlier adverted to, was the organizer and one of the incorporators of the Manserco, Inc.(pp. 480-481, Vol. III, rec.). V From the records, it further appears that pursuant to the Exclusive Distributorship Agreement between petitioner and respondent, the latter manufactured "WONDER" soap and delivered them to the former who in turn handled the distribution thereof. This continued for sometime until January, 1961, when the arrangement was stopped because as claimed and alleged by herein respondent, he discovered that petitioner began manufacturing her own soap and placed them in the boxes which contained his name and trademark, and for which reason respondent Dr. Perez filed an unfair competition case against her (petitioner) [see pp. 29-31, Vol. I, rec.; pp. 379-380, Vol. II, rec.] with the Court of First Instance of Bulacan, which issued a writ of preliminary injunction against her. These claims of respondent were never denied, much less refuted by petitioner in her rebuttal testimony. Earlier in her direct testimony, petitioner stated that her occupation was merchant and manufacturer of bleaching soap (p. 222, Vol. II, rec.) and on cross-examination she stated that she manufactured Marvel and Dahlia Bleaching Beauty Soap as well as C.Y. GABRIEL WONDER BEAUTY SOAP, although she claimed to have manufactured the same only from February, 1961 to September, 1961 (pp. 265-270, Vol. II, rec.). Her use of the mark "Wonder" on the soap manufactured by her is patently shown by Exhibit "9" consisting of a cake of soap with the inscription C.Y. GABRIEL WONDER SPECIAL and an accompanying literature wherein appear, among others, the following words: C.Y. Gabriel WONDER MEDICATED Beauty Soap, Manufactured by: C.Y. GABRIEL COSMETIC LABORATORY (see Exh. "9", p. 105, Vol. III, rec.; pp. 440-441, Vol. II, rec.). VI OUR examination of the entire records of the present case likewise revealed petitioner's disregard of the rudiments of fair dealing. Mr. Justice Fernando, in behalf of the Court, stated in Lim Kiah vs. Kaynee Company, thus: ... The decision of the Director of Patents is not only sound in law but also commendable for its consonance with the appropriate ethical standard which by no means should be excluded from the business world as alien, if not a hostile, force. While in the fierce competitive jungle which at time constitutes the arena of commercial transactions, shrewdness and ingenuity are at a premium, the law is by no means called upon to yield invariably its nod of approval to schemes frowned upon by the concept of fairness. Here, petitioner engaged in manufacturing and selling the same kind of

products would rely on a trademark, which undeniably was previously registered abroad and which theretofore had been used and advertised extensively by one of the leading department stores in the Philippines. (25 SCRA 490.) To our mind, the situation of herein petitioner is worse.

WHEREFORE, THE DECISION SOUGHT TO BE REVIEWED IS HEREBY AFFIRMED AND THE PETITION IS HEREBY DISMISSED. WITH COSTS AGAINST PETITIONER. Makalintal, C.J., Castro, Teehankee, Esguerra and Muoz Palma, JJ., concur.1wph1.t

G.R. No. L-28554 February 28, 1983 UNNO COMMERCIAL ENTERPRISES, INCORPORATED, petitioner, vs. GENERAL MILLING CORPORATION and TIBURCIO S. EVALLE, in his capacity as Director of Patents, respondents. Salem & Dionisio Law Office for petitioner. Siguion Reyna, Montecillo, Bello & Ongsiako for private respondent. TEEHANKEE, J.: The Court affirms respondent Director of Patent's decision declaring respondent General Milling Corporation as the prior user of the trademark "All Montana" on wheat flour in the Philippines and ordering the cancellation of the certificate of registration for the same trademark previously issued in favor of petitioner Unno Commercial Enterprises, Incorporated, it appearing that Unno Commercial Enterprises, Inc. merely acted as exclusive distributor of All Montana wheat flour in the Philippines. Only the owner of a trademark, trade name or service mark may applly for its registration and an importer, broker, indentor or distributor acquires no rights to the trademark of the goods he is dealing with in the absence of a valid transfer or assignment of the trade mark. On December 11, 1962, respondent General Milling Corporation filed an application for the registration of the trademark "All Montana" to be used in the sale of wheat flour. In view of the fact that the same trademark was previously, registered in favor of petitioner Unno Commercial Enterprises, Inc., the Chief Trademark Examiner of the Philippines Patent Office declared an interference proceeding 1 between respondent corporation's application (Serial No. 9732), as Junior - Party-Applicant and petitioner company's registration (Registration No. 9589), as Senior Party-Applicant, docketed in the Philippines Patent Office as Inter Partes Case No. 313, to determine which party has previously adopted and used the trademark "All Montana". Respondent General Milling Corporation, in its application for registration, alleged that it started using the trademark "All Montana" on August 31, 1955 and subsequently was licensed to use the same by Centennial Mills, Inc. by virtue of a deed of assignment executed on September 20, 1962. On the other hand petitioner Unno Commercial Enterprises, Inc. argued that the same trademark had been registered in its favor on March 8, 1962 asserting that it started using the trademark on June 30, 1956, as indentor or broker for S.H. Huang Bros. & Co., a local firm. The Director of Patents, after hearing, ruled in favor of respondent General Milling Corporation and rendered its decision as follows: However, there is testimony in the record (t.s.n., pp. 11-12, Jan.17,1967, testimony of Jose Uy) to the effect that, indispensable, "ALL MONTANA" wheat flour is a premium flour produced from premium wheat coming from the State of Montana, U.S.A. It is apparent that the trademark is primarily geographically descriptive of the goods. It is therefore a matter overlooked by the Trademark Examiner, and it is incumbent upon him to determine if the applicant should claim and is qualified to claim distinctiveness under Section 4(f) of the Trademark Statute. Otherwise, it is registrable on the Supplemental Register and should thus be registered therein. WHEREFORE, the Junior Party-Applicant is adjudged prior -user of the trademark ALL MONTANA, but 'because it is primarily geographically descriptive, the application is herein remanded to the Chief Trademark Examiner for proper proceeding before issuance of the certificate of registration. The certificate of registration issued to the Senior Party is ordered cancelled. IT IS SO ORDERED. After its motion for reconsideration was denied, petitioner brought the instant petition seeking the reversal of the decision and praying that it be declared the owner and prior user of the trademark "All Montana" on wheat flour. Petitioner based its claim of ownership over the trademark in question by the fact that it acted as an indentor or broker for S. H. Huang Bros. & Co., a local importer of wheat flour, offering as evidence the various shipments, documents, invoices and other correspondence of Centennial Mills, Inc., shipping thousand of bags of wheat flour bearing the trademark "All Montana" to the Philippines. Petitioner argued that these documents, invoices and correspondence proved the fact that it has been using the trademark "All Montana" as early as 1955 in the concept of an owner and maintained that anyone, whether he is only an importer, broker or indentor can appropriate, use and own a particular

mark of its own choice although he is not the manufacturer of the goods he deals with. Relying on the provisions of Section 2-A of the Trademarks Law 2 (Republic Act 166), petitioner insists that "the appropriation and ownership of a particular trademark is not merely confined to producers or manufacturers but likewise to anyone who lawfully deals in merchandise who renders any lawful service in commerce, like petitioner in the case at bar. 3 The right to register trademark is based on ownership. 4 When the applicant is not the owner of the trademark being applied for, he has no right to apply for the registration of the same. 5 Under the Trademark Law only the owner of the trademark, trade name or service mark used to distinguish his goods, business or service from the goods, business or service of others is entitled to register the same. 6 The term owner does not include the importer of the goods bearing the trademark, trade name, service mark, or other mark of ownership, unless such importer is actually the owner thereof in the country from which the goods are imported. A local importer, however, may make application for the registration of a foreign trademark, trade name or service mark if he is duly authorized by the actual owner of the name or other mark of ownership. 7 Thus, this Court, has on several occasions ruled that where the applicant's alleged ownership is not shown in any notarial document and the applicant appears to be merely an importer or distributor of the merchandise covered by said trademark, its application cannot be granted. 8 Moreover, the provision relied upon by petitioner (Sec. 2-A, Rep. Act No. 166) allows one "who lawfully produces or deals in merchandise ... or who engages in any lawful business or who renders any lawful service in commerce, by actual use thereof . . . (to) appropriate to his exclusive use a trademark, or a service mark not so appropriated by another. " In the case at bar, the evidence showed that the trademark "All Montana" was owned and registered in the name of Centennial Mills, Inc. which later transferred it to respondent General Milling Corporation by way of a deed of assignment. It is undisputed that way back in March, 1955, Centennial Mills, Inc. under the tradename Wenatchee Milling Co., exported flour to the Philippines, through its distributor, herein petitioner Unno Commercial Enterprises, Inc. which acted as indentor or broker for the firm S. H. Huang Bros. & Co. However, because of increased taxes and subsidies, Centennial Mills discontinued shipments of flour in the Philippines and eventually sold its brands for wheat flour, including "All Montana" brand to respondent General Milling Corporation in consideration of 1,000 shares of stock of respondent corporation with a par value of P100.00 per share or a total of P100,000.00. Respondent General Milling Corporation, since the start of the operation in 1961 of its flour mills located in Lapu-lapu City, Cebu has been manufacturing and selling "All Montana" flour in the Philippines. As against petitioner's argument that respondent failed to establish convincingly the ownership of the trademark "All Montana" by its assignor Centennial Mills, Inc., the Director of Patents correctly found that ample evidence was presented that Centennial Mills, Inc. was the owner and prior user in the Philippines of the trademark "All Montana"

through a local importer and broker. The Deed of Assignment itself constitutes sufficient proof of its ownership of the trademark "All Montana," showing that Centennial Mills was a corporation duly organized and existing under and by virtue of the laws of the State of Oregon, U.S.A. with principal place and business at Portland, Oregon, U.S.A. and the absolute and registered owner of several trademarks for wheat flour, i.e. (Imperial, White Lily, Duck, General, Swan, White Horse, Vinta, El Paro, Baker's Joy, Choice, Red Bowl All Montana and Dollar.) all of which were assigned by it to respondent General Milling Corporation. The deed of assignment was signed by its president, Dugald MacGregor, duly acknowledged before James Hunt, a notary public for the State of Oregon, accompanied by a certification issued by the Secretary of State of the State of Oregon stating that the said James Hunt is a duly qualified Notary Public with full power and authority to take acknowledgments of all oaths and that full faith and credit should be given to his official acts as notary public. The Director of Patents likewise correctly rejected petitioner's contention that in a 1954 conference in Manila the ownership and use by petitioner of the brand "All Montana" was agreed upon, on the contrary finding that "Details of that meeting were, however, explained by Mr. Dugald MacGregor, President of Centennial Mills, Inc., as the Junior Party's rebuttal witness. Mr. MacGregor confirmed holding such conference in a restaurant in Manila with representatives of the Senior Party, namely; Messrs. Jose Uy, Francisco Gonzales and S. H. Huang although he could not remember the name of the restaurant. He further explained that his company owned the trademark; that it had been using the mark in the United States; and that ownership of the mark had never been conferred upon any other company, much less the Senior Party"; and "Inasmuch as it was not the owner of the trademark, the Senior Party could not be regarded as having used and adopted it, and had no right to apply for its registration. It acknowledged that it was a mere importer of flour, and a mere importer and distributor acquires no rights in the mark used on the imported goods by the foreign exporter in the absence of an assignment of any kind ... Trademarks used and adopted on goods manufactured or packed in a foreign country in behalf of a domestic importer, broker, or indentor and distributor are presumed to be owned by the manufacturer or packer, unless there is a written agreement clearly showing that ownership vests in the importer, broker, indentor or distributor. Thus, petitioner's contention that it is the owner of the mark "All Montana" because of its certificate of registration issued by the Director of Patents, must fail, since ownership of a trademark is not acquired by the mere fact of registration alone. 9 Registration merely creates a prima facie presumption of the validity of the registration, of the registrant's ownership of the trademark and of the exclusive right to the use thereof. 10 Registration does not perfect a trademark right. 11 As conceded itself by petitioner, evidence may be presented to overcome the presumption. Prior use by one will controvert a claim of legal appropriation, by subsequent users. In the case at bar, the Director of Patents found that "ample evidence was presented in the record that Centennial Mills, Inc. was the owner and prior user in the Philippines of the trademark 'All Montana' through a local importer and broker. Use of a trademark by a mere importer, indentor or exporter (the Senior Party herein) inures to the

benefit of the foreign manufacturer whose goods are Identified by the trademark. The Junior Party has hereby established a continuous chain of title and, consequently, prior adoption and use" and ruled that "based on the facts established, it is safe to conclude that the Junior Party has satisfactorily discharged the burden of proving priority of adoption and use and is entitled to registration." It is wellsettled that we are precluded from making further inquiry, since the findings of fact of the Director of Patents in the absence of any showing that there was grave abuse of discretion is binding on us 12 and the findings of facts by the Director of Patents are deemed conclusive in the Supreme Court provided that they are supported by substantial evidence. 13 Petitioner has failed to show that the findings of fact of the Director of Patents are not substantially supported by evidence nor that any grave abuse of discretion was committed.

Finally, the Court finds without merit petitioner's argument that the Director of Patents could not order the cancellation of' its certificate of registration in an interference proceeding and that the question of whether or not a certificate of registration is to be cancelled should have been brought in cancellation proceedings. Under Rule 178 of the Rules of the Patent Office in Trademark Cases, 14 the Director of Patents is expressly authorized to order the cancellation of a registered mark or trade name or name or other mark of ownership in an inter partes case, such as the interference proceeding at bar. 15 WHEREFORE, the appealed decision is hereby affirmed. No costs. Melencio-Herrera, Plana, Vasquez, Relova and Gutierrez, Jr., JJ., concur.

G.R. No. 100098 December 29, 1995 EMERALD GARMENT MANUFACTURING CORPORATION, petitioner, vs. HON. COURT OF APPEALS, BUREAU OF PATENTS, TRADEMARKS AND TECHNOLOGY TRANSFER and H.D. LEE COMPANY, INC., respondents. KAPUNAN, J.: In this petition for review on certiorari under Rule 45 of the Revised Rules of Court, Emerald Garment Manufacturing Corporation seeks to annul the decision of the Court of Appeals dated 29 November 1990 in CA-G.R. SP No. 15266 declaring petitioner's trademark to be confusingly similar to that of private respondent and the resolution dated 17 May 1991 denying petitioner's motion for reconsideration. The record reveals the following antecedent facts: On 18 September 1981, private respondent H.D. Lee Co., Inc., a foreign corporation organized under the laws of Delaware, U.S.A., filed with the Bureau of Patents, Trademarks & Technology Transfer (BPTTT) a Petition for Cancellation of Registration No. SR 5054 (Supplemental Register) for the trademark "STYLISTIC MR. LEE" used on skirts, jeans, blouses, socks, briefs, jackets, jogging suits, dresses, shorts, shirts and lingerie under Class 25, issued on 27 October 1980 in the name of petitioner Emerald Garment Manufacturing Corporation, a domestic corporation organized and existing under Philippine laws. The petition was docketed as Inter Partes Case No. 1558. 1 Private respondent, invoking Sec. 37 of R.A. No. 166 (Trademark Law) and Art. VIII of the Paris Convention for the Protection of Industrial Property, averred that petitioner's trademark "so closely resembled its own trademark, 'LEE' as previously registered and used in the Philippines, and not abandoned, as to be likely, when applied to or used in connection with petitioner's goods, to cause confusion, mistake and deception on the part of the purchasing public as to the origin of the goods." 2 In its answer dated 23 March 1982, petitioner contended that its trademark was entirely and unmistakably different from that of private respondent and that its certificate of registration was legally and validly granted. 3 On 20 February 1984, petitioner caused the publication of its application for registration of the trademark "STYLISTIC MR. LEE" in the Principal Register." 4 On 27 July 1984, private respondent filed a notice of opposition to petitioner's application for registration also on grounds that petitioner's trademark was confusingly similar to its "LEE" trademark. 5 The case was docketed as Inter Partes Case No. 1860. On 21 June 1985, the Director of Patents, on motion filed by private respondent dated 15 May 1985, issued an order consolidating Inter Partes Cases Nos. 1558 and 1860 on grounds that a common question of law was involved. 6 On 19 July 1988, the Director of Patents rendered a decision granting private respondent's petition for cancellation and opposition to registration. The Director of Patents found private respondent to be the prior registrant of the trademark "LEE" in the Philippines and that it had been using said mark in the Philippines. 7 Moreover, the Director of Patents, using the test of dominancy, declared that petitioner's trademark was confusingly similar to private respondent's mark because "it is the word 'Lee' which draws the attention of the buyer and leads him to conclude that the goods originated from the same manufacturer. It is undeniably the dominant feature of the mark." 8 On 3 August 1988, petitioner appealed to the Court of Appeals and on 8 August 1988, it filed with the BPTTT a Motion to Stay Execution of the 19 July 1988 decision of the Director of Patents on grounds that the same would

cause it great and irreparable damage and injury. Private respondent submitted its opposition on 22 August 1988. 9 On 23 September 1988, the BPTTT issued Resolution No. 88-33 granting petitioner's motion to stay execution subject to the following terms and conditions: 1. That under this resolution, RespondentRegistrant is authorized only to dispose of its current stock using the mark "STYLISTIC MR. LEE"; 2. That Respondent-Registrant is strictly prohibited from further production, regardless of mode and source, of the mark in question (STYLISTIC MR. LEE) in addition to its current stock; 3. That this relief Order shall automatically cease upon resolution of the Appeal by the Court of Appeals and, if the Respondent's appeal loses, all goods bearing the mark "STYLISTIC MR. LEE" shall be removed from the market, otherwise such goods shall be seized in accordance with the law. SO ORDERED. 10 On 29 November 1990, the Court of Appeals promulgated its decision affirming the decision of the Director of Patents dated 19 July 1988 in all respects. 11 In said decision the Court of Appeals expounded, thus: xxx xxx xxx Whether or not a trademark causes confusion and is likely to deceive the public is a question of fact which is to be resolved by applying the "test of dominancy", meaning, if the competing trademark contains the main or essential or dominant features of another by reason of which confusion and deception are likely to result, then infringement takes place; that duplication or imitation is not necessary, a similarity in the dominant features of the trademark would be sufficient. The word "LEE" is the most prominent and distinctive feature of the appellant's trademark and all of the appellee's "LEE" trademarks. It is the mark which draws the attention of the buyer and leads him to conclude that the goods originated from the same manufacturer. While it is true that there are other words such as "STYLISTIC", printed in the appellant's label, such word is printed in such small letters over the word "LEE" that it is not conspicuous enough to draw the attention of ordinary buyers whereas the word "LEE" is printed across the label in big, bold letters and of the same color, style, type and size of lettering as that of the trademark of the appellee. The alleged difference is too insubstantial to be noticeable. Even granting

arguendo that the word "STYLISTIC" is conspicuous enough to draw attention, the goods may easily be mistaken for just another variation or line of garments under the ap appelle's "LEE" trademarks in view of the fact that the appellee has registered trademarks which use other words in addition to the principal mark "LEE" such as "LEE RIDERS", "LEESURES" and "LEE LEENS". The likelihood of confusion is further made more probable by the fact that both parties are engaged in the same line of business. It is well to reiterate that the determinative factor in ascertaining whether or not the marks are confusingly similar to each other is not whether the challenged mark would actually cause confusion or deception of the purchasers but whether the use of such mark would likely cause confusion or mistake on the part of the buying public. xxx xxx xxx The appellee has sufficiently established its right to prior use and registration of the trademark "LEE" in the Philippines and is thus entitled to protection from any infringement upon the same. It is thus axiomatic that one who has identified a peculiar symbol or mark with his goods thereby acquires a property right in such symbol or mark, and if another infringes the trademark, he thereby invokes this property right. The merchandise or goods being sold by the parties are not that expensive as alleged to be by the appellant and are quite ordinary commodities purchased by the average person and at times, by the ignorant and the unlettered. Ordinary purchasers will not as a rule examine the small letterings printed on the label but will simply be guided by the presence of the striking mark "LEE". Whatever difference there may be will pale in insignificance in the face of an evident similarity in the dominant features and overall appearance of the labels of the parties. 12 xxx xxx xxx On 19 December 1990, petitioner filed a motion for reconsideration of the above-mentioned decision of the Court of Appeals. Private respondent opposed said motion on 8 January 1991 on grounds that it involved an impermissible change of theory on appeal. Petitioner allegedly raised entirely new and unrelated arguments and defenses not previously raised in the proceedings below such as laches and a claim that private respondent appropriated the style and appearance of petitioner's trademark when it registered its "LEE" mark under Registration No. 44220. 13 On 17 May 1991, the Court of Appeals issued a resolution rejecting petitioner's motion for reconsideration and ruled thus: xxx xxx xxx

A defense not raised in the trial court cannot be raised on appeal for the first time. An issue raised for the first time on appeal and not raised timely in the proceedings in the lower court is barred by estoppel. The object of requiring the parties to present all questions and issues to the lower court before they can be presented to this Court is to have the lower court rule upon them, so that this Court on appeal may determine whether or not such ruling was erroneous. The purpose is also in furtherance of justice to require the party to first present the question he contends for in the lower court so that the other party may not be taken by surprise and may present evidence to properly meet the issues raised. Moreover, for a question to be raised on appeal, the same must also be within the issues raised by the parties in their pleadings. Consequently, when a party deliberately adopts a certain theory, and the case is tried and decided based upon such theory presented in the court below, he will not be permitted to change his theory on appeal. To permit him to do so would be unfair to the adverse party. A question raised for the first time on appeal, there having opportunity to raise them in the court of origin constitutes a change of theory which is not permissible on appeal. In the instant case, appellant's main defense pleaded in its answer dated March 23, 1982 was that there was "no confusing similarity between the competing trademark involved. On appeal, the appellant raised a single issue, to wit: The only issue involved in this case is whether or not respondent-registrant's trademark "STYLISTIC MR. LEE" is confusingly similar with the petitioner's trademarks "LEE or LEERIDERS, LEE-LEENS and LEE-SURES." Appellant's main argument in this motion for reconsideration on the other hand is that the appellee is estopped by laches from asserting its right to its trademark. Appellant claims although belatedly that appellee went to court with "unclean hands" by changing the appearance of its trademark to make it identical to the appellant's trademark. Neither defenses were raised by the appellant in the proceedings before the Bureau of Patents. Appellant cannot raise them now for the first time on appeal, let alone on a mere motion for reconsideration of the decision of this Court dismissing the appellant's appeal. While there may be instances and situations justifying relaxation of this rule, the circumstance of the instant case, equity would be better served by applying the settled rule it appearing that appellant has not given any reason

at all as to why the defenses raised in its motion for reconsideration was not invoked earlier. 14 xxx xxx xxx Twice rebuffed, petitioner presents its case before this Court on the following assignment of errors: I. THE COURT OF APPEALS ERRED IN NOT FINDING THAT PRIVATE RESPONDENT CAUSED THE ISSUANCE OF A FOURTH "LEE" TRADEMARK IMITATING THAT OF THE PETITIONER'S ON MAY 5, 1989 OR MORE THAN EIGHT MONTHS AFTER THE BUREAU OF PATENT'S DECISION DATED JULY 19, 1988. II. THE COURT OF APPEALS ERRED IN RULING THAT THE DEFENSE OF ESTOPPEL BY LACHES MUST BE RAISED IN THE PROCEEDINGS BEFORE THE BUREAU OF PATENTS, TRADEMARKS AND TECHNOLOGY TRANSFER. III. THE COURT OF APPEALS ERRED WHEN IT CONSIDERED PRIVATE RESPONDENT'S PRIOR REGISTRATION OF ITS TRADEMARK AND DISREGARDED THE FACT THAT PRIVATE RESPONDENT HAD FAILED TO PROVE COMMERCIAL USE THEREOF BEFORE FILING OF APPLICATION FOR REGISTRATION. 15 In addition, petitioner reiterates the issues it raised in the Court of Appeals: I. THE ISSUE INVOLVED IN THIS CASE IS WHETHER OR NOT PETITIONER'S TRADEMARK SYTLISTIC MR. LEE, IS CONFUSINGLY SIMILAR WITH THE PRIVATE RESPONDENT'S TRADEMARK LEE OR LEE-RIDER, LEE-LEENS AND LEESURES. II. PETITIONER'S EVIDENCES ARE CLEAR AND SUFFICIENT TO SHOW THAT IT IS THE PRIOR USER AND ITS TRADEMARK IS DIFFERENT FROM THAT OF THE PRIVATE RESPONDENT. III. PETITIONER'S TRADEMARK IS ENTIRELY DIFFERENT FROM THE PRIVATE RESPONDENT'S AND THE REGISTRATION OF ITS TRADEMARK IS PRIMA FACIE EVIDENCE OF GOOD FAITH. IV. PETITIONER'S "STYLISTIC MR. LEE" TRADEMARK CANNOT BE CONFUSED WITH PRIVATE RESPONDENT'S LEE TRADEMARK. 16 Petitioner contends that private respondent is estopped from instituting an action for infringement before the BPTTT under the equitable principle of laches pursuant to Sec. 9-A

of R.A. No. 166, otherwise known as the Law on Trademarks, Trade-names and Unfair Competition: Sec. 9-A. Equitable principles to govern proceedings. In opposition proceedings and in all other inter partes proceedings in the patent office under this act, equitable principles of laches, estoppel, and acquiescence, where applicable, may be considered and applied. Petitioner alleges that it has been using its trademark "STYLISTIC MR. LEE" since 1 May 1975, yet, it was only on 18 September 1981 that private respondent filed a petition for cancellation of petitioner's certificate of registration for the said trademark. Similarly, private respondent's notice of opposition to petitioner's application for registration in the principal register was belatedly filed on 27 July 1984. 17 Private respondent counters by maintaining that petitioner was barred from raising new issues on appeal, the only contention in the proceedings below being the presence or absence of confusing similarity between the two trademarks in question. 18 We reject petitioner's contention. Petitioner's trademark is registered in the supplemental register. The Trademark Law (R.A. No. 166) provides that "marks and tradenames for the supplemental register shall not be published for or be subject to opposition, but shall be published on registration in the Official Gazette." 19 The reckoning point, therefore, should not be 1 May 1975, the date of alleged use by petitioner of its assailed trademark but 27 October 1980, 20 the date the certificate of registration SR No. 5054 was published in the Official Gazette and issued to petitioner. It was only on the date of publication and issuance of the registration certificate that private respondent may be considered "officially" put on notice that petitioner has appropriated or is using said mark, which, after all, is the function and purpose of registration in the supplemental register. 21 The record is bereft of evidence that private respondent was aware of petitioner's trademark before the date of said publication and issuance. Hence, when private respondent instituted cancellation proceedings on 18 September 1981, less than a year had passed. Corollarily, private respondent could hardly be accused of inexcusable delay in filing its notice of opposition to petitioner's application for registration in the principal register since said application was published only on 20 February 1984. 22 From the time of publication to the time of filing the opposition on 27 July 1984 barely five (5) months had elapsed. To be barred from bringing suit on grounds of estoppel and laches, the delay must be lengthy. 23 More crucial is the issue of confusing similarity between the two trademarks. Petitioner vehemently contends that its trademark "STYLISTIC MR. LEE" is entirely different from and not confusingly similar to private respondent's "LEE" trademark.

Private respondent maintains otherwise. It asserts that petitioner's trademark tends to mislead and confuse the public and thus constitutes an infringement of its own mark, since the dominant feature therein is the word "LEE." The pertinent provision of R.A. No. 166 (Trademark Law) states thus: Sec. 22. Infringement, what constitutes. Any person who shall use, without the consent of the registrant, any reproduction, counterfeit, copy or colorable imitation of any registered mark or trade-name in connection with the sale, offering for sale, or advertising of any goods, business or services on or in connection with which such use is likely to cause confusion or mistake or to deceive purchasers or others as to the source or origin of such goods or services, or identity of such business; or reproduce, counterfeit, copy or colorably imitable any such mark or trade-name and apply such reproduction, counterfeit, copy, or colorable imitation to labels, signs, prints, packages, wrappers, receptacles or advertisements intended to be used upon or in connection with such goods, business or services; shall be liable to a civil action by the registrant for any or all of the remedies herein provided. Practical application, however, of the aforesaid provision is easier said than done. In the history of trademark cases in the Philippines, particularly in ascertaining whether one trademark is confusingly similar to or is a colorable imitation of another, no set rules can be deduced. Each case must be decided on its own merits. In Esso Standard Eastern, Inc. v. Court of Appeals, held:
24

we

. . . But likelihood of confusion is a relative concept; to be determined only according to the particular, and sometimes peculiar, circumstances of each case. It is unquestionably true that, as stated in Coburn vs. Puritan Mills, Inc.: "In trademark cases, even more than in other litigation, precedent must be studied in the light of the facts of the particular case." xxx xxx xxx Likewise, it has been observed that: In determining whether a particular name or mark is a "colorable imitation" of another, no allembracing rule seems possible in view of the great number of factors which must necessarily be considered in resolving this question of fact, such as the class of product or business to which the article belongs; the product's quality, quantity, or size, including its wrapper or container; the dominant color, style, size, form, meaning of letters, words, designs and emblems used; the nature of the package, wrapper or container; the character of the product's purchasers; location of the business; the

likelihood of deception or the mark or name's tendency to confuse etc. 25 Proceeding to the task at hand, the essential element of infringement is colorable imitation. This term has been defined as "such a close or ingenious imitation as to be calculated to deceive ordinary purchasers, or such resemblance of the infringing mark to the original as to deceive an ordinary purchaser giving such attention as a purchaser usually gives, and to cause him to purchase the one supposing it to be the other." 26 Colorable imitation does not mean such similitude as amounts to identity. Nor does it require that all the details be literally copied. Colorable imitation refers to such similarity in form, content, words, sound, meaning, special arrangement, or general appearance of the trademark or tradename with that of the other mark or tradename in their over-all presentation or in their essential, substantive and distinctive parts as would likely mislead or confuse persons in the ordinary course of purchasing the genuine article. 27 In determining whether colorable imitation exists, jurisprudence has developed two kinds of tests the Dominancy Test applied in Asia Brewery, Inc. v. Court of Appeals 28 and other cases 29 and the Holistic Test developed in Del Monte Corporation v. Court of Appeals 30 and its proponent cases. 31 As its title implies, the test of dominancy focuses on the similarity of the prevalent features of the competing trademarks which might cause confusion or deception and thus constitutes infringement. xxx xxx xxx . . . If the competing trademark contains the main or essential or dominant features of another, and confusion and deception is likely to result, infringement takes place. Duplication or imitation is not necessary; nor it is necessary that the infringing label should suggest an effort to imitate. [C. Neilman Brewing Co. v. Independent Brewing Co., 191 F., 489, 495, citing Eagle White Lead Co., vs. Pflugh (CC) 180 Fed. 579]. The question at issue in cases of infringement of trademarks is whether the use of the marks involved would be likely to cause confusion or mistakes in the mind of the public or deceive purchasers. (Auburn Rubber Corporation vs. Honover Rubber Co., 107 F. 2d 588; . . .) 32 xxx xxx xxx On the other side of the spectrum, the holistic test mandates that the entirety of the marks in question must be considered in determining confusing similarity. xxx xxx xxx

In determining whether the trademarks are confusingly similar, a comparison of the words is not the only determinant factor. The trademarks in their entirety as they appear in their respective labels or hang tags must also be considered in relation to the goods to which they are attached. The discerning eye of the observer must focus not only on the predominant words but also on the other features appearing in both labels in order that he may draw his conclusion whether one is confusingly similar to the other. 33 xxx xxx xxx Applying the foregoing tenets to the present controversy and taking into account the factual circumstances of this case, we considered the trademarks involved as a whole and rule that petitioner's "STYLISTIC MR. LEE" is not confusingly similar to private respondent's "LEE" trademark. Petitioner's trademark is the whole "STYLISTIC MR. LEE." Although on its label the word "LEE" is prominent, the trademark should be considered as a whole and not piecemeal. The dissimilarities between the two marks become conspicuous, noticeable and substantial enough to matter especially in the light of the following variables that must be factored in. First, the products involved in the case at bar are, in the main, various kinds of jeans. These are not your ordinary household items like catsup, soysauce or soap which are of minimal cost. Maong pants or jeans are not inexpensive. Accordingly, the casual buyer is predisposed to be more cautious and discriminating in and would prefer to mull over his purchase. Confusion and deception, then, is less likely. In Del Monte Corporation v. Court of Appeals, 34 we noted that: . . . Among these, what essentially determines the attitudes of the purchaser, specifically his inclination to be cautious, is the cost of the goods. To be sure, a person who buys a box of candies will not exercise as much care as one who buys an expensive watch. As a general rule, an ordinary buyer does not exercise as much prudence in buying an article for which he pays a few centavos as he does in purchasing a more valuable thing. Expensive and valuable items are normally bought only after deliberate, comparative and analytical investigation. But mass products, low priced articles in wide use, and matters of everyday purchase requiring frequent replacement are bought by the casual consumer without great care. . . . Second, like his beer, the average Filipino consumer generally buys his jeans by brand. He does not ask the sales clerk for generic jeans but for, say, a Levis, Guess, Wrangler or even an Armani. He is, therefore, more or less knowledgeable and familiar with his preference and will not easily be distracted. Finally, in line with the foregoing discussions, more credit should be given to the "ordinary purchaser." Cast in this particular controversy, the ordinary purchaser is not the

"completely unwary consumer" but is the "ordinarily intelligent buyer" considering the type of product involved. The definition laid down in Dy Buncio v. Tan Tiao Bok 35 is better suited to the present case. There, the "ordinary purchaser" was defined as one "accustomed to buy, and therefore to some extent familiar with, the goods in question. The test of fraudulent simulation is to be found in the likelihood of the deception of some persons in some measure acquainted with an established design and desirous of purchasing the commodity with which that design has been associated. The test is not found in the deception, or the possibility of deception, of the person who knows nothing about the design which has been counterfeited, and who must be indifferent between that and the other. The simulation, in order to be objectionable, must be such as appears likely to mislead the ordinary intelligent buyer who has a need to supply and is familiar with the article that he seeks to purchase." There is no cause for the Court of Appeal's apprehension that petitioner's products might be mistaken as "another variation or line of garments under private respondent's 'LEE' trademark". 36 As one would readily observe, private respondent's variation follows a standard format "LEERIDERS," "LEESURES" and "LEELEENS." It is, therefore, improbable that the public would immediately and naturally conclude that petitioner's "STYLISTIC MR. LEE" is but another variation under private respondent's "LEE" mark. As we have previously intimated the issue of confusing similarity between trademarks is resolved by considering the distinct characteristics of each case. In the present controversy, taking into account these unique factors, we conclude that the similarities in the trademarks in question are not sufficient as to likely cause deception and confusion tantamount to infringement. Another way of resolving the conflict is to consider the marks involved from the point of view of what marks are registrable pursuant to Sec. 4 of R.A. No. 166, particularly paragraph 4 (e): CHAPTER II-A. The Principal Register (Inserted by Sec. 2, Rep. Act No. 638.) Sec. 4. Registration of trade-marks, trade-names and service-marks on the principal register. There is hereby established a register of trademarks, trade-names and service-marks which shall be known as the principal register. The owner of a trade-mark, trade-name or servicemark used to distinguish his goods, business or services from the goods, business or services of others shall have the right to register the same on the principal register, unless it: xxx xxx xxx (e) Consists of a mark or trade-name which, when applied to or used in connection with the goods, business or services of the applicant is merely descriptive or deceptively misdescriptive of them, or when applied to or used in

connection with the goods, business or services of the applicant is primarily geographically descriptive or deceptively misdescriptive of them, or is primarily merely a surname; (Emphasis ours.) xxx xxx xxx "LEE" is primarily a surname. Private respondent cannot, therefore, acquire exclusive ownership over and singular use of said term. . . . It has been held that a personal name or surname may not be monopolized as a trademark or tradename as against others of the same name or surname. For in the absence of contract, fraud, or estoppel, any man may use his name or surname in all legitimate ways. Thus, "Wellington" is a surname, and its first user has no cause of action against the junior user of "Wellington" as it is incapable of exclusive appropriation. 37 In addition to the foregoing, we are constrained to agree with petitioner's contention that private respondent failed to prove prior actual commercial use of its "LEE" trademark in the Philippines before filing its application for registration with the BPTTT and hence, has not acquired ownership over said mark. Actual use in commerce in the Philippines is an essential prerequisite for the acquisition of ownership over a trademark pursuant to Sec. 2 and 2-A of the Philippine Trademark Law (R.A. No. 166) which explicitly provides that: CHAPTER II. Registration of Marks and Tradenames. Sec. 2. What are registrable. Trade-marks, trade-names, and service marks owned by persons, corporations, partnerships or associations domiciled in the Philippines and by persons, corporations, partnerships, or associations domiciled in any foreign country may be registered in accordance with the provisions of this act: Provided, That said trademarks, trade-names, or service marks are actually in use in commerce and services not less than two months in the Philippines before the time the applications for registration are filed: And Provided, further, That the country of which the applicant for registration is a citizen grants by law substantially similar privileges to citizens of the Philippines, and such fact is officially certified, with a certified true copy of the foreign law translated into the English language, by the government of the foreign country to the Government of the Republic of the Philippines. (As amended.) (Emphasis ours.) Sec. 2-A. Ownership of trade-marks, tradenames and service-marks; how acquired. Anyone who lawfully produces or deals in merchandise of any kind or who engages in

lawful business, or who renders any lawful service in commerce, by actual use hereof in manufacture or trade, in business, and in the service rendered; may appropriate to his exclusive use a trade-mark, a trade-name, or a service-mark not so appropriated by another, to distinguish his merchandise, business or services from others. The ownership or possession of trade-mark, trade-name, service-mark, heretofore or hereafter appropriated, as in this section provided, shall be recognized and protected in the same manner and to the same extent as are other property rights to the law. (As amended.) (Emphasis ours.) The provisions of the 1965 Paris Convention for the Protection of Industrial Property 38 relied upon by private respondent and Sec. 21-A of the Trademark Law (R.A. No. 166) 39 were sufficiently expounded upon and qualified in the recent case of Philip Morris, Inc. v. Court of Appeals: 40 xxx xxx xxx Following universal acquiescence and comity, our municipal law on trademarks regarding the requirement of actual use in the Philippines must subordinate an international agreement inasmuch as the apparent clash is being decided by a municipal tribunal (Mortisen vs. Peters, Great Britain, High Court of Judiciary of Scotland, 1906, 8 Sessions, 93; Paras, International Law and World Organization, 1971 Ed., p. 20). Withal, the fact that international law has been made part of the law of the land does not by any means imply the primacy of international law over national law in the municipal sphere. Under the doctrine of incorporation as applied in most countries, rules of international law are given a standing equal, not superior, to national legislative enactments. xxx xxx xxx In other words, (a foreign corporation) may have the capacity to sue for infringement irrespective of lack of business activity in the Philippines on account of Section 21-A of the Trademark Law but the question of whether they have an exclusive right over their symbol as to justify issuance of the controversial writ will depend on actual use of their trademarks in the Philippines in line with Sections 2 and 2-A of the same law. It is thus incongruous for petitioners to claim that when a foreign corporation not licensed to do business in the Philippines files a complaint for infringement, the entity need not be actually using its trademark in commerce in the Philippines. Such a foreign corporation may have the personality to file a suit for infringement but it may not necessarily be entitled to protection due to absence of actual use of the emblem in the local market. xxx xxx xxx

Undisputably, private respondent is the senior registrant, having obtained several registration certificates for its various trademarks "LEE," "LEERIDERS," and "LEESURES" in both the supplemental and principal registers, as early as 1969 to 1973. 41 However, registration alone will not suffice. In Sterling Products International, Inc. v. Farbenfabriken Bayer Aktiengesellschaft, 42 we declared: xxx xxx xxx A rule widely accepted and firmly entrenched because it has come down through the years is that actual use in commerce or business is a prerequisite in the acquisition of the right of ownership over a trademark. xxx xxx xxx It would seem quite clear that adoption alone of a trademark would not give exclusive right thereto. Such right "grows out of their actual use." Adoption is not use. One may make advertisements, issue circulars, give out price lists on certain goods; but these alone would not give exclusive right of use. For trademark is a creation of use. The underlying reason for all these is that purchasers have come to understand the mark as indicating the origin of the wares. Flowing from this is the trader's right to protection in the trade he has built up and the goodwill he has accumulated from use of the trademark. Registration of a trademark, of course, has value: it is an administrative act declaratory of a pre-existing right. Registration does not, however, perfect a trademark right. (Emphasis ours.) xxx xxx xxx To augment its arguments that it was, not only the prior registrant, but also the prior user, private respondent invokes Sec. 20 of the Trademark Law, thus: Sec. 20. Certificate of registration prima facie evidence of validity. A certificate of registration of a mark or tradename s