Republic of the Philippines

SUPREME COURT

Manila

FIRST DIVISION

G.R. No. L-63796-97 May 2, 1984

LA CHEMISE LACOSTE, S. A., petitioner,

vs. HON. OSCAR C. FERNANDEZ, Presiding Judge of Branch XLIX, Regional Trial Court, National Capital Judicial Region, Manila and GOBINDRAM HEMANDAS, respondents.

G.R. No. L-65659 May 2l, 1984

GOBINDRAM HEMANDAS SUJANANI, petitioner, vs. HON. ROBERTO V. ONGPIN, in his capacity as Minister of Trade and Industry, and HON. CESAR SAN DIEGO, in his capacity as Director of Patents, respondents.

Castillo, Laman, Tan & Pantaleon for petitioners in 63796-97.

Ramon C. Fernandez for private respondent in 63796-97 and petitioner in 65659.

GUTIERREZ, JR., J.:

It is among this Court's concerns that the Philippines should not acquire an unbecoming reputation among the manufacturing and trading centers of the world as a haven for intellectual pirates imitating and illegally profiting from trademarks and tradenames which have established themselves in international or foreign trade.

Before this Court is a petition for certiorari with preliminary injunction filed by La Chemise Lacoste, S.A., a well known European manufacturer of clothings and sporting apparels sold in the international market and bearing the trademarks "LACOSTE" "CHEMISE LACOSTE", "CROCODILE DEVICE" and a composite mark consisting of the word "LACOSTE" and a representation of a crocodile/alligator. The petitioner asks us to set aside as null and void, the order of judge Oscar C. Fernandez, of Branch XLIX, Regional Trial Court, National Capital Judicial Region, granting the motion to quash the search warrants previously issued by him and ordering the return of the seized items.

The facts are not seriously disputed. The petitioner is a foreign corporation, organized and existing under the laws of France and not doing business in the Philippines, It is undeniable from the records that it is the actual owner of the abovementioned trademarks used on clothings and other goods specifically sporting apparels sold in many parts of the world and which have been marketed in the Philippines since 1964, The main basis of the private respondent's case is its claim of alleged prior registration.

In 1975, Hemandas & Co., a duly licensed domestic firm applied for and was issued Reg. No. SR-2225 (SR stands for Supplemental Register) for the trademark "CHEMISE LACOSTE & CROCODILE DEVICE" by the Philippine Patent Office for use on T-shirts, sportswear and other garment products of the company. Two years later, it applied for the registration of the same trademark under the Principal Register. The Patent Office eventually issued an order dated March 3, 1977 which states that:

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... Considering that the mark was already registered in the Supplemental Register in favor of herein applicant, the Office has no other recourse but to allow the application, however, Reg. No. SR-2225 is now being contested in a Petition for Cancellation docketed as IPC No. 1046, still registrant is presumed to be the owner of the mark until after the registration is declared cancelled.

Thereafter, Hemandas & Co. assigned to respondent Gobindram Hemandas all rights, title, and interest in the trademark "CHEMISE LACOSTE & DEVICE".

On November 21, 1980, the petitioner filed its application for registration of the trademark "Crocodile Device" (Application Serial No. 43242) and "Lacoste" (Application Serial No. 43241).The former was approved for publication while the latter was opposed by Games and Garments in Inter Partes Case No. 1658. In 1982, the petitioner filed a Petition for the Cancellation of Reg. No. SR-2225 docketed as Inter Partes Case No. 1689. Both cases have now been considered by this Court in Hemandas v. Hon. Roberto Ongpin (G.R. No. 65659).

On March 21, 1983, the petitioner filed with the National Bureau of Investigation (NBI) a letter-complaint alleging therein the acts of unfair competition being committed by Hemandas and requesting their assistance in his apprehension and prosecution. The NBI conducted an investigation and subsequently filed with the respondent court two applications for the issuance of search warrants which would authorize the search of the premises used and occupied by the Lacoste Sports Center and Games and Garments both owned and operated by Hemandas.

The respondent court issued Search Warrant Nos. 83-128 and 83-129 for violation of Article 189 of the Revised Penal Code, "it appearing to the satisfaction of the judge after examining under oath applicant and his witnesses that there are good and sufficient reasons to believe that Gobindram Hemandas ... has in his control and possession in his premises the ... properties subject of the offense," (Rollo, pp. 67 and 69) The NBI agents executed the two search warrants and as a result of the search found and seized various goods and articles described in the warrants.

Hemandas filed a motion to quash the search warrants alleging that the trademark used by him was different from petitioner's trademark and that pending the resolution of IPC No. 1658 before the Patent Office, any criminal or civil action on the same subject matter and between the same parties would be premature.

The petitioner filed its opposition to the motion arguing that the motion to quash was fatally defective as it cited no valid ground for the quashal of the search warrants

and that the grounds alleged in the motion were absolutely without merit. The State Prosecutor likewise filed his opposition on the grounds that the goods seized were instrument of a crime and necessary for the resolution of the case on preliminary investigation and that the release of the said goods would be fatal to the case of the People should prosecution follow in court.

The respondent court was, however, convinced that there was no probable cause to justify the issuance of the search warrants. Thus, in its order dated March 22, 1983, the search warrants were recalled and set aside and the NBI agents or officers in custody of the seized items were ordered to return the same to Hemandas. (Rollo, p. 25)

The petitioner anchors the present petition on the following issues:

Did respondent judge act with grave abuse of discretion amounting to lack of jurisdiction,

(i) in reversing the finding of probable cause which he himself had made in issuing the search warrants, upon allegations which are matters of defense and as such can be raised and resolved only upon trial on the merits; and

(ii) in finding that the issuance of the search warrants is premature in the face of the fact that (a) Lacoste's registration of the subject trademarks is still pending with the Patent Office with opposition from Hemandas; and (b) the subject trademarks had been earlier registered by Hemandas in his name in the Supplemental Register of the Philippine Patent Office?

Respondent, on the other hand, centers his arguments on the following issues:

I

THE PETITIONER HAS NO CAPACITY TO SUE BEFORE PHILIPPINE COURTS.

II

THE RESPONDENT JUDGE DID NOT COMMIT A GRAVE ABUSE OF DISCRETION TANTAMOUNT TO LACK OF JURISDICTION IN ISSUING THE ORDER DATED APRIL 22, 1983.

Hemandas argues in his comment on the petition for certiorari that the petitioner being a foreign corporation failed to allege essential facts bearing upon its capacity to sue before Philippine courts. He states that not only is the petitioner not doing business in the Philippines but it also is not licensed to do business in the Philippines. He also cites the case of Leviton Industries v. Salvador (114 SCRA 420) to support his contention The Leviton case, however, involved a complaint for unfair competition under Section 21-A of Republic Act No. 166 which provides:

Sec. 21 — A. Any foreign corporation or juristic person to which a mark or tradename has been registered or assigned under this Act may bring an action hereunder for infringement, for unfair competition, or false designation of origin and false description, whether or not it has been licensed to do business in the Philippines under Act numbered Fourteen Hundred and Fifty-Nine, as amended,

otherwise known as the Corporation Law, at the time it brings the complaint; Provided, That the country of which the said foreign 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.

We held that it was not enough for Leviton, a foreign corporation organized and existing under the laws of the State of New York, United States of America, to merely allege that it is a foreign corporation. It averred in Paragraph 2 of its complaint that its action was being filed under the provisions of Section 21-A of Republic Act No. 166, as amended. Compliance with the requirements imposed by the abovecited provision was necessary because Section 21-A of Republic Act No. 166 having explicitly laid down certain conditions in a specific proviso, the same must be expressly averred before a successful prosecution may ensue. It is therefore, necessary for the foreign corporation to comply with these requirements or aver why it should be exempted from them, if such was the case. The foreign corporation may have the right to sue before Philippine courts, but our rules on pleadings require that the qualifying circumstances necessary for the assertion of such right should first be affirmatively pleaded.

In contradistinction, the present case involves a complaint for violation of Article 189 of the Revised Penal Code. The Leviton case is not applicable.

Asserting a distinctly different position from the Leviton argument, Hemandas argued in his brief that the petitioner was doing business in the Philippines but was

not licensed to do so. To support this argument, he states that the applicable ruling is the case of Mentholatum Co., Inc. v. Mangaliman: (72 Phil. 524) where Mentholatum Co. Inc., a foreign corporation and Philippine-American Drug Co., the former's exclusive distributing agent in the Philippines filed a complaint for infringement of trademark and unfair competition against the Mangalimans.

The argument has no merit. The Mentholatum case is distinct from and inapplicable to the case at bar. Philippine American Drug Co., Inc., was admittedly selling products of its principal Mentholatum Co., Inc., in the latter's name or for the latter's account. Thus, this Court held that "whatever transactions the Philippine-American Drug Co., Inc. had executed in view of the law, the Mentholatum Co., Inc., did it itself. And, the Mentholatum Co., Inc., being a foreign doing business in the Philippines without the license required by Section 68 of the Corporation Law, it may not prosecute this action for violation of trademark and unfair competition."

In the present case, however, the petitioner is a foreign corporation not doing business in the Philippines. The marketing of its products in the Philippines is done through an exclusive distributor, Rustan Commercial Corporation The latter is an independent entity which buys and then markets not only products of the petitioner but also many other products bearing equally well-known and established trademarks and tradenames. in other words, Rustan is not a mere agent or conduit of the petitioner.

The rules and regulations promulgated by the Board of Investments pursuant to its rule-making power under Presidential Decree No. 1789, otherwise known as the Omnibus Investment Code, support a finding that the petitioner is not doing business in the Philippines. Rule I, Sec. 1 (g) of said rules and regulations defines "doing business" as one" which includes, inter alia:

(1) ... A foreign firm which does business through middlemen acting on 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 account, and not in the name or for the account of a principal Thus, where a foreign firm is represented 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.

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Applying the above provisions to the facts of this case, we find and conclude that the petitioner is not doing business in the Philippines. Rustan is actually a middleman acting and transacting business in its own name and or its own account and not in the name or for the account of the petitioner.

But even assuming the truth of the private respondent's allegation that the petitioner failed to allege material facts in its petition relative to capacity to sue, the petitioner may still maintain the present suit against respondent Hemandas. 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. 115), 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.

We further held:

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... 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 rem, 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 Mining Co. v. Allen and Wheeler Co.

(208 Fed., 513). in which the syllabus says:

Since it is the trade and not the mark that is to be protected, a trade-mark 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.

Our recognizing the capacity of the petitioner to sue is not by any means novel or precedent setting. Our jurisprudence is replete with cases illustrating instances when foreign corporations not doing business in the Philippines may nonetheless sue in our courts. In East Board Navigation Ltd, v. Ysmael and Co., Inc. (102 Phil. 1), we recognized a right of foreign corporation to sue on isolated transactions. In General Garments Corp. v. Director of Patents (41 SCRA 50), we sustained the right of Puritan Sportswear Corp., a foreign corporation not

licensed to do and not doing business in the Philippines, to file a petition for cancellation of a trademark before the Patent Office.

More important is the nature of the case which led to this petition. What preceded this petition for certiorari was a letter complaint filed before the NBI charging Hemandas with a criminal offense, i.e., violation of Article 189 of the Revised Penal Code. If prosecution follows after the completion of the preliminary investigation being conducted by the Special Prosecutor the information shall be in the name of the People of the Philippines and no longer the petitioner which is only an aggrieved party since a criminal offense is essentially an act against the State. It is the latter which is principally the injured party although there is a private right violated. Petitioner's capacity to sue would become, therefore, of not much significance in the main case. We cannot snow a possible violator of our criminal statutes to escape prosecution upon a far-fetched contention that the aggrieved party or victim of a crime has no standing to sue.

In upholding the right of the petitioner to maintain the present suit before our courts for unfair competition or infringement of trademarks of a foreign corporation, we are moreover recognizing our duties and the rights of foreign states under the Paris Convention for the Protection of Industrial Property to which the Philippines and France are parties. We are simply interpreting and enforcing a solemn international commitment of the Philippines embodied in a multilateral treaty to which we

are a party and which we entered into because it is in our national interest to do so.

The Paris Convention provides in part that:

ARTICLE 1

(1) The countries to which the present Convention applies constitute themselves into a Union for the protection of industrial property.

(2) The protection of industrial property is concerned with patents, utility models, industrial designs, trademarks service marks, trade names, and indications of source or appellations of origin, and the repression of unfair competition.

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ARTICLE 2

(2) Nationals of each of the countries of the Union shall as regards the protection of industrial property, enjoy in all the other countries of the Union the advantages that their respective laws now grant, or may hereafter grant, to nationals, without prejudice to the rights specially provided by the present Convention. Consequently, they shall have the same protection as the latter, and the same legal remedy against any infringement of their rights, provided they observe the conditions and formalities imposed upon nationals.

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ARTICLE 6

(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.

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ARTICLE 8

A trade 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 a trademark.

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ARTICLE 10bis

(1) The countries of the Union are bound to assure to persons entitled to the benefits of the Union effective protection against unfair competition.

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ARTICLE 10ter

(1) The countries of the Union undertake to assure to nationals of the other countries of the Union appropriate legal remedies to repress effectively all the acts referred to in Articles 9, 10 and l0bis.

(2) They undertake, further, to provide measures to permit syndicates and associations which represent the industrialists, producers or traders concerned and the existence of which is not contrary to the laws of their countries, to take action in the Courts or before the administrative authorities, with a view to the repression of the acts referred to in Articles 9, 10 and 10bis, in so far as the law of the country in which protection is claimed allows such action by the syndicates and associations of that country.

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ARTICLE 17

Every country party to this Convention undertakes to adopt, in accordance with its constitution, the measures necessary to ensure the application of this Convention.

It is understood that at the time an instrument of ratification or accession is deposited on behalf of a country; such country will be in a position under its domestic law to give effect to the provisions of this Convention. (61 O.G. 8010)

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In Vanity Fair Mills, Inc. v. T Eaton Co. (234 F. 2d 633) the United States Circuit Court of Appeals had occasion to comment on the extraterritorial application of the Paris Convention It said that:

[11] The International Convention is essentially a compact between the various member countries to accord in their own countries to citizens of the other contracting parties trademark and other rights comparable to those accorded their own citizens by their domestic law. The underlying principle is that foreign nationals should be given the same treatment in each of the member countries as that country makes available to its own citizens. In addition, the Convention sought to create uniformity in certain respects by obligating each member nation 'to assure to nationals of countries of the Union an effective protection against unfair competition.'

[12] The Convention is not premised upon the Idea that the trade-mark and related laws of each member nation shall be given extra-territorial application, but on exactly the converse principle that each nation's law shall have only territorial application. Thus a foreign national of a member nation using his trademark in commerce in the United States is accorded extensive protection here against infringement and other types of unfair competition by virtue of United States membership in the Convention. But that protection has its source in, and is subject to the limitations of, American law, not the law of the foreign national's own country. ...

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:

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... 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, 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 all 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.

Hemandas further contends that the respondent court did not commit grave abuse of discretion in issuing the questioned order of April 22, 1983.

A review of the grounds invoked by Hemandas 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. For instance, on the basis of the facts before the Judge, we fail to understand how he could treat a bare allegation that the respondent's trademark is different from the petitioner's trademark as a sufficient basis to grant the motion to quash. We will treat the issue of prejudicial question later. Granting that respondent Hemandas was only trying to show the absence of probable cause, we, nonetheless, hold the arguments to be untenable.

As a mandatory requirement for the issuance of a valid search warrant, the Constitution requires in no uncertain terms the determination of probable cause by the judge after examination under oath or affirmation of the complainant and the witnesses he may produce (Constitution, Art. IV, Sec. 3). Probable cause has traditionally meant such facts and circumstances antecedent to the issuance of the warrant that are in themselves sufficient to induce a cautious man to rely upon them and act in pursuance thereof (People v. Sy Juco, 64 Phil. 667).

This concept of probable cause was amplified and modified by our ruling in Stonehill v. Diokno, (20 SCRA 383) that probable cause "presupposes the introduction of competent proof that the party against whom it is sought has performed particular acts, or committed specific omissions, violating a given provision of our criminal laws."

The question of whether or not probable cause exists is one which must be decided in the light of the conditions obtaining in given situations (Central Bank v. Morfe, 20 SCRA 507). We agree that there is no general formula or fixed rule for the determination of the existence of probable cause since, as we have recognized in Luna v. Plaza (26 SCRA 310), the existence depends to a large degree upon the finding or opinion of the judge conducting the examination. However, the findings of the judge should not disregard the facts before him nor run counter to the clear dictates of reason. More so it is plain that our country's ability to abide by international commitments is at stake.

The records show that the NBI agents at the hearing of the application for the warrants before respondent court presented three witnesses under oath, sworn statements, and various exhibits in the form of clothing apparels manufactured by Hemandas but carrying the trademark Lacoste. The respondent court personally interrogated Ramon Esguerra, Samuel Fiji, and Mamerto Espatero by means of searching questions. After hearing the testimonies and examining the documentary evidence, the respondent court was convinced that there were good

and sufficient reasons for the issuance of the warrant. And it then issued the warrant.

The respondent court, therefore, complied with the constitutional and statutory requirements for the issuance of a valid search warrant. At that point in time, it was fully convinced that there existed probable cause. But after hearing the motion to quash and the oppositions thereto, the respondent court executed a complete turnabout and declared that there was no probable cause to justify its earlier issuance of the warrants.

True, the lower court should be given the opportunity to correct its errors, if there be any, but the rectification must, as earlier stated be based on sound and valid grounds. In this case, there was no compelling justification for the about face. The allegation that vital facts were deliberately suppressed or concealed by the petitioner should have been assessed more carefully because the object of the quashal was the return of items already seized and easily examined by the court. The items were alleged to be fake and quite obviously would be needed as evidence in the criminal prosecution. Moreover, an application for a search warrant is heard ex parte. It is neither a trial nor a part of the trial. Action on these applications must be expedited for time is of the essence. Great reliance has to be accorded by the judge to the testimonies under oath of the complainant and the witnesses. The allegation of Hemandas that the applicant withheld information from the respondent court was clearly no basis to order the return of the seized items.

Hemandas relied heavily below and before us on the argument that it is the holder of a certificate of registration of the trademark "CHEMISE LACOSTE & CROCODILE DEVICE". Significantly, such registration is only in the Supplemental Register.

A certificate of registration in the Supplemental Register is not prima facie evidence of the validity of registration, of the registrant's exclusive right to use the same in connection with the goods, business, or services specified in the certificate. Such a certificate of registration cannot be filed, with effect, with the Bureau of Customs in order to exclude from the Philippines, foreign goods bearing infringement marks or trade names (Rule 124, Revised Rules of Practice Before the Phil. Pat. Off. in Trademark Cases; Martin, Philippine Commercial Laws, 1981, Vol. 2, pp. 513-515).

Section 19-A of Republic Act 166 as amended not only provides for the keeping of the supplemental register in addition to the principal register but specifically directs that:

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The certificates of registration for marks and trade names registered on the supplemental register shall be conspicuously different from certificates issued for marks and trade names on the principal register.

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The reason is explained by a leading commentator on Philippine Commercial Laws:

The registration of a mark upon the supplemental register is not, as in the case of the principal register, prima facie evidence of (1) the validity of registration; (2) registrant's ownership of the mark; and (3) registrant's exclusive right to use the mark. It is not subject to opposition, although it may be cancelled after its issuance. Neither may it be the subject of interference proceedings. Registration on the supplemental register is not constructive notice of registrant's claim of ownership. A supplemental register is provided for the registration of marks which are not registrable on the principal register because of some defects (conversely, defects which make a mark unregistrable on the principal register, yet do not bar them from the supplemental register.) (Agbayani, II Commercial Laws of the Philippines, 1978, p. 514, citing Uy Hong Mo v. Titay & Co., et al., Dec. No. 254 of Director of Patents, Apr. 30, 1963);

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 entered in the Principal Register, all who deal with it should be on guard that there are certain defects, some obstacles which the user 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 "registrant 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 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. And 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).

By the same token, the argument that the application was premature in view of the pending case before the Patent Office is likewise without legal basis.

The proceedings pending before the Patent Office involving IPC Co. 1658 do not partake of the nature of a prejudicial question which must first be definitely resolved.

Section 5 of Rule 111 of the Rules of Court provides that:

A petition for the suspension of the criminal action based upon the pendency of a pre-judicial question in a civil case, may only be presented by any party before or during the trial of the criminal action.

The case which suspends the criminal prosecution must be a civil case which is determinative of the innocence or, subject to the availability of other defenses, the guilt of the accused. The pending case before the Patent Office is an administrative proceeding and not a civil case. The decision of the Patent Office cannot be finally determinative of the private respondent's innocence of the charges against him.

In Flordelis v. Castillo (58 SCRA 301), we held that:

As clearly delineated in the aforecited provisions of the new Civil Code and the Rules of Court, and as uniformly applied in numerous decisions of this Court, (Berbari v. Concepcion, 40 Phil. 837 (1920); Aleria v. Mendoza, 83 Phil. 427 (1949); People v. Aragon, 94 Phil. 357 (1954); Brito-Sy v. Malate Taxicab & Garage, Inc., 102 Phil 482 (1957); Mendiola v. Macadael, 1 SCRA 593; Benitez v. Concepcion, 2 SCRA 178; Zapante v. Montesa, 4 SCRA 510; Jimenez v. Averia, 22 SCRA 1380.) In Buenaventura v. Ocampo (55 SCRA 271) the doctrine of prejudicial question was held inapplicable because no criminal case but merely an administrative case and a civil suit were involved. The Court, however, held that, in view of the peculiar circumstances of that case, the respondents' suit for damages in the lower court was premature as it was filed during the pendency of an administrative case against the respondents before the POLCOM. 'The possibility cannot be overlooked,' said the Court, 'that the POLCOM may hand down a decision adverse to the respondents, in which case the damage suit will become unfounded and baseless for wanting in cause of action.') the doctrine of pre-judicial question comes into play generally in a situation where a civil action and a criminal action both penned and there exists in the former an issue

which must be preemptively resolved before the criminal action may proceed, because howsoever the issue raised in the civil action is resolved would be determinative juris et de jure of the guilt or

innocence of the accused in the criminal case.

In the present case, no civil action pends nor has any been instituted. What was pending was an administrative case before the Patent Office.

Even assuming that there could be an administrative proceeding with exceptional or special circumstances which render a criminal prosecution premature pending the promulgation of the administrative decision, no such peculiar circumstances are present in this case.

Moreover, we take note of the action taken by the Patents Office and the Minister of Trade and affirmed by the Intermediate Appellate Court in the case of La Chemise Lacoste S. A. v. Ram Sadhwani (AC-G.R. No. SP-13356, June 17, 1983).

The same November 20, 1980 memorandum of the Minister of Trade discussed in this decision was involved in the appellate court's decision. The Minister as the "implementing authority" under Article 6bis of the Paris Convention for the protection of Industrial Property instructed the Director of Patents to reject applications for Philippine registration of signature and other world famous trademarks by applicants other than its original owners or users. The brand "Lacoste" was specifically cited together with Jordache, Gloria Vanderbilt, Sasson, Fila, Pierre Cardin, Gucci, Christian Dior, Oscar dela Renta, Calvin Klein, Givenchy, Ralph Laurence, Geoffrey

Beene, Lanvin, and Ted Lapidus. The Director of Patents was likewise ordered to require Philippine registrants of such trademarks to surrender their certificates of registration. Compliance by the Director of Patents was challenged.

The Intermediate Appellate Court, in the La Chemise Lacoste S.A. v. Sadhwani decision which we cite with approval sustained the power of the Minister of Trade to issue the implementing memorandum and, after going over the evidence in the records, affirmed the decision of the Director of Patents declaring La Chemise Lacoste &A. the owner of the disputed trademark and crocodile or alligator device. The Intermediate Appellate Court speaking through Mr. Justice Vicente V. Mendoza stated:

In the case at bar, the Minister of Trade, as 'the competent authority of the country of registration,' has found that among other well-known trademarks 'Lacoste' is the subject of conflicting claims. For this reason, applications for its registration must be rejected or refused, pursuant to the treaty obligation of the Philippines.

Apart from this finding, the annexes to the opposition, which La Chemise Lacoste S.A. filed in the Patent Office, show that it is the owner of the trademark 'Lacoste' and the device consisting of a representation of a crocodile or alligator by the prior adoption and use of such mark and device on clothing, sports apparel and the like. La Chemise Lacoste S.A, obtained registration of these mark and device and was in fact issued renewal certificates by the French National Industry Property Office.

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Indeed, due process is a rule of reason. In the case at bar the order of the Patent Office is based not only on the undisputed fact of ownership of the trademark by the appellee but on a prior determination by the Minister of Trade, as the competent authority under the Paris Convention, that the trademark and device sought to be registered by the appellant are well-known marks which the Philippines, as party to the Convention, is bound to protect in favor of its owners. it would be to exalt form over substance to say that under the circumstances, due process requires that a hearing should be held before the application is acted upon.

The appellant cites section 9 of Republic Act No. 166, which requires notice and hearing whenever an opposition to the registration of a trademark is made. This provision does not apply, however, to situations covered by the Paris Convention, where the appropriate authorities have determined that a well-known trademark is already that of another person. In such cases, the countries signatories to the Convention are obliged to refuse or to cancel the registration of the mark by any other person or authority. In this case, it is not disputed that the trademark Lacoste is such a well-known mark that a hearing, such as that provided in Republic Act No. 166, would be superfluous.

The issue of due process was raised and fully discussed in the appellate court's decision. The court ruled that due process was not violated.

In the light of the foregoing it is quite plain that the prejudicial question argument is without merit.

We have carefully gone over the records of all the cases filed in this Court and find more than enough evidence to

sustain a finding that the petitioner is the owner of the trademarks "LACOSTE", "CHEMISE LACOSTE", the crocodile or alligator device, and the composite mark of LACOSTE and the representation of the crocodile or alligator. Any pretensions of the private respondent that he is the owner are absolutely without basis. Any further ventilation of the issue of ownership before the Patent Office will be a superfluity and a dilatory tactic.

The issue of whether or not the trademark used by the private respondent is different from the petitioner's trade mark is a matter of defense and will be better resolved in the criminal proceedings before a court of justice instead of raising it as a preliminary matter in an administrative proceeding.

The purpose of the law protecting a trademark cannot be overemphasized. They are to point out distinctly the origin or ownership of the article 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 (Etepha v. Director of Patents, 16 SCRA 495).

The legislature has enacted laws to regulate the use of trademarks and provide for the protection thereof. Modern trade and commerce demands that depredations on legitimate trade marks of non-nationals including those who have not shown prior registration thereof should not be countenanced. The law against such depredations is not only for the protection of the owner of the trademark but also, and more importantly, for the protection of purchasers from confusion, mistake, or

deception as to the goods they are buying. (Asari Yoko Co., Ltd. v. Kee Boc, 1 SCRA 1; General Garments Corporation v. Director of Patents, 41 SCRA 50).

The law on trademarks and tradenames is based on the principle of business integrity and common justice' This law, both in letter and spirit, is laid upon the premise that, while it encourages fair trade in every way and aims to foster, and not to hamper, competition, no one, especially a trader, is justified in damaging or jeopardizing another's business by fraud, deceipt, trickery or unfair methods of any sort. This necessarily precludes the trading by one dealer upon the good name and reputation built up by another (Baltimore v. Moses, 182 Md 229, 34 A (2d) 338).

The records show that the goodwill and reputation of the petitioner's products bearing the trademark LACOSTE date back even before 1964 when LACOSTE clothing apparels were first marketed in the Philippines. To allow Hemandas to continue using the trademark Lacoste for the simple reason that he was the first registrant in the Supplemental Register of a trademark used in international commerce and not belonging to him is to render nugatory the very essence of the law on trademarks and tradenames.

We now proceed to the consideration of the petition in Gobindram Hemandas Suianani u. Hon. Roberto V Ongpin, et al. (G.R. No. 65659).

Actually, three other petitions involving the same trademark and device have been filed with this Court.

In Hemandas & Co. v. Intermediate Appellate Court, et al. (G.R. No. 63504) the petitioner asked for the following relief:

IN VIEW OF ALL THE FOREGOING, it is respectfully prayed (a) that the Resolutions of the respondent Court of January 3, 1983 and February 24, 1983 be nullified; and that the Decision of the same respondent Court of June 30, 1983 be declared to be the law on the matter; (b) that the Director of Patents be directed to issue the corresponding registration certificate in the Principal Register; and (c) granting upon the petitioner such other legal and equitable remedies as are justified by the premises.

On December 5, 1983, we issued the following resolution:

Considering the allegations contained, issues raised and the arguments adduced in the petition for review, the respondent's comment thereon, and petitioner's reply to said comment, the Court Resolved to DENY the petition for lack of merit.

The Court further Resolved to CALL the attention of the Philippine Patent Office to the pendency in this Court of G.R. No. 563796-97 entitled 'La Chemise Lacoste, S.A. v. Hon. Oscar C. Fernandez and Gobindram Hemandas' which was given due course on June 14, 1983 and to the fact that G.R. No. 63928-29 entitled 'Gobindram Hemandas v. La Chemise Lacoste, S.A., et al.' filed on May 9, 1983 was dismissed for lack of merit on September 12, 1983. Both petitions involve the same dispute over the use of the trademark 'Chemise Lacoste'.

The second case of Gobindram Hemandas vs. La Chemise Lacoste, S.A., et al. (G.R. No. 63928-29) prayed for the following:

I. On the petition for issuance of writ of preliminary injunction, an order be issued after due hearing:

l. Enjoining and restraining respondents Company, attorneys-in-fact, and Estanislao Granados from further proceedings in the unfair competition charges pending with the Ministry of Justice filed against petitioner;

2. Enjoining and restraining respondents Company and its attorneys-in-fact from causing undue publication in newspapers of general circulation on their unwarranted claim that petitioner's products are FAKE pending proceedings hereof; and

3. Enjoining and restraining respondents Company and its attorneys-in-fact from sending further threatening letters to petitioner's customers unjustly stating that petitioner's products they are dealing in are FAKE and threatening them with confiscation and seizure thereof.

II. On the main petition, judgment be rendered:

l. Awarding and granting the issuance of the Writ of Prohibition, prohibiting, stopping, and restraining respondents from further committing the acts complained of;

2. Awarding and granting the issuance of the Writ of Mandamus, ordering and compelling respondents National Bureau of Investigation, its aforenamed agents, and State Prosecutor Estanislao Granados to immediately comply with the Order of the

Regional Trial Court, National Capital Judicial Region, Branch XLIX, Manila, dated April 22, 1983, which directs the immediate return of the seized items under Search Warrants Nos. 83-128 and 83-129;

3. Making permanent any writ of injunction that may have been previously issued by this Honorable Court in the petition at bar: and

4. Awarding such other and further relief as may be just and equitable in the premises.

As earlier stated, this petition was dismissed for lack of merit on September 12, 1983. Acting on a motion for reconsideration, the Court on November 23, 1983 resolved to deny the motion for lack of merit and declared the denial to be final.

Hemandas v. Hon. Roberto Ongpin (G.R. No. 65659) is the third petition.

In this last petition, the petitioner prays for the setting aside as null and void and for the prohibiting of the enforcement of the following memorandum of respondent Minister Roberto Ongpin:

MEMORANDUM:

FOR: THE DIRECTOR OF PATENTS

Philippine Patent Office

xxx xxx xxx

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 the 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] 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 6 bis 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 dates of such registration;

(d) that the trademark has been long established and obtained goodwill and general 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 6 bis 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.

6. Consistent with the foregoing, you are hereby directed to expedite the hearing and to decide without delay the following cases pending before your Office:

1. INTER PARTES CASE NO. 1689-Petition filed by La Chemise Lacoste, S.A. for the cancellation of Certificate of Registration No. SR-2225 issued to Gobindram Hemandas, assignee of Hemandas and Company;

2. INTER PARTES CASE NO. 1658-Opposition filed by Games and Garments Co. against the registration of the trademark Lacoste sought by La Chemise Lacoste, S.A.;

3. INTER PARTES CASE NO. 1786-Opposition filed by La Chemise Lacoste, S.A. against the registration

of trademark Crocodile Device and Skiva sought by one Wilson Chua.

Considering our discussions in G.R. Nos. 63796-97, we find the petition in G.R. No. 65659 to be patently without merit and accordingly deny it due course.

In complying with the order to decide without delay the cases specified in the memorandum, the Director of Patents shall limit himself to the ascertainment of facts in issues not resolved by this decision and apply the law as expounded by this Court to those facts.

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 counterfeit consumer items flooding the Philippine market or exported abroad from our country. The greater victim is not so much the manufacturer whose product is being faked but the Filipino consuming public and in the case of 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 has 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, neck, ties, etc. — the list is quite length — and pay good money relying on the brand name as guarantee of its quality and

genuine nature only to explode in bitter frustration and genuine nature on 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.

WHEREFORE, the petition in G.R. NOS. 63797-97 is hereby GRANTED. The order dated April 22, 1983 of the respondent regional trial court is REVERSED and SET ASIDE. Our Temporary Restraining Order dated April 29, 1983 is ma(i.e. PERMANENT. The petition in G.R. NO. 65659 is DENIED due course for lack of merit. Our Temporary Restraining Order dated December 5, 1983 is LIFTED and SET ASIDE, effective immediately.

SO ORDERED.

Teehankee (Chairman), Melencio-Herrera, Plana, Relova and De la Fuente, JJ., concur.

Republic of the Philippines

SUPREME COURT

Manila

FIRST DIVISION

G.R. No. L-78325 January 25, 1990

DEL MONTE CORPORATION and PHILIPPINE PACKING CORPORATION, petitioners, vs. COURT OF APPEALS and SUNSHINE SAUCE MANUFACTURING INDUSTRIES, respondents.

Bito, Misa & Lozada for petitioners.

Reynaldo F. Singson for private respondent.

CRUZ, J.:

The petitioners are questioning the decision of the respondent court upholding the dismissal by the trial court of their complaint against the private respondent for infringement of trademark and unfair competition.

Petitioner Del Monte Corporation is a foreign company organized under the laws of the United States and not engaged in business in the Philippines. Both the Philippines and the United States are signatories to the Convention of Paris of September 27, 1965, which grants to the nationals of the parties rights and advantages

which their own nationals enjoy for the repression of acts of infringement and unfair competition.

Petitioner Philippine Packing Corporation (Philpack) is a domestic corporation duly organized under the laws of the Philippines. On April 11, 1969, Del Monte granted Philpack the right to manufacture, distribute and sell in the Philippines various agricultural products, including catsup, under the Del Monte trademark and logo.

On October 27,1965, Del Monte authorized Philpack to register with the Philippine Patent Office the Del Monte catsup bottle configuration, for which it was granted Certificate of Trademark Registration No. SR-913 by the Philippine Patent Office under the Supplemental Register. 1 On November 20, 1972, Del Monte also obtained two registration certificates for its trademark "DEL MONTE" and its logo. 2

Respondent Sunshine Sauce Manufacturing Industries was issued a Certificate of Registration by the Bureau of Domestic Trade on April 17,1980, to engage in the manufacture, packing, distribution and sale of various kinds of sauce, identified by the logo Sunshine Fruit Catsup. 3

This logo was registered in the Supplemental Register on September 20, 1983. 4 The product itself was contained in various kinds of bottles, including the Del Monte bottle, which the private respondent bought from the junk shops for recycling.

Having received reports that the private respondent was using its exclusively designed bottles and a logo confusingly similar to Del Monte's, Philpack warned it to

desist from doing so on pain of legal action. Thereafter, claiming that the demand had been ignored, Philpack and Del Monte filed a complaint against the private respondent for infringement of trademark and unfair competition, with a prayer for damages and the issuance of a writ of preliminary injunction. 5

In its answer, Sunshine alleged that it had long ceased to use the Del Monte bottle and that its logo was substantially different from the Del Monte logo and would not confuse the buying public to the detriment of the petitioners. 6

After trial, the Regional Trial Court of Makati dismissed the complaint. It held that there were substantial differences between the logos or trademarks of the parties; that the defendant had ceased using the petitioners' bottles; and that in any case the defendant became the owner of the said bottles upon its purchase thereof from the junk yards. Furthermore, the complainants had failed to establish the defendant's malice or bad faith, which was an essential element of infringement of trademark or unfair competition. 7

This decision was affirmed in toto by the respondent court, which is now faulted in this petition for certiorari under Rule 45 of the Rules of Court.

Section 22 of R.A. No. 166, otherwise known as the Trademark Law, provides in part 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 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 imitate 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.

Sec. 29 of the same law states as follows:

Sec. 29. Unfair competition, rights and remedies. — A person who has identified in the mind of the public the goods he manufactures or deals in, his business or services from those of others, whether or not a mark or tradename is employed, has a property right in the goodwill of the said goods, business or services so identified, which will be protected in the same manner as other property rights. Such a person shall have the remedies provided in section twenty- three, Chapter V hereof.

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

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 likely 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 ally 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 the goods, business or services of another.

To arrive at a proper resolution of this case, it is important to bear in mind the following distinctions between infringement of trademark and unfair competition.

(1) Infringement of trademark is the unauthorized use of a trademark, whereas unfair competition is the passing off of one's goods as those of another.

(2) In infringement of trademark fraudulent intent is unnecessary whereas in unfair competition fraudulent intent is essential.

(3) In infringement of trademark the prior registration of the trademark is a prerequisite to the action, whereas in unfair competition registration is not necessary.

8

In the challenged decision, the respondent court cited the following test laid down by this Court in a number of cases:

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 predorninant words but also on the other features appearing on both labels.

9

and applying the same, held that there was no colorable imitation of the petitioners' trademark and logo by the

private respondent. The respondent court agreed with the findings of the trial court that:

In order to resolve the said issue, the Court now attempts to make a comparison of the two products, to wit:

1. As to the shape of label or make:

Del Monte: Semi-rectangular with a crown or tomato shape design on top of the rectangle.

Sunshine: Regular rectangle.

2. As to brand printed on label:

Del Monte: Tomato catsup mark.

Sunshine: Fruit catsup.

3. As to the words or lettering on label or mark:

Del Monte: Clearly indicated words packed by Sysu International, Inc., Q.C., Philippines.

Sunshine: Sunshine fruit catsup is clearly indicated "made in the Philippines by Sunshine Sauce Manufacturing Industries" No. 1 Del Monte Avenue, Malabon, Metro Manila.

4. As to color of logo:

Del Monte: Combination of yellow and dark red, with words "Del Monte Quality" in white.

Sunshine: White, light green and light red, with words "Sunshine Brand" in yellow.

5. As to shape of logo:

Del Monte: In the shape of a tomato.

Sunshine: Entirely different in shape.

6. As to label below the cap:

Del Monte: Seal covering the cap down to the neck of the bottle, with picture of tomatoes with words "made from real tomatoes."

Sunshine: There is a label below the cap which says "Sunshine Brand."

7. As to the color of the products:

Del Monte: Darker red.

Sunshine: Lighter than Del Monte.

While the Court does recognize these distinctions, it does not agree with the conclusion that there was no infringement or unfair competition. It seems to us that the lower courts have been so pre-occupied with the details that they have not seen the total picture.

It has been correctly held that side-by-side comparison is not the final test of similarity. 10 Such comparison requires a careful scrutiny to determine in what points the labels of the products differ, as was done by the trial judge. The ordinary 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. Where the housewife has to return home as soon as possible to her baby or the working woman has to make quick purchases during her off hours, she is apt to be confused by similar labels even if they do have minute differences. The male shopper is worse as he usually does not bother about such distinctions.

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. 11 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. 12

It has been held that in making purchases, the consumer must depend upon his recollection of the appearance of the product which he intends to purchase. 13 The buyer having in mind the mark/label of the respondent must rely upon his memory of the petitioner's mark. 14 Unlike the judge who has ample time to minutely examine the labels

in question in the comfort of his sala, the ordinary shopper does not enjoy the same opportunity.

A number of courts have held that to determine whether a trademark has been infringed, we must consider the mark 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. 15 The court therefore should be guided by its first impression, 16 for a buyer acts quickly and is governed by a casual glance, the value of which may be dissipated as soon as the court assumes to analyze carefully the respective features of the mark. 17

It has also been held that it is not the function of the court in cases of infringement and unfair competition to educate purchasers but rather to take their carelessness for granted, and to be ever conscious of the fact that marks need not be identical. A confusing similarity will justify the intervention of equity. 18 The judge must also be aware of the fact that usually a defendant in cases of infringement does not normally copy but makes only colorable changes. 19 Well has it been said that the most successful form of copying is to employ enough points of similarity to confuse the public with enough points of difference to confuse the courts. 20

We also note that the respondent court failed to take into consideration several factors which should have affected its conclusion, to wit: age, training and education of the usual purchaser, the nature and cost of the article, whether the article is bought for immediate consumption and also the conditions under which it is usually purchased . 21 Among these, what essentially determines

the attitude 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. 22 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. 23 In this latter category is catsup.

At that, even if the labels were analyzed together it is not difficult to see that the Sunshine label is a colorable imitation of the Del Monte trademark. The predominant colors used in the Del Monte label are green and red-orange, the same with Sunshine. The word "catsup" in both bottles is printed in white and the style of the print/letter is the same. Although the logo of Sunshine is not a tomato, the figure nevertheless approximates that of a tomato.

As previously stated, the person who infringes a trade mark does not normally copy out but only makes colorable changes, employing enough points of similarity to confuse the public with enough points of differences to confuse the courts. What is undeniable is the fact that when a manufacturer prepares to package his product, he has before him a boundless choice of words, phrases, colors and symbols sufficient to distinguish his product from the others. When as in this case, Sunshine chose,

without a reasonable explanation, to use the same colors and letters as those used by Del Monte though the field of its selection was so broad, the inevitable conclusion is that it was done deliberately to deceive . 24

It has been aptly observed that the ultimate ratio in cases of grave doubt is the rule that as between a newcomer who by the confusion has nothing to lose and everything to gain and one who by honest dealing has already achieved favor with the public, any doubt should be resolved against the newcomer inasmuch as the field from which he can select a desirable trademark to indicate the origin of his product is obviously a large one. 25

Coming now to the second issue, we find that the private respondent is not guilty of infringement for having used the Del Monte bottle. The reason is that the configuration of the said bottle was merely registered in the Supplemental Register. In the case of Lorenzana v. Macagba, 26 we declared that:

(1) Registration in the Principal Register gives rise to a presumption of the validity of the registration, the registrant's ownership of the mark and his right to the exclusive use thereof. There is no such presumption in the registration in the Supplemental Register.

(2) Registration in the Principal Register is limited to the actual owner of the trademark and proceedings therein on the issue of ownership which may be contested

through opposition or interference proceedings or, after registration, in a petition for cancellation.

Registration in the Principal Register is constructive notice of the registrant's claim of ownership, while registration in the Supplemental Register is merely proof of actual use of the trademark and notice that the registrant has used or appropriated it. It is not subject to opposition although it may be cancelled after the issuance. Corollarily, registration in the Principal Register is a basis for an action for infringement while registration in the Supplemental Register is not.

(3) In applications for registration in the Principal Register, publication of the application is necessary. This is not so in applications for registrations in the Supplemental Register.

It can be inferred from the foregoing that although Del Monte has actual use of the bottle's configuration, the petitioners cannot claim exclusive use thereof because it has not been registered in the Principal Register. However, we find that Sunshine, despite the many choices available to it and notwithstanding that the caution "Del Monte Corporation, Not to be Refilled" was embossed on the bottle, still opted to use the petitioners' bottle to market a product which Philpack also produces. This clearly shows the private respondent's bad faith and

its intention to capitalize on the latter's reputation and goodwill and pass off its own product as that of Del Monte.

The Court observes that the reasons given by the respondent court in resolving the case in favor of Sunshine are untenable. First, it declared that the registration of the Sunshine label belied the company's malicious intent to imitate petitioner's product. Second, it held that the Sunshine label was not improper because the Bureau of Patent presumably considered other trademarks before approving it. Third, it cited the case of Shell Co. v. Insular Petroleum, 27 where this Court declared that selling oil in containers of another with markings erased, without intent to deceive, was not unfair competition.

Regarding the fact of registration, it is to be noted that the Sunshine label was registered not in the Principal Register but only in the Supplemental Register where the presumption of the validity of the trademark, the registrant's ownership of the mark and his right to its exclusive use are all absent.

Anent the assumption that the Bureau of Patent had considered other existing patents, it is reiterated that since registration was only in the Supplemental Register, this did not vest the registrant with the exclusive right to use the label nor did it give rise to the presumption of the validity of the registration.

On the argument that no unfair competition was committed, the Shell Case is not on all fours with the case at bar because:

(1) In Shell, the absence of intent to deceive was supported by the fact that the respondent therein, before marketing its product, totally obliterated and erased the brands/mark of the different companies stenciled on the containers thereof, except for a single isolated transaction. The respondent in the present case made no similar effort.

(2) In Shell, what was involved was a single isolated transaction. Of the many drums used, there was only one container where the Shell label was not erased, while in the case at hand, the respondent admitted that it made use of several Del Monte bottles and without obliterating the embossed warning.

(3) In Shell, the product of respondent was sold to dealers, not to ultimate consumers. As a general rule, dealers are well acquainted with the manufacturer from whom they make their purchases and since they are more experienced, they cannot be so easily deceived like the inexperienced public. There may well be similarities and imitations which deceive all, but generally the interests of the dealers are not regarded

with the same solicitude as are the interests of the ordinary consumer. For it is the form in which the wares come to the final buyer that is of significance. 28

As Sunshine's label is an infringement of the Del Monte's trademark, law and equity call for the cancellation of the private respondent's registration and withdrawal of all its products bearing the questioned label from the market. With regard to the use of Del Monte's bottle, the same constitutes unfair competition; hence, the respondent should be permanently enjoined from the use of such bottles.

The court must rule, however, that the damage prayed for cannot be granted because the petitioner has not presented evidence to prove the amount thereof. Section 23 of R.A. No. 166 provides:

Sec. 23. Actions and damages and injunction for infringement. — Any person entitled to the exclusive use of a registered mark or trade name may recover damages in a civil action from any person who infringes his rights, and the measure of the damages suffered shall be either the reasonable profit which the complaining party would have made, had the defendant not infringed his said rights or the profit which the defendant actually made out of the infringement, or in the event such measure of damages cannot be readily ascertained with reasonable certainty the court may award as damages reasonable percentage based upon the amount of gross sales of the defendant or the value of the services in connection with which the mark or trade name was used in the infringement of the rights of the complaining party. In cases where

actual intent to mislead the public or to defraud the complaining party shall be shown, in the discretion of the court, the damages may be doubled.

The complaining party, upon proper showing may also be granted injunction.

Fortunately for the petitioners, they may still find some small comfort in Art. 2222 of the Civil Code, which provides:

Art. 2222. The court may award nominal damages in every obligation arising from any source enumerated in Art. 1157, or in every case where any property right has been invaded.

Accordingly, the Court can only award to the petitioners, as it hereby does award, nominal damages in the amount of Pl,000.00.

WHEREFORE, the petition is GRANTED. The decision of the Court of Appeals dated December 24, 1986 and the Resolution dated April 27,1987, are REVERSED and SET ASIDE and a new judgment is hereby rendered:

(1) Canceling the private respondent's Certificate of Register No. SR-6310 and permanently enjoining the private respondent from using a label similar to that of the petitioners.

(2) Prohibiting the private respondent from using the empty bottles of the petitioners as containers for its own products.

(3) Ordering the private respondent to pay the petitioners nominal damages in the amount of Pl,000.00, and the costs of the suit.

SO ORDERED.

Narvasa Gancayco, Griño-Aquino and Medialdea, JJ., concur.

Footnotes

1 Original Records, pp. 29-30.

2 Ibid., Annex 2 pp. 8-9; Annex 3, pp. 16-17.

3 Id., Annex A. p. 41.

4 Id., Annex B, pp. 42-43.

5 Id., pp. 1-6.

6 Id., pp. 38-40.

7 Id., pp. 166-168. Decision penned by Judge Roque A. Tamayo, affirmed in the Court of Appeals by Coquia, J., ponente, with Luciano

and Cui, JJ., concurring.

8 Jose C. Vitug, Pandect of Commercial Law & Jurisprudence, l st ed., p. 291 citing Compania General de Tabacos v. de Aljambra Cigar and Cigarette Manufacturing Co., 33 Phil 485; Ogura v. Chua, 59 Phil.

471: Parke Davies & Co. v. Kiu Foo & Co., 60 Phil. 928.

9 Mead Johnson Co. v. N.V.J. Von Dorp. Ltd., 7 SCRA 768; Bristol

Myers Co. v. Director of Patents, 17 SCRA 128.

10 Stuart v. F.G. Stewart Co., 91 F 243.

11 Notaseme Hosiery v. Strauss 201 F 99.

12 McLean v. Fleming 96 US 245; Fischer v. Blank, 138 N.Y. 244;

Tillman Bendel v. California Packing Corporation, 63 F 2d 498.

13 Martini & Rossi v. Consumer's People's Products, 57 F 2d 599.

14 Stuart v. F. G. Stewart Co., 91 F 243.

15 Helmet Co. v. Wm Wrigley Jr. Co., 245 F 842; Pennzoil Co. v.

Pennsylvania Petroleum Co., 159 M.D. 187,

16 William Waltke & Co. v. Geo H. Schafer, 49 App. D.C. 294; Ward

Baking Co. v. Potter Wrintington, 298 F 398.

17 Vortex Mfg. Co. v. Ply-Rite Contracting Co., 33 F 2d 302.

18 Hilton v. Hilton, 90 N.J. Eq 564.

19 Bickmore Gall Cure Co. v. Karns, 134 F 833-1 J.C. Penny Co. v.

H.D. Lee Merchantile Co., 120 F 2d 949.

20 Baker and Master Printers Union of New Jersey, 34 F. Supp. 808.

21 11 H.D. Nims, The Law of Unfair Competition and Trademark,

1947, p. 1027.

22 Ibid., p. 1030.

23 11 Rudolf Callman, The Law of Unfair Competition and Trademark,

1945, pp. 1137, 1136.

24 Ibid., Vol. 111, 2nd ed. pp. 1527-1528 cited in Converse Rubber

Corporation v. Universal Rubber Product Inc., 147 SCRA 155.

25 William Waltke & Co. v. Geo H. Schafer & Co., 49 App. D.C. 294;

Standard Oil v. Michie 34 F 2d 802.

26 154 SCRA 723.

27 11 SCRA 436.

26 Supra., p. 1141.

Republic of the Philippines

SUPREME COURT

Manila

EN BANC

G.R. No. 103543 July 5, 1993

ASIA BREWERY, INC., Petitioner, vs. THE HON.

COURT OF APPEALS and SAN MIGUEL

CORPORATION, Respondents.

GRIÑO-AQUINO, J.:

On September 15, 1988, San Miguel Corporation (SMC) filed

a complaint against Asia Brewery Inc. (ABI) for infringement

of trademark and unfair competition on account of the latter's

BEER PALE PILSEN or BEER NA BEER product which has

been competing with SMC's SAN MIGUEL PALE PILSEN

for a share of the local beer market. (San Miguel Corporation

vs. Asia Brewery Inc., Civ. Case. No. 56390, RTC Branch 166,

Pasig, Metro Manila.). chanroblesvirtualawlib rary chanr obles virtual law l ibrary

On August 27, 1990, a decision was rendered by the trial

Court, presided over by Judge Jesus O. Bersamira, dismissing

SMC's complaint because ABI "has not committed trademark

infringement or unfair competition against" SMC (p. 189,

Rollo).chanroblesvirtualawlibrary chan robles virtual law librar y

SMC appealed to the Court of Appeals (C.A.-G.R. CV No.

28104). On September 30, 1991, the Court of Appeals (Sixth

Division composed of Justice Jose C. Campos, Jr., chairman

and ponente, and Justices Venancio D. Aldecoa Jr. and

Filemon H. Mendoza, as members) reversed the trial court. The

dispositive part of the decision reads as follows:

In the light of the foregoing analysis and under the plain

language of the applicable rule and principle on the matter, We

find the defendant Asia Brewery Incorporated GUILTY of

infringement of trademark and unfair competition. The

decision of the trial court is hereby REVERSED, and a new

judgment entered in favor of the plaintiff and against the

defendant as follows: chanrobles vir tual law libra ry

(1) The defendant Asia Brewery Inc. its officers, agents,

servants and employees are hereby permanently enjoined and

restrained from manufacturing, putting up, selling, advertising,

offering or announcing for sale, or supplying Beer Pale Pilsen,

or any similar preparation, manufacture or beer in bottles and

under labels substantially identical with or like the said bottles

and labels of plaintiff San Miguel Corporation employed for

that purpose, or substantially identical with or like the bottles

and labels now employed by the defendant for that purpose, or

in bottles or under labels which are calculated to deceive

purchasers and consumers into the belief that the beer is the

product of the plaintiff or which will enable others to

substitute, sell or palm off the said beer of the defendant as and

for the beer of the plaintiff-complainant. chanroblesvirtualawlibra ry chanrobles vi rtual law lib rary

(2) The defendant Asia Brewery Inc. is hereby ordered to

render an accounting and pay the San Miguel Corporation

double any and all the payments derived by defendant from

operations of its business and the sale of goods bearing the

mark "Beer Pale Pilsen" estimated at approximately Five

Million Pesos (P5,000,000.00); to recall all its products bearing

the mark "Beer Pale Pilsen" from its retailers and deliver these

as well as all labels, signs, prints, packages, wrappers,

receptacles and advertisements bearing the infringing mark and

all plates, molds, materials and other means of making the

same to the Court authorized to execute this judgment for

destruction. chanroblesvirt ualawlibrar y chanrobles virt ual law libra ry

(3) The defendant is hereby ordered to pay plaintiff the sum of

Two Million Pesos (P2,000,000.00) as moral damages and Half

a Million Pesos (P5,000,000.00) by way of exemplary

damages. chanroblesvirtualawli brary chan robles virtual law library

(4) The defendant is further ordered to pay the plaintiff

attorney's fees in the amount of P250,000.00 plus costs to this

suit. (p. 90, Rollo.)

Upon a motion for reconsideration filed by ABI, the above

dispositive part of the decision, was modified by the separate

opinions of the Special Sixth Division 1 so that it should read

thus:

In the light of the foregoing analysis and under the plain

language of the applicable rule and principle on the matter, We

find the defendant Asia Brewery Incorporated GUILTY of

infringement of trademark and unfair competition. The

decision of the trial court is hereby REVERSED, and a new

judgment entered in favor of the plaintiff and against the

defendant as follows: chanrobles vir tual law libra ry

(1) The defendant Asia Brewery Inc., its officers, agents,

servants and employees are hereby permanently enjoined and

restrained from manufacturing, putting up, selling, advertising,

offering or announcing for sale, or supplying Beer Pale Pilsen,

or any similar preparation, manufacture or beer in bottles and

under labels substantially identical with or like the said bottles

and labels of plaintiff San Miguel Corporation employed for

that purpose, or substantially identical with or like the bottles

and labels now employed by the defendant for that purpose, or

in bottles or under labels which are calculated to deceive

purchasers and consumers into the belief that the beer if the

product of the plaintiff or which will enable others to

substitute, sell or palm off the said beer of the defendant as and

for the beer of the plaintiff-complainant. chanroblesvirtualawlibra ry chanrobles vi rtual law lib rary

(2) The defendant Asia Brewery Inc. is hereby ordered 2to

recall all its products bearing the mark Beer Pale Pilsen from

its retailers and deliver these as well as all labels, signs, prints,

packages, wrappers, receptacles and advertisements bearing the

infringing mark and all plates, molds, materials and other

means of making the same to the Court authorized to execute

this judgment for destruction. chanroblesvirtualawl ibrary chan robles virtual law librar y

(3) The defendant is hereby ordered to pay plaintiff the sum of

Two Million Pesos (P2,000,000.00) as moral damages and Half

a Million Pesos (P500,000.00) by way of exemplary

damages. chanroblesvirtualawli brary chan robles virtual law library

(4) The defendant is further ordered to pay the plaintiff

attorney's fees in the amount of P250,000.00 plus costs of this

suit.

In due time, ABI appealed to this Court by a petition for

certiorari under Rule 45 of the Rules of Court. The lone issue

in this appeal is whether ABI infringes SMC's trademark: San

Miguel Pale Pilsen with Rectangular Hops and Malt Design,

and thereby commits unfair competition against the latter. It is

a factual issue (Phil. Nut Industry Inc. v. Standard Brands Inc.,

65 SCRA 575) and as a general rule, the findings of the Court

of Appeals upon factual questions are conclusive and ought not

to be disturbed by us. However, there are exceptions to this

general rule, and they are:

(1) When the conclusion is grounded entirely on speculation,

surmises and conjectures; chanrobles vir tual law lib rary

(2) When the inference of the Court of Appeals from its

findings of fact is manifestly mistaken, absurd and impossible; chanrobles

virtual law lib rary

(3) Where there is grave abuse of discretion; chanrobles vi rtual law lib rary

(4) When the judgment is based on a misapprehension of facts;

chanrobles virtual law lib rary

(5) When the appellate court, in making its findings, went

beyond the issues of the case, and the same are contrary to the

admissions of both the appellant and the appellee; chanr obles vir tual law library

(6) When the findings of said court are contrary to those of the

trial court; chanrobles virtual law libra ry

(7) When the findings are without citation of specific evidence

on which they are based; chanrob les virtual law lib rary

(8) When the facts set forth in the petition as well as in the

petitioner's main and reply briefs are not disputed by the

respondents; and chan robles virtual law librar y

(9) When the findings of facts of the Court of Appeals are

premised on the absence of evidence and are contradicted on

record. (Reynolds Philippine Corporation vs. Court of Appeals,

169 SCRA 220, 223 citing, Mendoza vs. Court of Appeals, 156

SCRA 597; Manlapaz vs. Court of Appeals, 147 SCRA 238;

Sacay vs. Sandiganbayan, 142 SCRA 593, 609; Guita vs. CA,

139 SCRA 576; Casanayan vs. Court of Appeals, 198 SCRA

333, 336; also Apex Investment and Financing Corp. vs. IAC,

166 SCRA 458 [citing Tolentino vs. De Jesus, 56 SCRA 167;

Carolina Industries, Inc. vs. CMS Stock Brokerage, Inc., 97

SCRA 734; Manero vs. CA, 102 SCRA 817; and Moran, Jr. vs.

CA, 133 SCRA 88].)

Under any of these exceptions, the Court has to review the

evidence in order to arrive at the correct findings based on the

record (Roman Catholic Bishop of Malolos, Inc. vs. IAC, 191

SCRA 411, 420.) Where findings of the Court of Appeals and

trial court are contrary to each other, the Supreme Court may

scrutinize the evidence on record. (Cruz vs. CA, 129 SCRA

222, 227.) chanrobles virtual law library

The present case is one of the exceptions because there is no

concurrence between the trial court and the Court of Appeals

on the lone factual issue of whether ABI, by manufacturing and

selling its BEER PALE PILSEN in amber colored steinie

bottles of 320 ml. capacity with a white painted rectangular

label has committed trademark infringement and unfair

competition against SMC. chanroblesvirtualawlibrary chan robles virtual law libra ry

Infringement of trademark is a form of unfair competition

(Clarke vs. Manila Candy Co., 36 Phil. 100, 106). Sec. 22 of

Republic Act No. 166, otherwise known as the Trademark

Law, defines what constitutes infringement:

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 imitate 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. (Emphasis supplied.)

This definition implies that only registered trade marks, trade

names and service marks are protected against infringement or

unauthorized use by another or others. The use of someone

else's registered trademark, trade name or service mark is

unauthorized, hence, actionable, if it is done "without the

consent of the registrant." (Ibid.) chanrobles virtual law libra ry

The registered trademark of SMC for its pale pilsen beer is:

San Miguel Pale Pilsen With Rectangular Hops and Malt

Design. (Philippine Bureau of Patents, Trademarks and

Technology Transfer Trademark Certificate of Registration No.

36103, dated 23 Oct. 1986,

(p. 174, Rollo.)

As described by the trial court in its decision (Page 177, Rollo):

. . . . a rectangular design [is] bordered by what appears to be

minute grains arranged in rows of three in which there appear

in each corner hop designs. At the top is a phrase written in

small print "Reg. Phil. Pat. Off." and at the bottom "Net

Contents: 320 Ml." The dominant feature is the phrase "San

Miguel" written horizontally at the upper portion. Below are

the words "Pale Pilsen" written diagonally across the middle of

the rectangular design. In between is a coat of arms and the

phrase "Expertly Brewed." The "S" in "San" and the "M" of

"Miguel," "P" of "Pale" and "Pilsen" are written in Gothic

letters with fine strokes of serifs, the kind that first appeared in

the 1780s in England and used for printing German as

distinguished from Roman and Italic. Below "Pale Pilsen" is

the statement "And Bottled by" (first line, "San Miguel

Brewery" (second line), and "Philippines" (third line). (p. 177,

Rollo; Emphasis supplied.)

On the other hand, ABI's trademark, as described by the trial

court, consists of:

. . . a rectangular design bordered by what appear to be buds of

flowers with leaves. The dominant feature is "Beer" written

across the upper portion of the rectangular design. The phrase

"Pale Pilsen" appears immediately below in smaller block

letters. To the left is a hop design and to the right, written in

small prints, is the phrase "Net Contents 320 ml." Immediately

below "Pale Pilsen" is the statement written in three lines

"Especially brewed and bottled by" (first line), "Asia Brewery

Incorporated" (second line), and "Philippines" (third line), (p.

177, Rollo; Emphasis supplied.)

Does ABI's BEER PALE PILSEN label or "design" infringe

upon SMC's SAN MIGUEL PALE PILSEN WITH

RECTANGULAR MALT AND HOPS DESIGN? The answer

is "No." chanrobles virtual law library

Infringement is determined by the "test of dominancy" rather

than by differences or variations in the details of one trademark

and of another. The rule was formulated in Co Tiong Sa vs.

Director of Patents, 95 Phil. 1, 4 (1954); reiterated in Lim Hoa

vs. Director of Patents, 100 Phil. 214, 216-217 (1956), thus:

It has been consistently held that the question of infringement

of a trademark is to be determined by the test of dominancy.

Similarity in size, form and color, while relevant, is not

conclusive. 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. vs. 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; . . . .) (Emphasis

supplied.)

In Forbes, Munn & Co. (Ltd.) vs. Ang San To, 40 Phil. 272,

275, the test was similarity or "resemblance between the two

(trademarks) such as would be likely to cause the one mark to

be mistaken for the other. . . . [But] this is not such similitude

as amounts to identity."

In Phil. Nut Industry Inc. vs. Standard Brands Inc., 65 SCRA

575, the court was more specific: the test is "similarity in the

dominant features of the trademarks." chanrobles vir tual law lib rary

What are the dominant features of the competing trademarks

before us? chanrobles vi rtual law lib rary

There is hardly any dispute that the dominant feature of SMC's

trademark is the name of the product: SAN MIGUEL PALE

PILSEN, written in white Gothic letters with elaborate serifs at

the beginning and end of the letters "S" and "M" on an amber

background across the upper portion of the rectangular

design. chanroblesvirtualawlib rary chanrob les virtual law lib rary

On the other hand, the dominant feature of ABI's trademark is

the name: BEER PALE PILSEN, with the word "Beer" written

in large amber letters, larger than any of the letters found in the

SMC label. chanroblesvir tualawlibra ry chanrobles vir tual law lib rary

The trial court perceptively observed that the word "BEER"

does not appear in SMC's trademark, just as the words "SAN

MIGUEL" do not appear in ABI's trademark. Hence, there is

absolutely no similarity in the dominant features of both

trademarks. chanroblesvirtua lawlibrary chanrobles virtual law libra ry

Neither in sound, spelling or appearance can BEER PALE

PILSEN be said to be confusingly similar to SAN MIGUEL

PALE PILSEN. No one who purchases BEER PALE PILSEN

can possibly be deceived that it is SAN MIGUEL PALE

PILSEN. No evidence whatsoever was presented by SMC

proving otherwise. chanroblesvi rtualawlibra ry chanrobles vi rtual law lib rary

Besides the dissimilarity in their names, the following other

dissimilarities in the trade dress or appearance of the

competing products abound: chanrobles virtual law library

(1) The SAN MIGUEL PALE PILSEN bottle has a slender

tapered neck. chanroblesvirtualawlibrary chan robles virtual law librar y

The BEER PALE PILSEN bottle has a fat, bulging neck. chanroblesvirtualawli brary chan robles virtual law library

(2) The words "pale pilsen" on SMC's label are printed in bold

and laced letters along a diagonal band, whereas the words

"pale pilsen" on ABI's bottle are half the size and printed in

slender block letters on a straight horizontal band. (See Exhibit

"8-a".). chanroblesvirtualawlibrary chanr obles virtual law l ibrary

(3) The names of the manufacturers are prominently printed on

their respective bottles. chanroblesvirtualawlib rary chanrob les virtual law lib rary

SAN MIGUEL PALE PILSEN is "Bottled by the San Miguel

Brewery, Philippines," whereas BEER PALE PILSEN is

"Especially brewed and bottled by Asia Brewery Incorporated,

Philippines." chanrob les virtual law lib rary

(4) On the back of ABI's bottle is printed in big, bold letters,

under a row of flower buds and leaves, its copyrighted slogan: chanrob les

virtual law lib rary

"BEER NA BEER!" chanr obles virtual law l ibrary

Whereas SMC's bottle carries no slogan. chanroblesvirtualawl ibrary chan robles virtual law librar y

(5) The back of the SAN MIGUEL PALE PILSEN bottle

carries the SMC logo, whereas the BEER PALE PILSEN bottle

has no logo. chanroblesvirtualawlibrary chanrob les virtual law lib rary

(6) The SAN MIGUEL PALE PILSEN bottle cap is stamped

with a coat of arms and the words "San Miguel Brewery

Philippines" encircling the same. chanroblesvirtualawlib rary chanrob les virtual law lib rary

The BEER PALE PILSEN bottle cap is stamped with the name

"BEER" in the center, surrounded by the words "Asia Brewery

Incorporated Philippines." chanrobles vi rtual law lib rary

(7) Finally, there is a substantial price difference between

BEER PALE PILSEN (currently at P4.25 per bottle) and SAN

MIGUEL PALE PILSEN (currently at P7.00 per bottle). One

who pays only P4.25 for a bottle of beer cannot expect to

receive San Miguel Pale Pilsen from the storekeeper or

bartender. chanroblesvirtualawlib rary chanro bles virtual law l ibrary

The fact that the words pale pilsen are part of ABI's trademark

does not constitute an infringement of SMC's trademark: SAN

MIGUEL PALE PILSEN, for "pale pilsen" are generic words

descriptive of the color ("pale"), of a type of beer ("pilsen"),

which is a light bohemian beer with a strong hops flavor that

originated in the City of Pilsen in Czechoslovakia and became

famous in the Middle Ages. (Webster's Third New

International Dictionary of the English Language, Unabridged.

Edited by Philip Babcock Gove. Springfield, Mass.: G & C

Merriam Co., [c] 1976, page 1716.) "Pilsen" is a "primarily

geographically descriptive word," (Sec. 4, subpar. [e] Republic

Act No. 166, as inserted by Sec. 2 of R.A. No. 638) hence,

non-registerable and not appropriable by any beer

manufacturer. The Trademark Law provides:

Sec. 4. . . .. The owner of trade-mark, 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 chanrob les virtual law lib rary

(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 supplied.)

The words "pale pilsen" may not be appropriated by SMC for

its exclusive use even if they are part of its registered

trademark: SAN MIGUEL PALE PILSEN, any more than such

descriptive words as "evaporated milk," "tomato ketchup,"

"cheddar cheese," "corn flakes" and "cooking oil" may be

appropriated by any single manufacturer of these food

products, for no other reason than that he was the first to use

them in his registered trademark. In Masso Hermanos, S.A. vs.

Director of Patents, 94 Phil. 136, 139 (1953), it was held that a

dealer in shoes cannot register "Leather Shoes" as his

trademark because that would be merely descriptive and it

would be unjust to deprive other dealers in leather shoes of the

right to use the same words with reference to their

merchandise. No one may appropriate generic or descriptive

words. They belong to the public domain (Ong Ai Gui vs.

Director of Patents, 96 Phil. 673, 676 [1955]):

A word or a combination of words which is merely descriptive

of an article of trade, or of its composition, characteristics, or

qualities, cannot be appropriated and protected as a trademark

to the exclusion of its use by others. . . . inasmuch as all

persons have an equal right to produce and vend similar

articles, they also have the right to describe them properly and

to use any appropriate language or words for that purpose, and

no person can appropriate to himself exclusively any word or

expression, properly descriptive of the article, its qualities,

ingredients or characteristics, and thus limit other persons in

the use of language appropriate to the description of their

manufactures, the right to the use of such language being

common to all. This rule excluding descriptive terms has also

been held to apply to trade-names. As to whether words

employed fall within this prohibition, it is said that the true test

is not whether they are exhaustively descriptive of the article

designated, but whether in themselves, and as they are

commonly used by those who understand their meaning, they

are reasonably indicative and descriptive of the thing intended.

If they are thus descriptive, and not arbitrary, they cannot be

appropriated from general use and become the exclusive

property of anyone. (52 Am. Jur. 542-543.) chanrobles virtual law librar y

. . . . Others may use the same or similar descriptive word in

connection with their own wares, provided they take proper

steps to prevent the public being deceived. (Richmond

Remedies Co. vs. Dr. Miles Medical Co., 16 E. [2d] 598.) chanrobles virtual law library

. . . . A descriptive word may be admittedly distinctive,

especially if the user is the first creator of the article. It will,

however, be denied protection, not because it lacks

distinctiveness, but rather because others are equally entitled to

its use. (2 Callman. Unfair Competition and Trademarks, pp.

869-870.)" (Emphasis supplied.)

The circumstance that the manufacturer of BEER PALE

PILSEN, Asia Brewery Incorporated, has printed its name all

over the bottle of its beer product: on the label, on the back of

the bottle, as well as on the bottle cap, disproves SMC's charge

that ABI dishonestly and fraudulently intends to palm off its

BEER PALE PILSEN as SMC's product. In view of the visible

differences between the two products, the Court believes it is

quite unlikely that a customer of average intelligence would

mistake a bottle of BEER PALE PILSEN for SAN MIGUEL

PALE PILSEN. chanroblesvirtualawlibrary chan robles virtual law library

The fact that BEER PALE PILSEN like SAN MIGUEL PALE

PILSEN is bottled in amber-colored steinie bottles of 320 ml.

capacity and is also advertised in print, broadcast, and

television media, does not necessarily constitute unfair

competition. chanroblesvirtualawlib rary chanr obles virtual law l ibrary

Unfair competition is the employment of deception or any

other means contrary to good faith by which a person shall pass

off the goods manufactured by him or in which he deals, or his

business, or services, for those of another who has already

established goodwill for his similar goods, business or services,

or any acts calculated to produce the same result. (Sec. 29,

Republic Act No. 166, as amended.) The law further

enumerates the more common ways of committing unfair

competition, thus:

Sec. 29. . . . chanroblesvirtualawlibrar y chanrobles virt ual law libra ry

In particular, and without in any way limiting the scope of

unfair competition, the following shall be deemed guilty of

unfair competition: chanrobles virt ual law libra ry

(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 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. chanroblesvirtualawlibrary chanro bles virtual law li brary

(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 chanrobles virtual law libra ry

(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 the goods,

business or services of another.

In this case, the question to be determined is whether ABI is

using a name or mark for its beer that has previously come to

designate SMC's beer, or whether ABI is passing off its BEER

PALE PILSEN as SMC's SAN MIGUEL PALE PILSEN.

. . ..The universal test question is whether the public is likely to

be deceived. Nothing less than conduct tending to pass off one

man's goods or business as that of another will constitute unfair

competition. Actual or probable deception and confusion on

the part of the customers by reason of defendant's practices

must always appear. (Shell Co., of the Philippines, Ltd. vs.

Insular Petroleum Refining Co. Ltd. et al., 120 Phil. 434, 439.)

The use of ABI of the steinie bottle, similar but not identical to

the SAN MIGUEL PALE PILSEN bottle, is not unlawful. As

pointed out by ABI's counsel, SMC did not invent but merely

borrowed the steinie bottle from abroad and it claims neither

patent nor trademark protection for that bottle shape and

design. (See rollo, page 55.) The Cerveza Especial and the Efes

Pale Pilsen use the "steinie" bottle. (See Exhibits 57-D, 57-E.)

The trial court found no infringement of SMC's bottle -

The court agrees with defendant that there is no infringement

of plaintiff's bottle, firstly, because according to plaintiff's

witness Deogracias Villadolid, it is a standard type of bottle

called steinie, and to witness Jose Antonio Garcia, it is not a

San Miguel Corporation design but a design originally

developed in the United States by the Glass Container

Manufacturer's Institute and therefore lacks exclusivity.

Secondly, the shape was never registered as a trademark.

Exhibit "C" is not a registration of a beer bottle design required

under Rep. Act 165 but the registration of the name and other

marks of ownership stamped on containers as required by Rep.

Act 623. Thirdly, the neck of defendant's bottle is much larger

and has a distinct bulge in its uppermost part. (p. 186, Rollo.)

The petitioner's contention that bottle size, shape and color

may not be the exclusive property of any one beer

manufacturer is well taken. SMC's being the first to use the

steinie bottle does not give SMC a vested right to use it to the

exclusion of everyone else. Being of functional or common

use, and not the exclusive invention of any one, it is available

to all who might need to use it within the industry. Nobody can

acquire any exclusive right to market articles supplying simple

human needs in containers or wrappers of the general form,

size and character commonly and immediately used in

marketing such articles (Dy Buncio vs. Tan Tiao Bok, 42 Phil.

190, 194-195.)

. . . protection against imitation should be properly confined to

nonfunctional features. Even if purely functional elements are

slavishly copied, the resemblance will not support an action for

unfair competition, and the first user cannot claim secondary

meaning protection. Nor can the first user predicate his claim

to protection on the argument that his business was established

in reliance on any such unpatented nonfunctional feature, even

"at large expenditure of money." (Callman Unfair Competition,

Trademarks and Monopolies, Sec. 19.33 [4th Ed.].) (Petition

for Review, p. 28.)

ABI does not use SMC's steinie bottle. Neither did ABI copy it.

ABI makes its own steinie bottle which has a fat bulging neck

to differentiate it from SMC's bottle. The amber color is a

functional feature of the beer bottle. As pointed out by ABI, all

bottled beer produced in the Philippines is contained and sold

in amber-colored bottles because amber is the most effective

color in preventing transmission of light and provides the

maximum protection to beer. As was ruled in California

Crushed Fruit Corporation vs. Taylor B. and Candy Co., 38

F2d 885, a merchant cannot be enjoined from using a type or

color of bottle where the same has the useful purpose of

protecting the contents from the deleterious effects of light

rays. Moreover, no one may have a monopoly of any color. Not

only beer, but most medicines, whether in liquid or tablet form,

are sold in amber-colored bottles. chanroblesvirtualawl ibrary chan robles virtual law libra ry

That the ABI bottle has a 320 ml. capacity is not due to a desire

to imitate SMC's bottle because that bottle capacity is the

standard prescribed under Metrication Circular No. 778, dated

4 December 1979, of the Department of Trade, Metric System

Board. chanroblesvirtualawlibrar y chanrobles virt ual law libra ry

With regard to the white label of both beer bottles, ABI

explained that it used the color white for its label because white

presents the strongest contrast to the amber color of ABI's

bottle; it is also the most economical to use on labels, and the

easiest to "bake" in the furnace (p. 16, TSN of September 20,

1988). No one can have a monopoly of the color amber for

bottles, nor of white for labels, nor of the rectangular shape

which is the usual configuration of labels. Needless to say, the

shape of the bottle and of the label is unimportant. What is all

important is the name of the product written on the label of the

bottle for that is how one beer may be distinguished form the

others. chanroblesvirtualawlibrar y chanrobles virt ual law libra ry

In Dy Buncio v. Tan Tiao Bok, 42 Phil. 190, 196-197, where

two competing tea products were both labelled as Formosan

tea, both sold in 5-ounce packages made of ordinary wrapping

paper of conventional color, both with labels containing

designs drawn in green ink and Chinese characters written in

red ink, one label showing a double-decked jar in the center,

the other, a flower pot, this court found that the resemblances

between the designs were not sufficient to mislead the ordinary

intelligent buyer, hence, there was no unfair competition. The

Court held:

. . . . In order that there may be deception of the buying public

in the sense necessary to constitute unfair competition, it is

necessary to suppose a public 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 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 possibility of the deception, of the

person who knows nothing about the design which has been

counterfeited, and who must be indifferent as between that and

the other. The simulation, in order to be objectionable, must be

such as appears likely to mislead the ordinarily intelligent

buyer who has a need to supply and is familiar with the article

that he seeks to purchase.

The main thrust of SMC's complaint if not infringement of its

trademark, but unfair competition arising form the allegedly

"confusing similarity" in the general appearance or trade dress

of ABI's BEER PALE PILSEN beside SMC's SAN MIGUEL

PALE PILSEN (p. 209, Rollo) chanrobles virtual law library

SMC claims that the "trade dress" of BEER PALE PILSEN is

"confusingly similar" to its SAN MIGUEL PALE PILSEN

because both are bottled in 320 ml. steinie type, amber-colored

bottles with white rectangular labels. chanro blesvirtualawlib rary chanro bles virtual law li brary

However, when as in this case, the names of the competing

products are clearly different and their respective sources are

prominently printed on the label and on other parts of the

bottle, mere similarity in the shape and size of the container

and label, does not constitute unfair competition. The steinie

bottle is a standard bottle for beer and is universally used. SMC

did not invent it nor patent it. The fact that SMC's bottle is

registered under R.A. No. 623 (as amended by RA 5700, An

Act to Regulate the Use of Duly Stamped or Marked Bottles,

Boxes, Casks, Kegs, Barrels and Other Similar Containers)

simply prohibits manufacturers of other foodstuffs from the

unauthorized use of SMC's bottles by refilling these with their

products. It was not uncommon then for products such as patis

(fish sauce) and toyo (soy sauce) to be sold in recycled SAN

MIGUEL PALE PILSEN bottles. Registration of SMC's beer

bottles did not give SMC a patent on the steinie or on bottles of

similar size, shape or color. chanroblesvirtualawlibrary chanrobles vir tual law lib rary

Most containers are standardized because they are usually

made by the same manufacturer. Milk, whether in powdered or

liquid form, is sold in uniform tin cans. The same can be said

of the standard ketchup or vinegar bottle with its familiar

elongated neck. Many other grocery items such as coffee,

mayonnaise, pickles and peanut butter are sold in standard

glass jars. The manufacturers of these foodstuffs have equal

right to use these standards tins, bottles and jars for their

products. Only their respective labels distinguish them from

each other. Just as no milk producer may sue the others for

unfair competition because they sell their milk in the same size

and shape of milk can which he uses, neither may SMC claim

unfair competition arising from the fact that ABI's BEER

PALE PILSEN is sold, like SMC's SAN MIGUEL PALE

PILSEN in amber steinie bottles. chanroblesvirtualawl ibrary chan robles virtual law libra ry

The record does not bear out SMC's apprehension that BEER

PALE PILSEN is being passed off as SAN MIGUEL PALE

PILSEN. This is unlikely to happen for consumers or buyers of

beer generally order their beer by brand. As pointed out by

ABI's counsel, in supermarkets and tiendas, beer is ordered by

brand, and the customer surrenders his empty replacement

bottles or pays a deposit to guarantee the return of the empties.

If his empties are SAN MIGUEL PALE PILSEN, he will get

SAN MIGUEL PALE PILSEN as replacement. In sari-sari

stores, beer is also ordered from the tindera by brand. The

same is true in restaurants, pubs and beer gardens - beer is

ordered from the waiters by brand. (Op. cit. page 50.) chanrobles virtual law library

Considering further that SAN MIGUEL PALE PILSEN has

virtually monopolized the domestic beer market for the past

hundred years, those who have been drinking no other beer but

SAN MIGUEL PALE PILSEN these many years certainly

know their beer too well to be deceived by a newcomer in the

market. If they gravitate to ABI's cheaper beer, it will not be

because they are confused or deceived, but because they find

the competing product to their taste. chanroblesvirtualawlibrary chanrobles vi rtual law lib rary

Our decision in this case will not diminish our ruling in "Del

Monte Corporation vs. Court of Appeals and Sunshine Sauce

Manufacturing Industries," 181 SCRA 410, 419, 3that:

. . . to determine whether a trademark has been infringed, we

must consider the mark 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.

That ruling may not apply to all kinds of products. The Court

itself cautioned that in resolving cases of infringement and

unfair competition, the courts should "take into consideration

several factors which would affect its conclusion, to wit: the

age, training and education of the usual purchaser, the nature

and cost of the article, whether the article is bought for

immediate consumption and also the conditions under which it

is usually purchased" (181 SCRA 410, 418-419). chanroblesvirtualawlibra ry chanrobles virtual law libra ry

The Del Monte case involved catsup, a common household

item which is bought off the store shelves by housewives and

house help who, if they are illiterate and cannot identify the

product by name or brand, would very likely identify it by

mere recollection of its appearance. Since the competitor,

Sunshine Sauce Mfg. Industries, not only used recycled Del

Monte bottles for its catsup (despite the warning embossed on

the bottles: "Del Monte Corporation. Not to be refilled.") but

also used labels which were "a colorable imitation" of Del

Monte's label, we held that there was infringement of Del

Monte's trademark and unfair competition by Sunshine. chanroblesvirtualaw library chan robles virtual law libra ry

Our ruling in Del Monte would not apply to beer which is not

usually picked from a store shelf but ordered by brand by the

beer drinker himself from the storekeeper or waiter in a pub or

restaurant.chanroblesvirtualawlibrary chanrob les virtual law lib rary

Moreover, SMC's brand or trademark: "SAN MIGUEL PALE

PILSEN" is not infringed by ABI's mark: "BEER NA BEER"

or "BEER PALE PILSEN." ABI makes its own bottle with a

bulging neck to differentiate it from SMC's bottle, and prints

ABI's name in three (3) places on said bottle (front, back and

bottle cap) to prove that it has no intention to pass of its

"BEER" as "SAN MIGUEL." chanrobles virtual law libra ry

There is no confusing similarity between the competing beers

for the name of one is "SAN MIGUEL" while the competitor is

plain "BEER" and the points of dissimilarity between the two

outnumber their points of similarity. chanr oblesvirtualawlib rary chanro bles virtual law li brary

Petitioner ABI has neither infringed SMC's trademark nor

committed unfair competition with the latter's SAN MIGUEL

PALE PILSEN product. While its BEER PALE PILSEN

admittedly competes with the latter in the open market, that

competition is neither unfair nor fraudulent. Hence, we must

deny SMC's prayer to suppress it. chanroblesvirtualawlibra ry chanrobles vir tual law lib rary

WHEREFORE, finding the petition for review meritorious, the

same is hereby granted. The decision and resolution of the

Court of Appeals in CA-G.R. CV No. 28104 are hereby set

aside and that of the trial court is REINSTATED and

AFFIRMED. Costs against the private respondent. chanroblesvirtualawlibra ry chanrobles vir tual law lib rary

SO ORDERED.

Narvasa, C.J., Bidin, Regalado, Romero, Nocon, Bellosillo and

Melo, JJ., concur. chanroblesvir tualawlibrary chanrobles vir tual law library

Feliciano, J., took no part.

chanrobles virtual law libra ry

chanrobles virtual law libra ry

Separate Opinions

CRUZ, J., dissenting: chanrobles vi rtual law lib rary

The present ponencia stresses the specific similarities and

differences of the two products to support the conclusion that

there is no infringement of trade marks or unfair competition.

That test was rejected in my own ponencia in Del Monte

Corporation vs. Court of Appeals, 181 SCRA 410, concurred in

by Justices Narvasa, Gancayco, Griño-Aquino and Medialdea,

where we declared:

While the Court does recognize these distinctions, it does not

agree with the conclusion that there was no infringement or

unfair competition. It seems to us that the lower courts have

been so preoccupied with the details that they have not seen the

total picture. chanroblesvirtualawlibrar y chanrobles virt ual law libra ry

It has been correctly held that side-by-side comparison is not

the final test of similarity. Such comparison requires a careful

scrutiny to determine in what points the labels of the products

differ, as was done by the trial judge. The ordinary 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. Where the housewife has to return home

as soon as possible to her baby or the working woman has to

make quick purchases during her off hours, she is apt to be

confused by similar labels even if they do have minute

differences. The male shopper is worse as he usually does not

bother about such distinctions. chanrob lesvirtualawlib rary chanrobles vi rtual law lib rary

The question is not whether the two articles are distinguishable

by their labels when set aside 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. chanroblesvirtualawlibrary chanro bles

virtual law lib rary

It has been held that in making purchases, the consumer must

depend upon his recollection of the appearance of the product

which he intends to purchase. The buyer having in mind the

mark/label of the respondent must rely upon his memory of the

petitioner's mark. Unlike the judge who has ample time to

minutely examine the labels in question in the comfort of his

sala, the ordinary shopper does not enjoy the same

opportunity. chanroblesvir tualawlibra ry chanrobles vir tual law lib rary

A number of courts have held that to determine whether a

trademark has been infringed, we must consider the mark 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. The court therefore should be guided by its first impression,

for a buyer acts quickly and is governed by a casual glance, the

value of which may be dissipated as soon as the court assumes

to analyze carefully the respective features of the mark. chanroblesvirtualawlib rary chanro bles virtual law l ibrary

It has also been held that it is not the function of the court in

cases of infringement and unfair competition to educate

purchasers but rather to take their carelessness for granted, and

to be ever conscious of the fact that marks need not be

identical. A confusing similarity will justify the intervention of

equity. The judge must also be aware of the fact that usually a

defendant in cases of infringement does not normally copy but

makes only colorable changes. Well has it been said that the

most successful form of copying is to employ enough points of

similarity to confuse the public with enough points of

difference to confuse the courts. chanroblesvirtualawlibrar y chanrobles virt ual law libra ry

For the above reasons, and the other arguments stated in Del

Monte, I dissent.

Separate Opinions

CRUZ, J., dissenting: chanrobles vi rtual law lib rary

The present ponencia stresses the specific similarities and

differences of the two products to support the conclusion that

there is no infringement of trade marks or unfair competition.

That test was rejected in my own ponencia in Del Monte

Corporation vs. Court of Appeals, 181 SCRA 410, concurred in

by Justices Narvasa, Gancayco, Griño-Aquino and Medialdea,

where we declared:

While the Court does recognize these distinctions, it does not

agree with the conclusion that there was no infringement or

unfair competition. It seems to us that the lower courts have

been so preoccupied with the details that they have not seen the

total picture. chanroblesvirtualawlibrar y chanrobles virt ual law libra ry

It has been correctly held that side-by-side comparison is not

the final test of similarity. Such comparison requires a careful

scrutiny to determine in what points the labels of the products

differ, as was done by the trial judge. The ordinary 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. Where the housewife has to return home

as soon as possible to her baby or the working woman has to

make quick purchases during her off hours, she is apt to be

confused by similar labels even if they do have minute

differences. The male shopper is worse as he usually does not

bother about such distinctions. chanrob lesvirtualawlib rary chanrobles vi rtual law lib rary

The question is not whether the two articles are distinguishable

by their labels when set aside 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. chanroblesvirtualawlibrary chanro bles

virtual law lib rary

It has been held that in making purchases, the consumer must

depend upon his recollection of the appearance of the product

which he intends to purchase. The buyer having in mind the

mark/label of the respondent must rely upon his memory of the

petitioner's mark. Unlike the judge who has ample time to

minutely examine the labels in question in the comfort of his

sala, the ordinary shopper does not enjoy the same

opportunity. chanroblesvir tualawlibra ry chanrobles vir tual law lib rary

A number of courts have held that to determine whether a

trademark has been infringed, we must consider the mark 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. The court therefore should be guided by its first impression,

for a buyer acts quickly and is governed by a casual glance, the

value of which may be dissipated as soon as the court assumes

to analyze carefully the respective features of the mark. chanroblesvirtualawlib rary chanro bles virtual law l ibrary

It has also been held that it is not the function of the court in

cases of infringement and unfair competition to educate

purchasers but rather to take their carelessness for granted, and

to be ever conscious of the fact that marks need not be

identical. A confusing similarity will justify the intervention of

equity. The judge must also be aware of the fact that usually a

defendant in cases of infringement does not normally copy but

makes only colorable changes. Well has it been said that the

most successful form of copying is to employ enough points of

similarity to confuse the public with enough points of

difference to confuse the courts. chanroblesvirtualawlibrar y chanrobles virt ual law libra ry

For the above reasons, and the other arguments stated in Del

Monte, I dissent.

#

Endnotes:

1 Composed of Justice Jose C. Campos, Jr. as chairman, and Justices Ricardo Francisco, fully

concurring, Ricardo Pronove, partly concurring, Filemon H. Mendoza and Oscar Herrera, both dissenting. Justice Aldecoa, who had written a separate dissenting opinion, retired before a resolution

on the motion for reconsideration was promulgated. He was substituted by Justice Oscar M.

Herrera.chanrobles virtual law l ibrary

2 This portion of Justice Campos' original decision ordering ABI to render an accounting to SMC and

pay estimated damages of P5,000,000.00 did not carry enough votes to become a decision as only Justice Ricardo Francisco concurred fully with him. Justice Ricardo Pronove, although concurring

partially with Justice Campos' decision, excepted from the portion ordering an accounting and

payment of P5 million damages. chan robles virtual law l ibrary

3 Cited in Justice R. Francisco's concurring opinion, p. 107, Rollo.

Republic of the Philippines

SUPREME COURT

Manila

THIRD DIVISION

[G. R. No. 126627. August 14, 2003]

SMITH KLINE BECKMAN CORPORATION, petitioner,

vs.

THE HONORABLE COURT OF APPEALS and TRYCO

PHARMA CORPORATION, respondents.

D E C I S I O N

CARPIO-MORALES, J.:

Smith Kline Beckman Corporation (petitioner), a corporation

existing by virtue of the laws of the state of Pennsylvania,

United States of America (U.S.) and licensed to do business in

the Philippines, filed on October 8, 1976, as assignee, before

the Philippine Patent Office (now Bureau of Patents,

Trademarks and Technology Transfer) an application for patent

over an invention entitled ―Methods and Compositions for

Producing Biphasic Parasiticide Activity Using Methyl 5

Propylthio-2-Benzimidazole Carbamate.‖ The application bore

Serial No. 18989.

On September 24, 1981, Letters Patent No. 14561[1] for the

aforesaid invention was issued to petitioner for a term of

seventeen (17) years.

The letters patent provides in its claims[2] that the patented

invention consisted of a new compound named methyl 5

propylthio-2-benzimidazole carbamate and the methods or

compositions utilizing the compound as an active ingredient in

fighting infections caused by gastrointestinal parasites and

lungworms in animals such as swine, sheep, cattle, goats,

horses, and even pet animals.

Tryco Pharma Corporation (private respondent) is a domestic

corporation that manufactures, distributes and sells veterinary

products including Impregon, a drug that has Albendazole for

its active ingredient and is claimed to be effective against

gastro-intestinal roundworms, lungworms, tapeworms and

fluke infestation in carabaos, cattle and goats.

Petitioner sued private respondent for infringement of patent

and unfair competition before the Caloocan City Regional Trial

Court (RTC).[3] It claimed that its patent covers or includes

the substance Albendazole such that private respondent, by

manufacturing, selling, using, and causing to be sold and used

the drug Impregon without its authorization, infringed Claims

2, 3, 4, 7, 8 and 9 of Letters Patent No. 14561[4] as well as

committed unfair competition under Article 189, paragraph 1

of the Revised Penal Code and Section 29 of Republic Act No.

166 (The Trademark Law) for advertising and selling as its

own the drug Impregon although the same contained

petitioner’s patented Albendazole.[5]

On motion of petitioner, Branch 125 of the Caloocan RTC

issued a temporary restraining order against private respondent

enjoining it from committing acts of patent infringement and

unfair competition.[6] A writ of preliminary injunction was

subsequently issued.[7]

Private respondent in its Answer[8] averred that Letters Patent

No. 14561 does not cover the substance Albendazole for

nowhere in it does that word appear; that even if the patent

were to include Albendazole, such substance is unpatentable;

that the Bureau of Food and Drugs allowed it to manufacture

and market Impregon with Albendazole as its known

ingredient; that there is no proof that it passed off in any way

its veterinary products as those of petitioner; that Letters Patent

No. 14561 is null and void, the application for the issuance

thereof having been filed beyond the one year period from the

filing of an application abroad for the same invention covered

thereby, in violation of Section 15 of Republic Act No. 165

(The Patent Law); and that petitioner is not the registered

patent holder.

Private respondent lodged a Counterclaim against petitioner for

such amount of actual damages as may be proven;

P1,000,000.00 in moral damages; P300,000.00 in exemplary

damages; and P150,000.00 in attorney’s fees.

Finding for private respondent, the trial court rendered a

Decision dated July 23, 1991,[9] the dispositive portion of

which reads:

WHEREFORE, in view of the foregoing, plaintiff’s complaint

should be, as it is hereby, DISMISSED. The Writ of injunction

issued in connection with the case is hereby ordered

DISSOLVED.

The Letters Patent No. 14561 issued by the then Philippine

Patents Office is hereby declared null and void for being in

violation of Sections 7, 9 and 15 of the Patents Law.

Pursuant to Sec. 46 of the Patents Law, the Director of Bureau

of Patents is hereby directed to cancel Letters Patent No. 14561

issued to the plaintiff and to publish such cancellation in the

Official Gazette.

Defendant Tryco Pharmaceutical Corporation is hereby

awarded P330,000.00 actual damages and P100,000.00

attorney’s fees as prayed for in its counterclaim but said

amount awarded to defendant is subject to the lien on correct

payment of filing fees.

SO ORDERED. (Underscoring supplied)

On appeal, the Court of Appeals, by Decision of April 21,

1995,[10] upheld the trial court’s finding that private

respondent was not liable for any infringement of the patent of

petitioner in light of the latter’s failure to show that

Albendazole is the same as the compound subject of Letters

Patent No. 14561. Noting petitioner’s admission of the

issuance by the U.S. of a patent for Albendazole in the name of

Smith Kline and French Laboratories which was petitioner’s

former corporate name, the appellate court considered the U.S.

patent as implying that Albendazole is different from methyl 5

propylthio-2-benzimidazole carbamate. It likewise found that

private respondent was not guilty of deceiving the public by

misrepresenting that Impregon is its product.

The appellate court, however, declared that Letters Patent No.

14561 was not void as it sustained petitioner’s explanation that

Patent Application Serial No. 18989 which was filed on

October 8, 1976 was a divisional application of Patent

Application Serial No. 17280 filed on June 17, 1975 with the

Philippine Patent Office, well within one year from petitioner’s

filing on June 19, 1974 of its Foreign Application Priority Data

No. 480,646 in the U.S. covering the same compound subject

of Patent Application Serial No. 17280.

Applying Section 17 of the Patent Law, the Court of Appeals

thus ruled that Patent Application Serial No. 18989 was

deemed filed on June 17, 1995 or still within one year from the

filing of a patent application abroad in compliance with the

one-year rule under Section 15 of the Patent Law. And it

rejected the submission that the compound in Letters Patent

No. 14561 was not patentable, citing the jurisprudentially

established presumption that the Patent Office’s determination

of patentability is correct. Finally, it ruled that petitioner

established itself to be the one and the same assignee of the

patent notwithstanding changes in its corporate name. Thus the

appellate court disposed:

WHEREFORE, the judgment appealed from is AFFIRMED

with the MODIFICATION that the orders for the nullification

of Letters Patent No. 14561 and for its cancellation are deleted

therefrom.

SO ORDERED.

Petitioner’s motion for reconsideration of the Court of

Appeals’ decision having been denied[11] the present petition

for review on certiorari[12] was filed, assigning as errors the

following:

I. THE COURT OF APPEALS GRAVELY ERRED IN

NOT FINDING THAT ALBENDAZOLE, THE ACTIVE

INGREDIENT IN TRYCO’S “IMPREGON” DRUG, IS

INCLUDED IN PETITIONER’S LETTERS PATENT NO.

14561, AND THAT CONSEQUENTLY TRYCO IS

ANSWERABLE FOR PATENT INFRINGEMENT.

II. THE COURT OF APPEALS GRAVELY ERRED IN

AWARDING TO PRIVATE RESPONDENT TRYCO

PHARMA CORPORATION P330,000.00 ACTUAL

DAMAGES AND P100,000.00 ATTORNEY’S FEES.

Petitioner argues that under the doctrine of equivalents for

determining patent infringement, Albendazole, the active

ingredient it alleges was appropriated by private respondent for

its drug Impregon, is substantially the same as methyl 5

propylthio-2-benzimidazole carbamate covered by its patent

since both of them are meant to combat worm or parasite

infestation in animals. It cites the ―unrebutted‖ testimony of its

witness Dr. Godofredo C. Orinion (Dr. Orinion) that the

chemical formula in Letters Patent No. 14561 refers to the

compound Albendazole. Petitioner adds that the two

substances substantially do the same function in substantially

the same way to achieve the same results, thereby making them

truly identical. Petitioner thus submits that the appellate court

should have gone beyond the literal wordings used in Letters

Patent No. 14561, beyond merely applying the literal

infringement test, for in spite of the fact that the word

Albendazole does not appear in petitioner’s letters patent, it has

ably shown by evidence its sameness with methyl 5 propylthio-

2-benzimidazole carbamate.

Petitioner likewise points out that its application with the

Philippine Patent Office on account of which it was granted

Letters Patent No. 14561 was merely a divisional application of

a prior application in the U. S. which granted a patent for

Albendazole. Hence, petitioner concludes that both methyl 5

propylthio-2-benzimidazole carbamate and the U.S.-patented

Albendazole are dependent on each other and mutually

contribute to produce a single result, thereby making

Albendazole as much a part of Letters Patent No. 14561 as the

other substance is.

Petitioner concedes in its Sur-Rejoinder [13] that although

methyl 5 propylthio-2-benzimidazole carbamate is not identical

with Albendazole, the former is an improvement or improved

version of the latter thereby making both substances still

substantially the same.

With respect to the award of actual damages in favor of private

respondent in the amount of P330,000.00 representing lost

profits, petitioner assails the same as highly speculative and

conjectural, hence, without basis. It assails too the award of

P100,000.00 in attorney’s fees as not falling under any of the

instances enumerated by law where recovery of attorney’s fees

is allowed.

In its Comment,[14] private respondent contends that

application of the doctrine of equivalents would not alter the

outcome of the case, Albendazole and methyl 5 propylthio-2-

benzimidazole carbamate being two different compounds with

different chemical and physical properties. It stresses that the

existence of a separate U.S. patent for Albendazole indicates

that the same and the compound in Letters Patent No. 14561

are different from each other; and that since it was on account

of a divisional application that the patent for methyl 5

propylthio-2-benzimidazole carbamate was issued, then, by

definition of a divisional application, such a compound is just

one of several independent inventions alongside Albendazole

under petitioner’s original patent application.

As has repeatedly been held, only questions of law may be

raised in a petition for review on certiorari before this Court.

Unless the factual findings of the appellate court are mistaken,

absurd, speculative, conjectural, conflicting, tainted with grave

abuse of discretion, or contrary to the findings culled by the

court of origin,[15] this Court does not review them.

From an examination of the evidence on record, this Court

finds nothing infirm in the appellate court’s conclusions with

respect to the principal issue of whether private respondent

committed patent infringement to the prejudice of petitioner.

The burden of proof to substantiate a charge for patent

infringement rests on the plaintiff.[16] In the case at bar,

petitioner’s evidence consists primarily of its Letters Patent

No. 14561, and the testimony of Dr. Orinion, its general

manager in the Philippines for its Animal Health Products

Division, by which it sought to show that its patent for the

compound methyl 5 propylthio-2-benzimidazole carbamate

also covers the substance Albendazole.

From a reading of the 9 claims of Letters Patent No. 14561 in

relation to the other portions thereof, no mention is made of the

compound Albendazole. All that the claims disclose are: the

covered invention, that is, the compound methyl 5 propylthio-

2-benzimidazole carbamate; the compound’s being

anthelmintic but nontoxic for animals or its ability to destroy

parasites without harming the host animals; and the patented

methods, compositions or preparations involving the

compound to maximize its efficacy against certain kinds of

parasites infecting specified animals.

When the language of its claims is clear and distinct, the

patentee is bound thereby and may not claim anything beyond

them.[17] And so are the courts bound which may not add to or

detract from the claims matters not expressed or necessarily

implied, nor may they enlarge the patent beyond the scope of

that which the inventor claimed and the patent office allowed,

even if the patentee may have been entitled to something more

than the words it had chosen would include.[18]

It bears stressing that the mere absence of the word

Albendazole in Letters Patent No. 14561 is not determinative

of Albendazole’s non-inclusion in the claims of the patent.

While Albendazole is admittedly a chemical compound that

exists by a name different from that covered in petitioner’s

letters patent, the language of Letter Patent No. 14561 fails to

yield anything at all regarding Albendazole. And no extrinsic

evidence had been adduced to prove that Albendazole inheres

in petitioner’s patent in spite of its omission therefrom or that

the meaning of the claims of the patent embraces the same.

While petitioner concedes that the mere literal wordings of its

patent cannot establish private respondent’s infringement, it

urges this Court to apply the doctrine of equivalents.

The doctrine of equivalents provides that an infringement also

takes place when a device appropriates a prior invention by

incorporating its innovative concept and, although with some

modification and change, performs substantially the same

function in substantially the same way to achieve substantially

the same result.[19] Yet again, a scrutiny of petitioner’s

evidence fails to convince this Court of the substantial

sameness of petitioner’s patented compound and Albendazole.

While both compounds have the effect of neutralizing parasites

in animals, identity of result does not amount to infringement

of patent unless Albendazole operates in substantially the same

way or by substantially the same means as the patented

compound, even though it performs the same function and

achieves the same result.[20] In other words, the principle or

mode of operation must be the same or substantially the

same.[21]

The doctrine of equivalents thus requires satisfaction of the

function-means-and-result test, the patentee having the burden

to show that all three components of such equivalency test are

met.[22]

As stated early on, petitioner’s evidence fails to explain how

Albendazole is in every essential detail identical to methyl 5

propylthio-2-benzimidazole carbamate. Apart from the fact

that Albendazole is an anthelmintic agent like methyl 5

propylthio-2-benzimidazole carbamate, nothing more is

asserted and accordingly substantiated regarding the method or

means by which Albendazole weeds out parasites in animals,

thus giving no information on whether that method is

substantially the same as the manner by which petitioner’s

compound works. The testimony of Dr. Orinion lends no

support to petitioner’s cause, he not having been presented or

qualified as an expert witness who has the knowledge or

expertise on the matter of chemical compounds.

As for the concept of divisional applications proffered by

petitioner, it comes into play when two or more inventions are

claimed in a single application but are of such a nature that a

single patent may not be issued for them.[23] The applicant

thus is required ―to divide,‖ that is, to limit the claims to

whichever invention he may elect, whereas those inventions

not elected may be made the subject of separate applications

which are called ―divisional applications.‖[24] What this only

means is that petitioner’s methyl 5 propylthio-2-benzimidazole

carbamate is an invention distinct from the other inventions

claimed in the original application divided out, Albendazole

being one of those other inventions. Otherwise, methyl 5

propylthio-2-benzimidazole carbamate would not have been

the subject of a divisional application if a single patent could

have been issued for it as well as Albendazole.

The foregoing discussions notwithstanding, this Court does not

sustain the award of actual damages and attorney’s fees in

favor of private respondent. The claimed actual damages of

P330,000.00 representing lost profits or revenues incurred by

private respondent as a result of the issuance of the injunction

against it, computed at the rate of 30% of its alleged

P100,000.00 monthly gross sales for eleven months, were

supported by the testimonies of private respondent’s

President[25] and Executive Vice-President that the average

monthly sale of Impregon was P100,000.00 and that sales

plummeted to zero after the issuance of the injunction.[26]

While indemnification for actual or compensatory damages

covers not only the loss suffered (damnum emergens) but also

profits which the obligee failed to obtain (lucrum cessans or

ganacias frustradas), it is necessary to prove the actual amount

of damages with a reasonable degree of certainty based on

competent proof and on the best evidence obtainable by the

injured party.[27] The testimonies of private respondent’s

officers are not the competent proof or best evidence

obtainable to establish its right to actual or compensatory

damages for such damages also require presentation of

documentary evidence to substantiate a claim therefor.[28]

In the same vein, this Court does not sustain the grant by the

appellate court of attorney’s fees to private respondent

anchored on Article 2208 (2) of the Civil Code, private

respondent having been allegedly forced to litigate as a result

of petitioner’s suit. Even if a claimant is compelled to litigate

with third persons or to incur expenses to protect its rights, still

attorney’s fees may not be awarded where no sufficient

showing of bad faith could be reflected in a party’s persistence

in a case other than an erroneous conviction of the

righteousness of his cause.[29] There exists no evidence on

record indicating that petitioner was moved by malice in suing

private respondent.

This Court, however, grants private respondent temperate or

moderate damages in the amount of P20,000.00 which it finds

reasonable under the circumstances, it having suffered some

pecuniary loss the amount of which cannot, from the nature of

the case, be established with certainty.[30]

WHEREFORE, the assailed decision of the Court of Appeals is

hereby AFFIRMED with MODIFICATION. The award of

actual or compensatory damages and attorney’s fees to private

respondent, Tryco Pharma Corporation, is DELETED; instead,

it is hereby awarded the amount of P20,000.00 as temperate or

moderate damages.

SO ORDERED.

Puno, (Chairman), Panganiban, Sandoval-Gutierrez, and

Corona, JJ., concur.

Republic of the Philippines

SUPREME COURT

Manila

FIRST DIVISION

G.R. No. 113407 July 12, 2000

LOTHAR SCHUARTZ, FRIEDEL VERDERBERG,

UDOLF KUEHNE, DIETER FISCHER, JOHN

BERNARD WATKINS, HARRY GREAVES, CHEN WOO

CHIN, YOSHIMI IWASAKI, FABIO CARLI,

MORTIMER THOMPSON, MALCOLM JOHN LAW,

MICHIBAZU OCHI, KENJI SHIGEMATSU, ENI

SHINOZAKI, ROBERT CABI-AKMAN, ARTHUR

SPRENGER, REMY SIMOND and HEINRICH

EVBERGGER, petitioners,

vs.

THE HONORABLE COURT OF APPEALS (SPECIAL

FIFTH DIVISION) and THE BUREAU OF PATENTS,

TRADEMARKS AND TECHNOLOGY TRANSFER,

respondents.

R E S O L U T I O N

PARDO, J.:

Petitioners appeal via certiorari from the decision1 of the Court

of Appeals dismissing their appeal from the resolution of the

Director of Patents that denied with finality their petition for

revival of patent applications.

On different dates, petitioners applied to the Bureau of Patents,

Trademarks and Technology Transfer for registration of

patents. They hired the law firm Siguion Reyna, Montecillo

and Ongsiako to process their patent applications in the

Philippines, respectively identified as follows:

Applicant Serial No.

(1) Michibazu Ochi, Kenji Shigematsu and

Eni Shinozaki- Issuance of letters patent

for "Hackling Drum Room or Chamber at

the Self-Feeding Equipment for Threshing

of Upper Hackling System"

233542

(2) Robert Cabi-Akman, Arthur Sprenger and

Remy Simond- Issuance of letters patent

for "Colour Value Measurement"

296303

(3) Heinrich Evbergger- Issuance of letters

patent for "Tool for Moulding the Top Past

of a Plastic Container"

298984

(4) Mortimer Thompson- Issuance of letters

patent for "Tamper Evident Closures and

Packages"

301125

(5) Yoshimi Iwasaki- Issuance of letters patent

for "Method Generation for Hot Gas by

Incinerators"

305486

(6) John Bernard Watkins, Harry Greaves and

Chen Woo Chin- Issuance of letters patent

for "Preservation Composition"

308197

(7) Fabio Carli- Issuance of letters patent for 319688

"Pharmaceutical Compositions"

(8) Lothar Schuartz, Friedel Verderberg,

Rudolf Kuehne, and Dieter Fischer-

Issuance of letters patent for "Process for

Producing Copper-Laminated Base

Material for Printed Circuit Boards"

319749

(9) Malcolm John Law- Issuance of letters

patent for "Electrodeposition of Chromium

and Chromium Bearing Alloys." 11

3205010

Petitioners’ patent applications lacked certain requirements and

the Bureau informed the law firm about it, through

correspondences called Office Actions. As petitioners’ law

firm did not respond to these office actions within the

prescribed time, notices of abandonment were sent on the

following dates:

1âwphi1

Serial

Nos.

Date of Office

Action

Date of

Abandonment

(1) 23354 March 20, 1987 July 21, 1987

(2) 29630 June 18, 1986 October 21, 1986

(3) 29898 June 11, 1987 June 22, 1987

(4) 30112 June 3, 1987 August 6, 1987

(5) 30548 June 10, 1987 August 18, 1987

(6) 30819 January 28, 1987 July 28, 1987

(7) 31968 January 14, 1987 July 15, 1987

(8) 31974 July 23, 1987 September 24, 1987

(9) 32050 March 31, 1987 June 1, 198712

On December 7, 1987, two employees of the law firm, George

Bangkas and Rafael Rosas were dismissed from employment.

Prior to the dismissal, these employees worked with the patent

group of the law firm and had the duty, among others, of

getting the firm’s letters and correspondence from the Bureau

of Patents.

Immediately after their dismissal, the law firm conducted an

inventory of all the documents entrusted to them. It was then

that the firm learned about the notices of abandonment.

Thereafter, petitioners, through the law firm, filed with the

Bureau of Patents separate petitions for revival of the patent

applications on the following dates:

Serial Nos. Date Petition Filed

(1) 23354 March 3, 1988

(2) 29630 March 3, 1988

(3) 30122 January 15, 1988/February 29, 1988

(4) 30548 January 25, 1988/March 1, 1988

(5) 30819 May 27, 1988/July 15, 1988

(6) 31968 January 21, 1988/March 1, 1988

(7) 31974 March 14, 1988

(8) 32050 March 17, 1988

For Serial No. 29898, the applicant abandoned his application,

for which reason no petition for revival was filed.13

On January 31, 1991, Director Luis M. Duka, Jr. of the Bureau

of Patents denied all the petitions for revival because they were

filed out of time. The dispositive portion specifically provides:

"WHEREFORE, in consideration of the foregoing premises, all

the petitions for revival of the above-captioned abandoned

applications bearing Serial Nos. 23354, 29630, 29898, 30112,

30548, 30819, 31968, 31974, and 32050, are hereby denied and

no further petitions nor requests for reconsideration hereof

shall be entertained hereafter.

"SO ORDERED.

"Makati, Metro Manila, Philippines, this 31st day of January

1991.

LUIS M. DUKA, JR.

Director III" 14

On February 14, 1991, petitioners appealed the above

resolution of the Bureau of Patents to the Court of Appeals.15

On August 13, 1992, the Court of Appeals dismissed the

consolidated appeal for being filed beyond the 15-day

reglementary period to appeal. There was an unreasonable

delay before the petitions to revive applications were filed.

Moreover, petitioners’ patent applications could not be a

proper subject of a consolidated appeal because they covered

separate and distinct subjects and had been treated by the

Bureau of Patents as separate and individual applications.

Specifically the decision provides:

"WHEREFORE, for reasons above stated and in the light of the

applicable law on the matter, this petition for review on appeal

from the order/decision of the Director of Bureau of Patents is

hereby DISMISSED with costs against the appellants.1âwphi1

SO ORDERED." 16

On September 14, 1992, petitioners moved for reconsideration

of the Court of Appeals’ decision, which the court denied on

January 7, 1994. The appellate court found no cogent reason to

justify the reversal or modification of its decision.17

Aggrieved, petitioners filed the instant petition for review on

certiorari.18

At issue is the validity of the Court of Appeals’ dismissal of the

consolidated appeal of petitioners from the Director of Patents’

denial of the revival of their patent applications.

Petitioners contend that the Court of Appeals committed grave

abuse of discretion when it held that the consolidated appeal

was filed out of time. They were appealing from the resolution

of the Director of Patents dated January 31, 1991, which denied

the petition for revival of the patent applications. They received

a copy of the resolution, through their patent attorneys, on

February 7, 1991, and filed the consolidated appeal seven (7)

days after, or on February 14, 1991. According to petitioners,

these dates clearly established that their appeal was seasonably

filed.

The contention is not meritorious. If the facts above-mentioned

were the sole basis of determining whether the appeal was filed

on time, petitioners’ argument would be correct. However,

petitioners lost sight of the fact that the petition could not be

granted because of laches. Prior to the filing of the petition for

revival of the patent application with the Bureau of Patents, an

unreasonable period of time had lapsed due to the negligence

of petitioners’ counsel. By such inaction, petitioners were

deemed to have forfeited their right to revive their applications

for patent.

Facts show that the patent attorneys appointed to follow up the

applications for patent registration had been negligent in

complying with the rules of practice prescribed by the Bureau

of Patents. The firm had been notified about the abandonment

as early as June 1987, but it was only after December 7, 1987,

when their employees Bangkas and Rosas had been dismissed,

that they came to know about it. This clearly showed that

petitioners’ counsel had been remiss in the handling of their

clients’ applications.19

"A lawyer’s fidelity to the cause of his client requires him to be

ever mindful of the responsibilities that should be expected of

him. A lawyer shall not neglect a legal matter entrusted to

him."20

In the instant case, petitioners’ patent attorneys not

only failed to take notice of the notices of abandonment, but

they failed to revive the application within the four-month

period, as provided in the rules of practice in patent cases.

These applications are deemed forfeited upon the lapse of such

period.21

Hence, we can not grant the present petition.22

The Court of

Appeals did not err or gravely abuse its discretion in dismissing

the petition for review.

WHEREFORE, the Court DENIES the petition for lack of

merit. The Court AFFIRMS the decision of the Court of

Appeals in CA-G. R. SP No. 24175.

No costs.

SO ORDERED.

Davide, Jr., C.J., (Chairman), Puno, Kapunan, and Ynares-

Santiago, JJ., concur.

Footnotes

1 In CA-G. R. SP No. 24175, promulgated on August

13, 1992 by the Special Fifth Division, Justice Campos,

Jr., ponente, and Justices Guingona and Montoya,

concurring; Rollo, pp. 44-48.

2 Patent application filed on December 3, 1979.

3 Patent application filed on September 29, 1983.

4 Patent application filed on November 28, 1983.

5 Patent application filed on January 18, 1984.

6 Patent application filed on April 15, 1984.

7 Patent application filed on June 15, 1984.

8 Patent application filed on October 2, 1986.

9 Patent application filed on March 12, 1985.

10 Patent application filed on March 26, 1985.

11 Rollo, pp. 3-4.

12 Rollo, pp. 5-6.

13 Rollo, p. 7.

14 Bureau Resolution, Rollo, pp. 50-55.

15 Rollo, p. 46.

16 In CA-G. R. SP No. 24175, Rollo, pp. 44-48.

17 Rollo, p. 42.

18 Filed on January 31, 1994. Rollo, pp. 2-40. On

December 04, 1996, we gave due course to the petition

(Rollo, p. 102).

19 Government Service Insurance System vs. Court of

Appeals, 287 SCRA 204 [1998]; Sumbad vs. Court of

Appeals, 308 SCRA 575 [1999].

20 Villafuerte vs. Cortez, 288 SCRA 687 [1998].

21 "Section 111. Abandonment for failure to respond

within time limit.

(a) If an applicant fails to prosecute his

application within four months after the date

when the last official notice of any action by the

Office was mailed to him, or within such shorter

time as may be fixed (Rule 112), the application

will become abandoned.

x x x

"Section 113. Revival of abandoned

application.- An application abandoned for

failure to prosecute may be revived as a pending

application within four months from the date of

abandonment upon good cause shown, upon the

payment of the required fee and upon tender of

the proposed response to the last office action.

An application not revived within the specified

period shall be deemed forfeited." (Rules of

Practice in Patent Cases, cited in Solicitor

General’s Memorandum, Rollo, pp. 145-168, at

p. 159)

22 Diaz-Duarte vs. Ong, 298 SCRA 388 [1998].

Republic of the Philippines

SUPREME COURT

Manila

FIRST DIVISION

G.R. No. 143993 August 18, 2004

MCDONALD'S CORPORATION and MCGEORGE

FOOD INDUSTRIES, INC., petitioners,

vs.

L.C. BIG MAK BURGER, INC., FRANCIS B. DY, EDNA

A. DY, RENE B. DY, WILLIAM B. DY, JESUS

AYCARDO, ARACELI AYCARDO, and GRACE

HUERTO, respondents.

D E C I S I O N

CARPIO, J.:

The Case

This is a petition for review1 of the Decision dated 26

November 1999 of the Court of Appeals2 finding respondent

L.C. Big Mak Burger, Inc. not liable for trademark

infringement and unfair competition and ordering petitioners to

pay respondents P1,900,000 in damages, and of its Resolution

dated 11 July 2000 denying reconsideration. The Court of

Appeals' Decision reversed the 5 September 1994 Decision3 of

the Regional Trial Court of Makati, Branch 137, finding

respondent L.C. Big Mak Burger, Inc. liable for trademark

infringement and unfair competition.

The Facts

Petitioner McDonald's Corporation ("McDonald's") is a

corporation organized under the laws of Delaware, United

States. McDonald's operates, by itself or through its

franchisees, a global chain of fast-food restaurants.

McDonald's4 owns a family of marks

5 including the "Big Mac"

mark for its "double-decker hamburger sandwich."6

McDonald's registered this trademark with the United States

Trademark Registry on 16 October 1979.7 Based on this Home

Registration, McDonald's applied for the registration of the

same mark in the Principal Register of the then Philippine

Bureau of Patents, Trademarks and Technology ("PBPTT"),

now the Intellectual Property Office ("IPO"). Pending approval

of its application, McDonald's introduced its "Big Mac"

hamburger sandwiches in the Philippine market in September

1981. On 18 July 1985, the PBPTT allowed registration of the

"Big Mac" mark in the Principal Register based on its Home

Registration in the United States.

Like its other marks, McDonald's displays the "Big Mac" mark

in items8 and paraphernalia

9 in its restaurants, and in its

outdoor and indoor signages. From 1982 to 1990, McDonald's

spent P10.5 million in advertisement for "Big Mac" hamburger

sandwiches alone.10

Petitioner McGeorge Food Industries ("petitioner McGeorge"),

a domestic corporation, is McDonald's Philippine franchisee.11

Respondent L.C. Big Mak Burger, Inc. ("respondent

corporation") is a domestic corporation which operates fast-

food outlets and snack vans in Metro Manila and nearby

provinces.12

Respondent corporation's menu includes

hamburger sandwiches and other food items.13

Respondents

Francis B. Dy, Edna A. Dy, Rene B. Dy, William B. Dy, Jesus

Aycardo, Araceli Aycardo, and Grace Huerto ("private

respondents") are the incorporators, stockholders and directors

of respondent corporation.14

On 21 October 1988, respondent corporation applied with the

PBPTT for the registration of the "Big Mak" mark for its

hamburger sandwiches. McDonald's opposed respondent

corporation's application on the ground that "Big Mak" was a

colorable imitation of its registered "Big Mac" mark for the

same food products. McDonald's also informed respondent

Francis Dy ("respondent Dy"), the chairman of the Board of

Directors of respondent corporation, of its exclusive right to the

"Big Mac" mark and requested him to desist from using the

"Big Mac" mark or any similar mark.

Having received no reply from respondent Dy, petitioners on 6

June 1990 sued respondents in the Regional Trial Court of

Makati, Branch 137 ("RTC"), for trademark infringement and

unfair competition. In its Order of 11 July 1990, the RTC

issued a temporary restraining order ("TRO") against

respondents enjoining them from using the "Big Mak" mark in

the operation of their business in the National Capital Region.15

On 16 August 1990, the RTC issued a writ of preliminary

injunction replacing the TRO.16

In their Answer, respondents admitted that they have been

using the name "Big Mak Burger" for their fast-food business.

Respondents claimed, however, that McDonald's does not have

an exclusive right to the "Big Mac" mark or to any other

similar mark. Respondents point out that the Isaiyas Group of

Corporations ("Isaiyas Group") registered the same mark for

hamburger sandwiches with the PBPTT on 31 March 1979.

One Rodolfo Topacio ("Topacio") similarly registered the

same mark on 24 June 1983, prior to McDonald's registration

on 18 July 1985. Alternatively, respondents claimed that they

are not liable for trademark infringement or for unfair

competition, as the "Big Mak" mark they sought to register

does not constitute a colorable imitation of the "Big Mac"

mark. Respondents asserted that they did not fraudulently pass

off their hamburger sandwiches as those of petitioners' Big

Mac hamburgers.17

Respondents sought damages in their

counterclaim.

In their Reply, petitioners denied respondents' claim that

McDonald's is not the exclusive owner of the "Big Mac" mark.

Petitioners asserted that while the Isaiyas Group and Topacio

did register the "Big Mac" mark ahead of McDonald's, the

Isaiyas Group did so only in the Supplemental Register of the

PBPTT and such registration does not provide any protection.

McDonald's disclosed that it had acquired Topacio's rights to

his registration in a Deed of Assignment dated 18 May 1981.18

The Trial Court's Ruling

On 5 September 1994, the RTC rendered judgment ("RTC

Decision") finding respondent corporation liable for trademark

infringement and unfair competition. However, the RTC

dismissed the complaint against private respondents and the

counterclaim against petitioners for lack of merit and

insufficiency of evidence. The RTC held:

Undeniably, the mark "B[ig] M[ac]" is a registered

trademark for plaintiff McDonald's, and as such, it is

entitled [to] protection against infringement.

xxxx

There exist some distinctions between the names "B[ig]

M[ac]" and "B[ig] M[ak]" as appearing in the

respective signages, wrappers and containers of the

food products of the parties. But infringement goes

beyond the physical features of the questioned name

and the original name. There are still other factors to be

considered.

xxxx

Significantly, the contending parties are both in the

business of fast-food chains and restaurants. An average

person who is hungry and wants to eat a hamburger

sandwich may not be discriminating enough to look for

a McDonald's restaurant and buy a "B[ig] M[ac]"

hamburger. Once he sees a stall selling hamburger

sandwich, in all likelihood, he will dip into his pocket

and order a "B[ig] M[ak]" hamburger sandwich.

Plaintiff McDonald's fast-food chain has attained wide

popularity and acceptance by the consuming public so

much so that its air-conditioned food outlets and

restaurants will perhaps not be mistaken by many to be

the same as defendant corporation's mobile snack vans

located along busy streets or highways. But the thing is

that what is being sold by both contending parties is a

food item – a hamburger sandwich which is for

immediate consumption, so that a buyer may easily be

confused or deceived into thinking that the "B[ig]

M[ak]" hamburger sandwich he bought is a food-

product of plaintiff McDonald's, or a subsidiary or

allied outlet thereof. Surely, defendant corporation has

its own secret ingredients to make its hamburger

sandwiches as palatable and as tasty as the other brands

in the market, considering the keen competition among

mushrooming hamburger stands and multinational fast-

food chains and restaurants. Hence, the trademark

"B[ig] M[ac]" has been infringed by defendant

corporation when it used the name "B[ig] M[ak]" in its

signages, wrappers, and containers in connection with

its food business. xxxx

Did the same acts of defendants in using the name

"B[ig] M[ak]" as a trademark or tradename in their

signages, or in causing the name "B[ig] M[ak]" to be

printed on the wrappers and containers of their food

products also constitute an act of unfair competition

under Section 29 of the Trademark Law?

The answer is in the affirmative. xxxx

The xxx provision of the law concerning unfair

competition is broader and more inclusive than the law

concerning the infringement of trademark, which is of

more limited range, but within its narrower range

recognizes a more exclusive right derived by the

adoption and registration of the trademark by the person

whose goods or services are first associated therewith.

xxx Notwithstanding the distinction between an action

for trademark infringement and an action for unfair

competition, however, the law extends substantially the

same relief to the injured party for both cases. (See

Sections 23 and 29 of Republic Act No. 166)

Any conduct may be said to constitute unfair

competition if the effect is to pass off on the public the

goods of one man as the goods of another. The choice

of "B[ig] M[ak]" as tradename by defendant

corporation is not merely for sentimental reasons but

was clearly made to take advantage of the reputation,

popularity and the established goodwill of plaintiff

McDonald's. For, as stated in Section 29, a person is

guilty of unfair competition 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

likely influence purchasers to believe that the goods

offered are those of a manufacturer or dealer other than

the actual manufacturer or dealer. Thus, plaintiffs have

established their valid cause of action against the

defendants for trademark infringement and unfair

competition and for damages.19

The dispositive portion of the RTC Decision provides:

WHEREFORE, judgment is rendered in favor of

plaintiffs McDonald's Corporation and McGeorge Food

Industries, Inc. and against defendant L.C. Big Mak

Burger, Inc., as follows:

1. The writ of preliminary injunction issued in this case

on [16 August 1990] is made permanent;

2. Defendant L.C. Big Mak Burger, Inc. is ordered to

pay plaintiffs actual damages in the amount of

P400,000.00, exemplary damages in the amount of

P100,000.00, and attorney's fees and expenses of

litigation in the amount of P100,000.00;

3. The complaint against defendants Francis B. Dy,

Edna A. Dy, Rene B. Dy, Wiliam B. Dy, Jesus

Aycardo, Araceli Aycardo and Grace Huerto, as well as

all counter-claims, are dismissed for lack of merit as

well as for insufficiency of evidence.20

Respondents appealed to the Court of Appeals.

The Ruling of the Court of Appeals

On 26 November 1999, the Court of Appeals rendered

judgment ("Court of Appeals' Decision") reversing the RTC

Decision and ordering McDonald's to pay respondents

P1,600,000 as actual and compensatory damages and P300,000

as moral damages. The Court of Appeals held:

Plaintiffs-appellees in the instant case would like to

impress on this Court that the use of defendants-

appellants of its corporate name – the whole "L.C. B[ig]

M[ak] B[urger], I[nc]." which appears on their food

packages, signages and advertisements is an

infringement of their trademark "B[ig] M[ac]" which

they use to identify [their] double decker sandwich,

sold in a Styrofoam box packaging material with the

McDonald's logo of umbrella "M" stamped thereon,

together with the printed mark in red bl[o]ck capital

letters, the words being separated by a single space.

Specifically, plaintiffs-appellees argue that defendants-

appellants' use of their corporate name is a colorable

imitation of their trademark "Big Mac".

xxxx

To Our mind, however, this Court is fully convinced

that no colorable imitation exists. As the definition

dictates, it is not sufficient that a similarity exists in

both names, but that more importantly, the over-all

presentation, or in their essential, substantive and

distinctive parts is such as would likely MISLEAD or

CONFUSE persons in the ordinary course of

purchasing the genuine article. A careful comparison of

the way the trademark "B[ig] M[ac]" is being used by

plaintiffs-appellees and corporate name L.C. Big Mak

Burger, Inc. by defendants-appellants, would readily

reveal that no confusion could take place, or that the

ordinary purchasers would be misled by it. As pointed

out by defendants-appellants, the plaintiffs-appellees'

trademark is used to designate only one product, a

double decker sandwich sold in a Styrofoam box with

the "McDonalds" logo. On the other hand, what the

defendants-appellants corporation is using is not a

trademark for its food product but a business or

corporate name. They use the business name "L.C. Big

Mak Burger, Inc." in their restaurant business which

serves diversified food items such as siopao, noodles,

pizza, and sandwiches such as hotdog, ham, fish burger

and hamburger. Secondly, defendants-appellants'

corporate or business name appearing in the food

packages and signages are written in silhouette red-

orange letters with the "b" and "m" in upper case letters.

Above the words "Big Mak" are the upper case letter

"L.C.". Below the words "Big Mak" are the words

"Burger, Inc." spelled out in upper case letters.

Furthermore, said corporate or business name

appearing in such food packages and signages is always

accompanied by the company mascot, a young chubby

boy named Maky who wears a red T-shirt with the

upper case "m" appearing therein and a blue lower

garment. Finally, the defendants-appellants' food

packages are made of plastic material.

xxxx

xxx [I]t is readily apparent to the naked eye that there

appears a vast difference in the appearance of the

product and the manner that the tradename "Big Mak"

is being used and presented to the public. As earlier

noted, there are glaring dissimilarities between

plaintiffs-appellees' trademark and defendants-

appellants' corporate name. Plaintiffs-appellees' product

carrying the trademark "B[ig] M[ac]" is a double decker

sandwich (depicted in the tray mat containing

photographs of the various food products xxx sold in a

Styrofoam box with the "McDonald's" logo and

trademark in red, bl[o]ck capital letters printed thereon

xxx at a price which is more expensive than the

defendants-appellants' comparable food products. In

order to buy a "Big Mac", a customer needs to visit an

air-conditioned "McDonald's" restaurant usually

located in a nearby commercial center, advertised and

identified by its logo - the umbrella "M", and its mascot

– "Ronald McDonald". A typical McDonald's restaurant

boasts of a playground for kids, a second floor to

accommodate additional customers, a drive-thru to

allow customers with cars to make orders without

alighting from their vehicles, the interiors of the

building are well-lighted, distinctly decorated and

painted with pastel colors xxx. In buying a "B[ig]

M[ac]", it is necessary to specify it by its trademark.

Thus, a customer needs to look for a "McDonald's" and

enter it first before he can find a hamburger sandwich

which carry the mark "Big Mac". On the other hand,

defendants-appellants sell their goods through snack

vans xxxx

Anent the allegation that defendants-appellants are

guilty of unfair competition, We likewise find the same

untenable.

Unfair competition is defined as "the employment of

deception or any other means contrary to good faith by

which a person shall pass off the goods manufactured

by him or in which he deals, or his business, or service,

for those of another who has already established good

will for his similar good, business or services, or any

acts calculated to produce the same result" (Sec. 29,

Rep. Act No. 166, as amended).

To constitute unfair competition therefore it must

necessarily follow that there was malice and that the

entity concerned was in bad faith.

In the case at bar, We find no sufficient evidence

adduced by plaintiffs-appellees that defendants-

appellants deliberately tried to pass off the goods

manufactured by them for those of plaintiffs-appellees.

The mere suspected similarity in the sound of the

defendants-appellants' corporate name with the

plaintiffs-appellees' trademark is not sufficient evidence

to conclude unfair competition. Defendants-appellants

explained that the name "M[ak]" in their corporate

name was derived from both the first names of the

mother and father of defendant Francis Dy, whose

names are Maxima and Kimsoy. With this explanation,

it is up to the plaintiffs-appellees to prove bad faith on

the part of defendants-appellants. It is a settled rule that

the law always presumes good faith such that any

person who seeks to be awarded damages due to acts of

another has the burden of proving that the latter acted

in bad faith or with ill motive. 21

Petitioners sought reconsideration of the Court of Appeals'

Decision but the appellate court denied their motion in its

Resolution of 11 July 2000.

Hence, this petition for review.

Petitioners raise the following grounds for their petition:

I. THE COURT OF APPEALS ERRED IN FINDING

THAT RESPONDENTS' CORPORATE NAME "L.C.

BIG MAK BURGER, INC." IS NOT A COLORABLE

IMITATION OF THE MCDONALD'S TRADEMARK

"BIG MAC", SUCH COLORABLE IMITATION

BEING AN ELEMENT OF TRADEMARK

INFRINGEMENT.

A. Respondents use the words "Big Mak" as

trademark for their products and not merely as

their business or corporate name.

B. As a trademark, respondents' "Big Mak" is

undeniably and unquestionably similar to

petitioners' "Big Mac" trademark based on the

dominancy test and the idem sonans test

resulting inexorably in confusion on the part of

the consuming public.

II. THE COURT OF APPEALS ERRED IN

REFUSING TO CONSIDER THE INHERENT

SIMILARITY BETWEEN THE MARK "BIG MAK"

AND THE WORD MARK "BIG MAC" AS AN

INDICATION OF RESPONDENTS' INTENT TO

DECEIVE OR DEFRAUD FOR PURPOSES OF

ESTABLISHING UNFAIR COMPETITION.22

Petitioners pray that we set aside the Court of Appeals'

Decision and reinstate the RTC Decision.

In their Comment to the petition, respondents question the

propriety of this petition as it allegedly raises only questions of

fact. On the merits, respondents contend that the Court of

Appeals committed no reversible error in finding them not

liable for trademark infringement and unfair competition and in

ordering petitioners to pay damages.

The Issues

The issues are:

1. Procedurally, whether the questions raised in this petition are

proper for a petition for review under Rule 45.

2. On the merits, (a) whether respondents used the words "Big

Mak" not only as part of the corporate name "L.C. Big Mak

Burger, Inc." but also as a trademark for their hamburger

products, and (b) whether respondent corporation is liable for

trademark infringement and unfair competition.23

The Court's Ruling

The petition has merit.

On Whether the Questions Raised in the Petition are Proper

for a Petition for Review

A party intending to appeal from a judgment of the Court of

Appeals may file with this Court a petition for review under

Section 1 of Rule 45 ("Section 1")24

raising only questions of

law. A question of law exists when the doubt or difference

arises on what the law is on a certain state of facts. There is a

question of fact when the doubt or difference arises on the truth

or falsity of the alleged facts. 25

Here, petitioners raise questions of fact and law in assailing the

Court of Appeals' findings on respondent corporation's non-

liability for trademark infringement and unfair competition.

Ordinarily, the Court can deny due course to such a petition. In

view, however, of the contradictory findings of fact of the RTC

and Court of Appeals, the Court opts to accept the petition, this

being one of the recognized exceptions to Section 1.26

We took

a similar course of action in Asia Brewery, Inc. v. Court of

Appeals27

which also involved a suit for trademark

infringement and unfair competition in which the trial court

and the Court of Appeals arrived at conflicting findings.

On the Manner Respondents Used

"Big Mak" in their Business

Petitioners contend that the Court of Appeals erred in ruling

that the corporate name "L.C. Big Mak Burger, Inc." appears in

the packaging for respondents' hamburger products and not the

words "Big Mak" only.

The contention has merit.

The evidence presented during the hearings on petitioners'

motion for the issuance of a writ of preliminary injunction

shows that the plastic wrappings and plastic bags used by

respondents for their hamburger sandwiches bore the words

"Big Mak." The other descriptive words "burger" and "100%

pure beef" were set in smaller type, along with the locations of

branches.28

Respondents' cash invoices simply refer to their

hamburger sandwiches as "Big Mak."29

It is respondents' snack

vans that carry the words "L.C. Big Mak Burger, Inc."30

It was only during the trial that respondents presented in

evidence the plastic wrappers and bags for their hamburger

sandwiches relied on by the Court of Appeals.31

Respondents'

plastic wrappers and bags were identical with those petitioners

presented during the hearings for the injunctive writ except that

the letters "L.C." and the words "Burger, Inc." in respondents'

evidence were added above and below the words "Big Mak,"

respectively. Since petitioners' complaint was based on facts

existing before and during the hearings on the injunctive writ,

the facts established during those hearings are the proper

factual bases for the disposition of the issues raised in this

petition.

On the Issue of Trademark Infringement

Section 22 ("Section 22) of Republic Act No. 166, as amended

("RA 166"), the law applicable to this case,32

defines trademark

infringement as follows:

Infringement, what constitutes. — Any person who [1]

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 [2] reproduce, counterfeit, copy, or colorably imitate

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.33

Petitioners base their cause of action under the first part of

Section 22, i.e. respondents allegedly used, without petitioners'

consent, a colorable imitation of the "Big Mac" mark in

advertising and selling respondents' hamburger sandwiches.

This likely caused confusion in the mind of the purchasing

public on the source of the hamburgers or the identity of the

business.

To establish trademark infringement, the following elements

must be shown: (1) the validity of plaintiff's mark; (2) the

plaintiff's ownership of the mark; and (3) the use of the mark or

its colorable imitation by the alleged infringer results in

"likelihood of confusion."34

Of these, it is the element of

likelihood of confusion that is the gravamen of trademark

infringement.35

On the Validity of the "Big Mac"Mark

and McDonald's Ownership of such Mark

A mark is valid if it is "distinctive" and thus not barred from

registration under Section 436

of RA 166 ("Section 4").

However, once registered, not only the mark's validity but also

the registrant's ownership of the mark is prima facie

presumed.37

Respondents contend that of the two words in the "Big Mac"

mark, it is only the word "Mac" that is valid because the word

"Big" is generic and descriptive (proscribed under Section

4[e]), and thus "incapable of exclusive appropriation."38

The contention has no merit. The "Big Mac" mark, which

should be treated in its entirety and not dissected word for

word,39

is neither generic nor descriptive. Generic marks are

commonly used as the name or description of a kind of

goods,40

such as "Lite" for beer41

or "Chocolate Fudge" for

chocolate soda drink.42

Descriptive marks, on the other hand,

convey the characteristics, functions, qualities or ingredients of

a product to one who has never seen it or does not know it

exists,43

such as "Arthriticare" for arthritis medication.44

On the

contrary, "Big Mac" falls under the class of fanciful or arbitrary

marks as it bears no logical relation to the actual characteristics

of the product it represents.45

As such, it is highly distinctive

and thus valid. Significantly, the trademark "Little Debbie" for

snack cakes was found arbitrary or fanciful.46

The Court also finds that petitioners have duly established

McDonald's exclusive ownership of the "Big Mac" mark.

Although Topacio and the Isaiyas Group registered the "Big

Mac" mark ahead of McDonald's, Topacio, as petitioners

disclosed, had already assigned his rights to McDonald's. The

Isaiyas Group, on the other hand, registered its trademark only

in the Supplemental Register. A mark which is not registered in

the Principal Register, and thus not distinctive, has no real

protection.47

Indeed, we have held that registration in the

Supplemental Register is not even a prima facie evidence of the

validity of the registrant's exclusive right to use the mark on the

goods specified in the certificate.48

On Types of Confusion

Section 22 covers two types of confusion arising from the use

of similar or colorable imitation marks, namely, confusion of

goods (product confusion) and confusion of business (source or

origin confusion). In Sterling Products International,

Incorporated v. Farbenfabriken Bayer Aktiengesellschaft, et

al.,49

the Court distinguished these two types of confusion,

thus:

[Rudolf] Callman notes two types of confusion. The

first is the confusion of goods "in which event the

ordinarily prudent purchaser would be induced to

purchase one product in the belief that he was

purchasing the other." xxx The other is the confusion of

business: "Here though the goods of the parties are

different, the defendant's product is such as might

reasonably be assumed to originate with the plaintiff,

and the public would then be deceived either into that

belief or into the belief that there is some connection

between the plaintiff and defendant which, in fact, does

not exist."

Under Act No. 666,50

the first trademark law, infringement was

limited to confusion of goods only, when the infringing mark is

used on "goods of a similar kind."51

Thus, no relief was

afforded to the party whose registered mark or its colorable

imitation is used on different although related goods. To

remedy this situation, Congress enacted RA 166 on 20 June

1947. In defining trademark infringement, Section 22 of RA

166 deleted the requirement in question and expanded its scope

to include such use of the mark or its colorable imitation that is

likely to result in confusion on "the source or origin of such

goods or services, or identity of such business."52

Thus, while

there is confusion of goods when the products are competing,

confusion of business exists when the products are non-

competing but related enough to produce confusion of

affiliation.53

On Whether Confusion of Goods and

Confusion of Business are Applicable

Petitioners claim that respondents' use of the "Big Mak" mark

on respondents' hamburgers results in confusion of goods,

particularly with respect to petitioners' hamburgers labeled

"Big Mac." Thus, petitioners alleged in their complaint:

1.15. Defendants have unduly prejudiced and clearly

infringed upon the property rights of plaintiffs in the

McDonald's Marks, particularly the mark "B[ig]

M[ac]". Defendants' unauthorized acts are likely, and

calculated, to confuse, mislead or deceive the public

into believing that the products and services offered by

defendant Big Mak Burger, and the business it is

engaged in, are approved and sponsored by, or affiliated

with, plaintiffs.54

(Emphasis supplied)

Since respondents used the "Big Mak" mark on the same

goods, i.e. hamburger sandwiches, that petitioners' "Big Mac"

mark is used, trademark infringement through confusion of

goods is a proper issue in this case.

Petitioners also claim that respondents' use of the "Big Mak"

mark in the sale of hamburgers, the same business that

petitioners are engaged in, results in confusion of business.

Petitioners alleged in their complaint:

1.10. For some period of time, and without the consent

of plaintiff McDonald's nor its licensee/franchisee,

plaintiff McGeorge, and in clear violation of plaintiffs'

exclusive right to use and/or appropriate the

McDonald's marks, defendant Big Mak Burger acting

through individual defendants, has been operating "Big

Mak Burger", a fast food restaurant business dealing in

the sale of hamburger and cheeseburger sandwiches,

french fries and other food products, and has caused to

be printed on the wrapper of defendant's food products

and incorporated in its signages the name "Big Mak

Burger", which is confusingly similar to and/or is a

colorable imitation of the plaintiff McDonald's mark

"B[ig] M[ac]", xxx. Defendant Big Mak Burger has

thus unjustly created the impression that its

business is approved and sponsored by, or affiliated

with, plaintiffs. xxxx

2.2 As a consequence of the acts committed by

defendants, which unduly prejudice and infringe upon

the property rights of plaintiffs McDonald's and

McGeorge as the real owner and rightful proprietor, and

the licensee/franchisee, respectively, of the McDonald's

marks, and which are likely to have caused confusion

or deceived the public as to the true source,

sponsorship or affiliation of defendants' food

products and restaurant business, plaintiffs have

suffered and continue to suffer actual damages in the

form of injury to their business reputation and goodwill,

and of the dilution of the distinctive quality of the

McDonald's marks, in particular, the mark "B[ig]

M[ac]".55

(Emphasis supplied)

Respondents admit that their business includes selling

hamburger sandwiches, the same food product that petitioners

sell using the "Big Mac" mark. Thus, trademark infringement

through confusion of business is also a proper issue in this

case.

Respondents assert that their "Big Mak" hamburgers cater

mainly to the low-income group while petitioners' "Big Mac"

hamburgers cater to the middle and upper income groups. Even

if this is true, the likelihood of confusion of business remains,

since the low-income group might be led to believe that the

"Big Mak" hamburgers are the low-end hamburgers marketed

by petitioners. After all, petitioners have the exclusive right to

use the "Big Mac" mark. On the other hand, respondents would

benefit by associating their low-end hamburgers, through the

use of the "Big Mak" mark, with petitioners' high-end "Big

Mac" hamburgers, leading to likelihood of confusion in the

identity of business.

Respondents further claim that petitioners use the "Big Mac"

mark only on petitioners' double-decker hamburgers, while

respondents use the "Big Mak" mark on hamburgers and other

products like siopao, noodles and pizza. Respondents also point

out that petitioners sell their Big Mac double-deckers in a

styrofoam box with the "McDonald's" logo and trademark in

red, block letters at a price more expensive than the

hamburgers of respondents. In contrast, respondents sell their

Big Mak hamburgers in plastic wrappers and plastic bags.

Respondents further point out that petitioners' restaurants are

air-conditioned buildings with drive-thru service, compared to

respondents' mobile vans.

These and other factors respondents cite cannot negate the

undisputed fact that respondents use their "Big Mak" mark on

hamburgers, the same food product that petitioners' sell with

the use of their registered mark "Big Mac." Whether a

hamburger is single, double or triple-decker, and whether

wrapped in plastic or styrofoam, it remains the same

hamburger food product. Even respondents' use of the "Big

Mak" mark on non-hamburger food products cannot excuse

their infringement of petitioners' registered mark, otherwise

registered marks will lose their protection under the law.

The registered trademark owner may use his mark on the same

or similar products, in different segments of the market, and at

different price levels depending on variations of the products

for specific segments of the market. The Court has recognized

that the registered trademark owner enjoys protection in

product and market areas that are the normal potential

expansion of his business. Thus, the Court has declared:

Modern law recognizes that the protection to which the

owner of a trademark is entitled is not limited to

guarding his goods or business from actual market

competition with identical or similar products of the

parties, but extends to all cases in which the use by a

junior appropriator of a trade-mark or trade-name is

likely to lead to a confusion of source, as where

prospective purchasers would be misled into thinking

that the complaining party has extended his business

into the field (see 148 ALR 56 et seq; 53 Am Jur. 576)

or is in any way connected with the activities of the

infringer; or when it forestalls the normal potential

expansion of his business (v. 148 ALR, 77, 84; 52 Am.

Jur. 576, 577).56

(Emphasis supplied)

On Whether Respondents' Use of the "Big Mak"

Mark Results in Likelihood of Confusion

In determining likelihood of confusion, jurisprudence has

developed two tests, the dominancy test and the holistic test.57

The dominancy test focuses on the similarity of the prevalent

features of the competing trademarks that might cause

confusion. In contrast, the holistic test requires the court to

consider the entirety of the marks as applied to the products,

including the labels and packaging, in determining confusing

similarity.

The Court of Appeals, in finding that there is no likelihood of

confusion that could arise in the use of respondents' "Big Mak"

mark on hamburgers, relied on the holistic test. Thus, the Court

of Appeals ruled that "it is not sufficient that a similarity exists

in both name(s), but that more importantly, the overall

presentation, or in their essential, substantive and distinctive

parts is such as would likely MISLEAD or CONFUSE persons

in the ordinary course of purchasing the genuine article." The

holistic test considers the two marks in their entirety, as they

appear on the goods with their labels and packaging. It is not

enough to consider their words and compare the spelling and

pronunciation of the words.58

Respondents now vigorously argue that the Court of Appeals'

application of the holistic test to this case is correct and in

accord with prevailing jurisprudence.

This Court, however, has relied on the dominancy test rather

than the holistic test. The dominancy test considers the

dominant features in the competing marks in determining

whether they are confusingly similar. Under the dominancy

test, courts give greater weight to the similarity of the

appearance of the product arising from the adoption of the

dominant features of the registered mark, disregarding minor

differences.59

Courts will consider more the aural and visual

impressions created by the marks in the public mind, giving

little weight to factors like prices, quality, sales outlets and

market segments.

Thus, in the 1954 case of Co Tiong Sa v. Director of Patents,60

the Court ruled:

xxx It has been consistently held that the question of

infringement of a trademark is to be determined by the

test of dominancy. Similarity in size, form and color,

while relevant, is not conclusive. 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 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; xxx) (Emphasis supplied.)

The Court reiterated the dominancy test in Lim Hoa v.

Director of Patents,61

Phil. Nut Industry, Inc. v. Standard

Brands Inc.,62

Converse Rubber Corporation v. Universal

Rubber Products, Inc.,63

and Asia Brewery, Inc. v. Court of

Appeals.64

In the 2001 case of Societe Des Produits Nestlé,

S.A. v. Court of Appeals,65

the Court explicitly rejected the

holistic test in this wise:

[T]he 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. (Emphasis supplied)

The test of dominancy is now explicitly incorporated into law

in Section 155.1 of the Intellectual Property Code which

defines infringement as the "colorable imitation of a registered

mark xxx or a dominant feature thereof."

Applying the dominancy test, the Court finds that respondents'

use of the "Big Mak" mark results in likelihood of confusion.

First, "Big Mak" sounds exactly the same as "Big Mac."

Second, the first word in "Big Mak" is exactly the same as the

first word in "Big Mac." Third, the first two letters in "Mak"

are the same as the first two letters in "Mac." Fourth, the last

letter in "Mak" while a "k" sounds the same as "c" when the

word "Mak" is pronounced. Fifth, in Filipino, the letter "k"

replaces "c" in spelling, thus "Caloocan" is spelled "Kalookan."

In short, aurally the two marks are the same, with the first word

of both marks phonetically the same, and the second word of

both marks also phonetically the same. Visually, the two marks

have both two words and six letters, with the first word of both

marks having the same letters and the second word having the

same first two letters. In spelling, considering the Filipino

language, even the last letters of both marks are the same.

Clearly, respondents have adopted in "Big Mak" not only the

dominant but also almost all the features of "Big Mac." Applied to the same food product of hamburgers, the two

marks will likely result in confusion in the public mind.

The Court has taken into account the aural effects of the words

and letters contained in the marks in determining the issue of

confusing similarity. Thus, in Marvex Commercial Co., Inc. v.

Petra Hawpia & Co., et al.,66

the Court held:

The following random list of confusingly similar

sounds in the matter of trademarks, culled from Nims,

Unfair Competition and Trade Marks, 1947, Vol. 1, will

reinforce our view that "SALONPAS" and "LIONPAS"

are confusingly similar in sound: "Gold Dust" and

"Gold Drop"; "Jantzen" and "Jass-Sea"; "Silver Flash"

and "Supper Flash"; "Cascarete" and "Celborite";

"Celluloid" and "Cellonite"; "Chartreuse" and

"Charseurs"; "Cutex" and "Cuticlean"; "Hebe" and

"Meje"; "Kotex" and "Femetex"; "Zuso" and "Hoo

Hoo". Leon Amdur, in his book "Trade-Mark Law and

Practice", pp. 419-421, cities, as coming within the

purview of the idem sonans rule, "Yusea" and "U-C-A",

"Steinway Pianos" and "Steinberg Pianos", and "Seven-

Up" and "Lemon-Up". In Co Tiong vs. Director of

Patents, this Court unequivocally said that "Celdura"

and "Cordura" are confusingly similar in sound; this

Court held in Sapolin Co. vs. Balmaceda, 67 Phil. 795

that the name "Lusolin" is an infringement of the

trademark "Sapolin", as the sound of the two names is

almost the same. (Emphasis supplied)

Certainly, "Big Mac" and "Big Mak" for hamburgers create

even greater confusion, not only aurally but also visually.

Indeed, a person cannot distinguish "Big Mac" from "Big Mak"

by their sound. When one hears a "Big Mac" or "Big Mak"

hamburger advertisement over the radio, one would not know

whether the "Mac" or "Mak" ends with a "c" or a "k."

Petitioners' aggressive promotion of the "Big Mac" mark, as

borne by their advertisement expenses, has built goodwill and

reputation for such mark making it one of the easily

recognizable marks in the market today. This increases the

likelihood that consumers will mistakenly associate petitioners'

hamburgers and business with those of respondents'.

Respondents' inability to explain sufficiently how and why they

came to choose "Big Mak" for their hamburger sandwiches

indicates their intent to imitate petitioners' "Big Mac" mark.

Contrary to the Court of Appeals' finding, respondents' claim

that their "Big Mak" mark was inspired by the first names of

respondent Dy's mother (Maxima) and father (Kimsoy) is not

credible. As petitioners well noted:

[R]espondents, particularly Respondent Mr. Francis Dy,

could have arrived at a more creative choice for a

corporate name by using the names of his parents,

especially since he was allegedly driven by sentimental

reasons. For one, he could have put his father's name

ahead of his mother's, as is usually done in this

patriarchal society, and derived letters from said names

in that order. Or, he could have taken an equal number

of letters (i.e., two) from each name, as is the more

usual thing done. Surely, the more plausible reason

behind Respondents' choice of the word "M[ak]",

especially when taken in conjunction with the word

"B[ig]", was their intent to take advantage of

Petitioners' xxx "B[ig] M[ac]" trademark, with their

alleged sentiment-focused "explanation" merely

thought of as a convenient, albeit unavailing, excuse or

defense for such an unfair choice of name.67

Absent proof that respondents' adoption of the "Big Mak" mark

was due to honest mistake or was fortuitous,68

the inescapable

conclusion is that respondents adopted the "Big Mak" mark to

"ride on the coattails" of the more established "Big Mac"

mark.69

This saves respondents much of the expense in

advertising to create market recognition of their mark and

hamburgers.70

Thus, we hold that confusion is likely to result in the public

mind. We sustain petitioners' claim of trademark infringement.

On the Lack of Proof of

Actual Confusion

Petitioners' failure to present proof of actual confusion does

not negate their claim of trademark infringement. As noted in

American Wire & Cable Co. v. Director of Patents,71

Section

22 requires the less stringent standard of "likelihood of

confusion" only. While proof of actual confusion is the best

evidence of infringement, its absence is inconsequential.72

On the Issue of Unfair Competition

Section 29 ("Section 29")73

of RA 166 defines unfair

competition, thus:

xxxx

Any person who will employ deception or any other

means contrary to good faith by which he shall pass off

the goods manufactured by him or in which he deals, or

his business, or services for those of the one having

established such goodwill, or who shall commit any

acts calculated to produce said result, shall be guilty of

unfair competition, and shall be subject to an action

therefor.

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 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

the goods, business or services of another. (Emphasis

supplied)

The essential elements of an action for unfair competition are

(1) confusing similarity in the general appearance of the goods,

and (2) intent to deceive the public and defraud a competitor.74

The confusing similarity may or may not result from similarity

in the marks, but may result from other external factors in the

packaging or presentation of the goods. The intent to deceive

and defraud may be inferred from the similarity of the

appearance of the goods as offered for sale to the public.75

Actual fraudulent intent need not be shown.76

Unfair competition is broader than trademark infringement and

includes passing off goods with or without trademark

infringement. Trademark infringement is a form of unfair

competition.77

Trademark infringement constitutes unfair

competition when there is not merely likelihood of confusion,

but also actual or probable deception on the public because of

the general appearance of the goods. There can be trademark

infringement without unfair competition as when the infringer

discloses on the labels containing the mark that he

manufactures the goods, thus preventing the public from being

deceived that the goods originate from the trademark owner.78

To support their claim of unfair competition, petitioners allege

that respondents fraudulently passed off their hamburgers as

"Big Mac" hamburgers. Petitioners add that respondents'

fraudulent intent can be inferred from the similarity of the

marks in question.79

Passing off (or palming off) takes place where the defendant,

by imitative devices on the general appearance of the goods,

misleads prospective purchasers into buying his merchandise

under the impression that they are buying that of his

competitors.80

Thus, the defendant gives his goods the general

appearance of the goods of his competitor with the intention of

deceiving the public that the goods are those of his competitor.

The RTC described the respective marks and the goods of

petitioners and respondents in this wise:

The mark "B[ig] M[ac]" is used by plaintiff

McDonald's to identify its double decker hamburger

sandwich. The packaging material is a styrofoam box

with the McDonald's logo and trademark in red with

block capital letters printed on it. All letters of the

"B[ig] M[ac]" mark are also in red and block capital

letters. On the other hand, defendants' "B[ig] M[ak]"

script print is in orange with only the letter "B" and "M"

being capitalized and the packaging material is plastic

wrapper. xxxx Further, plaintiffs' logo and mascot are

the umbrella "M" and "Ronald McDonald's",

respectively, compared to the mascot of defendant

Corporation which is a chubby boy called "Macky"

displayed or printed between the words "Big" and

"Mak."81

(Emphasis supplied)

Respondents point to these dissimilarities as proof that they did

not give their hamburgers the general appearance of petitioners'

"Big Mac" hamburgers.

The dissimilarities in the packaging are minor compared to the

stark similarities in the words that give respondents' "Big

Mak" hamburgers the general appearance of petitioners' "Big

Mac" hamburgers. Section 29(a) expressly provides that the

similarity in the general appearance of the goods may be in the

"devices or words" used on the wrappings. Respondents have

applied on their plastic wrappers and bags almost the same

words that petitioners use on their styrofoam box. What

attracts the attention of the buying public are the words "Big

Mak" which are almost the same, aurally and visually, as the

words "Big Mac." The dissimilarities in the material and other

devices are insignificant compared to the glaring similarity in

the words used in the wrappings.

Section 29(a) also provides that the defendant gives "his goods

the general appearance of goods of another manufacturer."

Respondents' goods are hamburgers which are also the goods

of petitioners. If respondents sold egg sandwiches only instead

of hamburger sandwiches, their use of the "Big Mak" mark

would not give their goods the general appearance of

petitioners' "Big Mac" hamburgers. In such case, there is only

trademark infringement but no unfair competition. However,

since respondents chose to apply the "Big Mak" mark on

hamburgers, just like petitioner's use of the "Big Mac" mark on

hamburgers, respondents have obviously clothed their goods

with the general appearance of petitioners' goods.

Moreover, there is no notice to the public that the "Big Mak"

hamburgers are products of "L.C. Big Mak Burger, Inc."

Respondents introduced during the trial plastic wrappers and

bags with the words "L.C. Big Mak Burger, Inc." to inform the

public of the name of the seller of the hamburgers. However,

petitioners introduced during the injunctive hearings plastic

wrappers and bags with the "Big Mak" mark without the name

"L.C. Big Mak Burger, Inc." Respondents' belated presentation

of plastic wrappers and bags bearing the name of "L.C. Big

Mak Burger, Inc." as the seller of the hamburgers is an after-

thought designed to exculpate them from their unfair business

conduct. As earlier stated, we cannot consider respondents'

evidence since petitioners' complaint was based on facts

existing before and during the injunctive hearings.

Thus, there is actually no notice to the public that the "Big

Mak" hamburgers are products of "L.C. Big Mak Burger, Inc."

and not those of petitioners who have the exclusive right to the

"Big Mac" mark. This clearly shows respondents' intent to

deceive the public. Had respondents' placed a notice on their

plastic wrappers and bags that the hamburgers are sold by

"L.C. Big Mak Burger, Inc.", then they could validly claim that

they did not intend to deceive the public. In such case, there is

only trademark infringement but no unfair competition.82

Respondents, however, did not give such notice. We hold that

as found by the RTC, respondent corporation is liable for

unfair competition.

The Remedies Available to Petitioners

Under Section 2383

("Section 23") in relation to Section 29 of

RA 166, a plaintiff who successfully maintains trademark

infringement and unfair competition claims is entitled to

injunctive and monetary reliefs. Here, the RTC did not err in

issuing the injunctive writ of 16 August 1990 (made permanent

in its Decision of 5 September 1994) and in ordering the

payment of P400,000 actual damages in favor of petitioners.

The injunctive writ is indispensable to prevent further acts of

infringement by respondent corporation. Also, the amount of

actual damages is a reasonable percentage (11.9%) of

respondent corporation's gross sales for three (1988-1989 and

1991) of the six years (1984-1990) respondents have used the

"Big Mak" mark.84

The RTC also did not err in awarding exemplary damages by

way of correction for the public good85

in view of the finding of

unfair competition where intent to deceive the public is

essential. The award of attorney's fees and expenses of

litigation is also in order.86

WHEREFORE, we GRANT the instant petition. We SET

ASIDE the Decision dated 26 November 1999 of the Court of

Appeals and its Resolution dated 11 July 2000 and

REINSTATE the Decision dated 5 September 1994 of the

Regional Trial Court of Makati, Branch 137, finding

respondent L.C. Big Mak Burger, Inc. liable for trademark

infringement and unfair competition.

SO ORDERED.

Davide, C.J. (Chairman), Quisumbing, Ynares-Santiago and

Azcuna, JJ., concur.

Footnotes

1 Under Rule 45 of the 1997 Rules of Civil Procedure.

2 Penned by Associate Justice Eloy R. Bello, Jr. with

Presiding Justice Jainal D. Rasul and Associate Justice

Ruben T. Reyes concurring.

3 Penned by Judge Santiago Ranada, Jr.

4 Itself a registered service mark.

5 Some of McDonald's registered marks representing

food items (f) and services (s) are: McDONALD'S

HAMBURGERS (s); McDONALD'S (f); RONALD

McDONALD (s); McDONALDLAND (s);

McCHEESE & DESIGN (f); EGG McMUFFIN (s);

EGG McMUFFIN (f); McDONALDLAND (f);

McDONALD'S & ARCHES (s); McFEAST (f);

McCHICKEN (f); McDONALD'S & ARCHES (f);

McDONUTS (f); McPIZZA (f); McPIZZA (s);

McHAPPY DAY (s); MINI MAC (s); McDOUBLE (f);

TOGETHER-McDONALD'S & YOU (s); CHICKEN

McNUGGETS (f); McDONALD'S & YOU (s); SUPER

MAC (f); McSNACK (s); MAC FRIES (f); McRIB (f);

MAPLE McCRISP (f); LITE MAC (f); BIG MAC (s);

CHICKEN McSWISS (f); McMUFFIN (f); McD.L.T.

(f). (McDonald's Corporation v. McBagel's, Inc., 649

F.Supp. 1268 [1986]).

6 Aside from Big Mac sandwiches, McDonald's menu

includes cheeseburgers, special sandwiches, fried

french potatoes, chicken nuggets, fried fish sandwiches,

shakes, hot pies, sundaes, softdrinks, and other

beverages.

7 Certificate of Registration No. 1,126,102.

8 Table napkins, tray liners, cups and food wrappers.

9 Labels, promotional items and packages.

10 TSN (Arlene Manalo), 26 July 1990, pp. 34-35.

11 McDonald's and petitioner McGeorge are referred to

as petitioners.

12 Rizal, Laguna, Bulacan and Quezon.

13 E.g. pizzas, noodles, siopaos, hotdog sandwiches,

ham sandwiches, fish burgers, fruit juices, softdrinks

and other beverages.

14 Respondent corporation and private respondents are

referred to as respondents.

15 Records, p. 37.

16 Ibid., pp. 457-458.

17 Ibid., pp. 414-426.

18 Ibid., pp. 460-463.

19 Rollo, pp. 149-154.

20 Records, pp. 1431-1432.

21 Rollo, pp. 233-237 (Capitalization in the original).

22 Ibid., p. 24.

23 While petitioners seek to hold liable respondent

corporation only, the Court's opinion will refer not only

to the latter but also to all the respondents as all of them

filed the pleadings in this petition.

24 This provision states: "Filing of petition with

Supreme Court. — A party desiring to appeal by

certiorari from a judgment or final order or resolution

of the Court of Appeals, the Sandiganbayan, the

Regional Trial Court or other courts whenever

authorized by law, may file with the Supreme Court a

verified petition for review on certiorari. The petition

shall raise only questions of law which must be

distinctly set forth."

25 Ramos, et al. v. Pepsi-Cola Bottling Co. of the Phils.,

et al., 125 Phil. 701 (1967).

26 Ducusin, et al. v. CA, et al., 207 Phil. 248 (1983).

27 G.R. No. 103543, 5 July 1993, 224 SCRA 437.

28 Exhibits E-1 to 2, F-1 to 2 and G-1 to 2.

29 Exhibits E, F and G.

30 Exhibits L-10, L-16 to 27.

31 Exhibits 34, 36-37.

32 RA 166 has been superseded by Republic Act No.

8293 ("RA 8293"), the Intellectual Property Code of the

Philippines, which took effect on 1 January 1998.

Section 22 is substantially identical with Section 16 of

the United States' 1946 Trademark Act ("Lanham

Act").

33 Superseded by Section 155 of RA 8293 ("Section

155").

34 See A & H Sportswear Co. v. Victoria's Secret

Stores, Inc., 167 F.Supp.2d 770 (2001).

35 Shaley's Inc. v. Covalt, 704 F.2d 426 (1983). Also

referred to as the "lynchpin" (Suncoast Tours, Inc. v.

Lambert Groups, Inc. 1999 WL 1034683 [1999]) or

"touchstone" (VMG Enterprises, Inc. v. F. Quesada and

Franco, Inc., 788 F. Supp. 648 [1992]) of trademark

infringement.

36 This provision states: "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 trade-mark,

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:

(a) Consists of or comprises immoral, deceptive

or scandalous matter; or matter which may

disparage or falsely suggest a connection with

persons, living or dead, institutions, beliefs, or

national symbols, or bring them into contempt

or disrepute;

(b) Consists of or comprises the flag or coat of

arms or other insignia of the Philippines or any

of its political subdivisions, or of any foreign

nation, or any simulation thereof;

(c) Consists of or comprises a name, portrait, or

signature identifying a particular living

individual except by his written consent, or the

name, signature, or portrait of a deceased

President of the Philippines, during the life of

his widow, if any, except by the written consent

of the widow;

(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 a

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; or

(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;

(f) Except as expressly excluded in paragraphs

(a), (b), (c) and (d) of this section nothing herein

shall prevent the registration of a mark or trade-

name used by the applicant which has become

distinctive of the applicant's goods, business or

services. The Director may accept as prima facie

evidence that the mark or trade-name has

become distinctive, as applied to or used in

connection with the applicant's goods, business

or services, proof of substantially exclusive and

continuous use thereof as a mark or trade-name

by the applicant in connection with the sale of

goods, business or services for five years next

preceding the date of the filing of the

application for its registration." This has been

superseded by Section 123 of RA 8293.

37 Section 20, RA 166. This provision states:

"Certificate of registration prima facie evidence of

validity. — A certificate of registration of a mark or

trade-name shall be prima facie evidence of the validity

of the registration, the registrant's ownership of the

mark or trade-name, and of the registrant's exclusive

right to use the same in connection with the goods,

business or services specified in the certificate, subject

to any conditions and limitations stated therein." This

has been superseded by Section 138 of RA 8293.

Neither RA 166 nor RA 8293 provides when the

presumption of validity and ownership becomes

indubitable. In contrast, under the Lanham Act, as

amended, (15 United States Code § 1065), such takes

place once the trademark has become "incontestable"

i.e. after the mark owner files affidavits stating that the

mark is registered and has been in continuous use for

five consecutive years; that there is no pending

proceeding; and that there has been no adverse decision

concerning the registrant's ownership or right to

registration (See Luis Vuitton Malletier and Oakley,

Inc. v. Veit, 211 F.Supp.2d 556 [2002]). However, both

RA 166 (Section 12) and RA 8293 (Section 145)

require the filing of the affidavit attesting to the

continuous use of the mark for five years and, under

Section 145, failure to file such affidavit will result in

the removal of the mark from the Register.

38 Rollo, pp. 525-527.

39 Societe Des Produits Nestlé, S.A. v. Court of

Appeals, G.R. No. 112012, 4 April 2001, 356 SCRA

207; McKee Baking Co. v. Interstate Brands

Corporation, 738 F. Supp. 1272 (1990).

40 Societe Des Produits Nestlé, S.A. v. Court of

Appeals, supra note 39; Miller Brewing Co. v.

Heileman Brewing Co., 561 F.2d 75 (1977).

41 Miller Brewing Co. v. Heileman Brewing Co., supra

note 40.

42 A. J. Canfield Co. v. Honickman, 808 F.2d 291

(1986).

43 Societe Des Produits Nestlé, S.A. v. Court of

Appeals, supra note 39 citing § 43(A) of the Lanham

Act, as amended.

44 Bernard v. Commerce Drug Co., 964 F.2d 1338

(1992).

45 Keebler Co. v. Rovira Biscuit Corp., 624 F.2d 366

(1980).

46 McKee Baking Co. v. Interstate Brands Corporation,

supra note 39.

47 See A. Miller and M. Davis, Intellectual Property,

Patents, Trademarks and Copyright in a Nutshell 177-

178 (1983).

48 See Lorenzana v. Macagba, No. L-33773, 22 October

1987, 154 SCRA 723; La Chemise Lacoste, S.A. v.

Hon. Fernandez, etc., et al. 214 Phil. 332 (1984). RA

8293 no longer provides for a Supplemental Register

and instead mandates a single registry system (Section

137). Under Section 239, marks registered in the

Supplemental Register under RA 166 will remain in

force but are no longer subject to renewal.

49 137 Phil. 838 (1969).

50 Enacted on 6 March 1903.

51 Section 3 of Act No. 666 provides: "The ownership

or possession of a trade-mark, heretofore or hereafter

appropriated, as in the foregoing section provided, shall

be recognized and protected in the same manner and to

the same extent, as are other property rights known to

the law. To this end any person entitled to the exclusive

use of a trade-mark to designate the origin or ownership

of goods he has made or deals in may recover damages

in a civil action from any person who has sold goods of

a similar kind, bearing such trade-mark, and the

measure of the damages suffered, at the option of the

complaining party, shall be either the reasonable profit

which the complaining party would have made had the

defendant not sold the goods with the trade-mark

aforesaid, or the profit which the defendant actually

made out of the sale of the goods with the trade-mark,

and in cases where actual intent to mislead the public or

to defraud the owner of the trade-mark shall be shown,

in the discretion of the court, the damages may be

doubled. The complaining party, upon proper showing,

may have a preliminary injunction, restraining the

defendant temporarily from use of the trade-mark

pending the hearing, to be granted or dissolved in the

manner provided in the Code of Civil Procedure, and

such injunction upon final hearing, if the complainant's

property in the trade-mark and the defendant's violation

thereof shall be fully established, shall be made

perpetual, and this injunction shall be part of the

judgment for damages to be rendered in the same cause

as above provided." (Emphasis supplied)

52 The United States Congress had introduced the same

amendment to the Lanham Act in 1946. In 1962, the US

Congress again amended Section 16 of the Lanham Act

("Sec. 43(A)") by deleting the phrase "the source or

origin of such goods or services, or identity of such

business" in the definition of trademark infringement.

This led courts in that jurisdiction to hold that post-sale

confusion by the public at large (Esercizio v. Roberts,

944 F.2d 1235 [1991]. See also Koppers Company, Inc.

v. Krup-Koppers, 517 F.Supp. 836 [1981]) or

"subliminal confusion," defined as confusion on a

subliminal or subconscious level, causing the consumer

to identify the properties and reputation of one product

with those of another, although he can identify the

particular manufacturer of each, (Ortho Pharmaceutical

Corporation v. American Cyanamid Company, 361

F.Supp. 1032 [1973]. See also Farberware, Inc. v. Mr.

Coffee, Inc., 740 F.Supp. 291 (1990); Dreyfus Fund

Incorporated v. Royal Bank of Canada, 525 F. Supp.

1108 [1981]) are sufficient to sustain a trademark

infringement claim. Section 155 substantially

reproduces Sec. 43(A).

53 Agpalo, The Law on Trademark, Infringement and

Unfair Competition 45-46 (2000).

54 Records, p. 5.

55 Ibid., pp. 4, 6-7.

56 Sta. Ana v. Maliwat, et al., 133 Phil. 1006 (1968).

57 Societe Des Produits Nestlé, S.A. v. Court of

Appeals, supra note 39; Emerald Garment

Manufacturing Corporation v. Court of Appeals, G.R.

No. 100098, 29 December 1995, 251 SCRA 600.

58 V. Amador, Trademarks Under The Intellectual

Property Code 260 (1999).

59 Ibid., p. 263.

60 95 Phil. 1 (1954).

61 100 Phil. 214 (1956).

62 No. L-23035, 31 July 1975, 65 SCRA 575.

63 No. L-27906, 8 January 1987, 147 SCRA 154.

64 Supra note 27.

65 Supra note 39.

66 125 Phil. 295 (1966).

67 Rollo, pp. 588-589.

68 Time v. Life Television Co. of St. Paul, 123 F. Supp.

470 (1954);

69 Conde Nast Publications v. Vogue School of Fashion

Modelling, 105 F. Supp. 325 (1952); Hanson v.

Triangle Publications, 163 F.2d 74 (1947).

70 See Fisons Horticulture, Inc. v. Vigoro Industries,

Inc., 30 F.3d 466 (1994).

71 No. L-26557, 18 February 1970, 31 SCRA 544.

72 PACCAR Inc. v. Tele Scan Technologies, L.L.C.,

319 F.3d 243 (2003).

73 Reiterated in Section 168 of RA 8293.

74 V. Amador, supra note 58 at 278.

75 Shell Co. of the Philippines, Ltd. v. Ins. Petroleum

Refining Co., Ltd., 120 Phil. 434 (1964); "La Insular"

v. Jao Oge, 42 Phil. 366 (1921).

76 Alhambra Cigar, etc., Co. v. Mojica, 27 Phil. 266

(1914).

77 Co Tiong Sa v. Director of Patents, supra note 60;

Clarke v. Manila Candy Co., 36 Phil. 100 (1917).

78 See Q-Tips, Inc. v. Johnson & Johnson, 108 F.Supp

845 (1952).

79 Rollo, pp. 40-45.

80 Suncoast Tours, Inc. v. Lambert Groups, Inc. 1999

WL 1034683 (1999).

81 Rollo, pp. 148-149.

82 See Q-Tips, Inc. v. Johnson & Johnson, supra note

78.

83 This provision reads: "Actions, and damages and

injunction for infringement. — Any person entitled to

the exclusive use of a registered mark or trade-name

may recover damages in a civil action from any person

who infringes his rights, and the measure of the

damages suffered shall be either the reasonable profit

which the complaining party would have made, had the

defendant not infringed his said rights, or the profit

which the defendant actually made out of the

infringement, or in the event such measure of damages

cannot be readily ascertained with reasonable certainty,

then the court may award as damages a reasonable

percentage based upon the amount of gross sales of the

defendant of the value of the services in connection

with which the mark or trade-name was used in the

infringement of the rights of the complaining party. In

cases where actual intent to mislead the public or to

defraud the complaining party shall be shown, in the

discretion of the court, the damages may be doubled.

The complaining party, upon proper showing, may also

be granted injunction."

84 TSN, (Francis Dy), 15 March 1993, p. 32; TSN

(Francis Dy), 22 March 1993, pp. 1-2.

85 Article 2229, Civil Code.

86 Article 2208(1), Civil Code.

Republic of the Philippines

SUPREME COURT

Manila

SECOND DIVISION

G.R. No. 134217 May 11, 2000

KENNETH ROY SAVAGE/K ANGELIN EXPORT

TRADING, owned and managed by GEMMA DEMORAL-

SAVAGE, 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

SOSMEÑA, 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 forum-shopping, 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.

Footnotes

1 Original Record, pp. 222-223.

2 Id., p. 1.

3 Id., pp. 5 and 9.

4 Id., p. 11; Rollo, p. 31.

5 Original Record, pp. 13-14.

6 Id., p. 30.

7 Id., p. 84.

8 Id., p. 86.

9 Id., p. 124.

10 Supreme Court Administrative Order No.

113-95, 2 October 1995.

11 Supreme Court Administrative Order No.

104-96, 21 October 1996.

12 Ilano v. Court of Appeals, G.R. No. 109560,

26 May 1995 244 SCRA 346, citing Malaloan v.

Court of Appeals, G.R. No. 104879, 6 May

1994, 232 SCRA 249.

13 Malaloan v. Court of Appeals, G.R. No.

104879, 6 May 1994, 232 SCRA 249.

14 Par. 3, (h), Sec. 14, Chapter II, Batas

Pambansa Blg. 129.

15 See Note 13.

16 G.R. No. 118151, 22 August 1996, 260

SCRA 821.

17 Sec. 5, Rule 7, Rules of Court.

18 Original Record, pp. 239-240.

19 Subsection 239.1, Section 239, Part V, RA

8293.

20 See Note 16.

21 Sec. 168., Part III, RA 8293.

22 People v. Subido, G.R. No. 21734, 5

September 1975, 66 SCRA 545.

23 People v. Garcia, 85 Phil. 651 (1950).

24 Cigarette Manufacturing Co. v. Mojica, 27

Phil. 266 (1914); Ogura v. Chua, 59 Phil. 471

(1934).

25 Chapter VIII, Part II, RA 8293.

26 Act No. 3815.

27 Sec. 3, Rule 126, Rules of Court.

28 Nolasco v. Pano, G.R. No. 69803, 30 January

1987, 147 SCRA 509.

29 Rollo, p. 156.

Republic of the Philippines

SUPREME COURT

Manila

SECOND DIVISION

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-October-1990, 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-in-interest. 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 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 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.

Footnotes

1 Rollo, p. 61. The decision of the Court of Appeals was penned by Justice Gloria C. Paras and concurred in by Justice Salome A. Montoya and Justice Hector L. Hofileña.

2 Rollo, p. 131.

3 Id., p. 137.

4 Id., p. 154.

5 Id., pp. 155-156.

6 Rollo, Pp. 71-80.

7 Memorandum, CA Records, Rollo, p. 98.

8 Rollo, pp. 108-111.

9 Id., pp. 112-113

10 Petition, CA Records, Rollo, pp. 2-29.

11 Rollo, p. 69.

12 Moore vs. Marsh, 7 Wall 5125, 19 L.Ed.37e.

13 Anchor Hocking Glass Corp. vs White Cap., Co., D.C. Del., 47 F Supp. A451, 453 cited in 21 Words and Phrases, p. 634.

14 Peck vs Collins, 103 U.S. 660, 26 L. Ed, 512 cited in 60 Am. Jur., 2d, p. 687.

15 Baller & Cie vs. O'Donnel 229, US 1, 57 L. Ed. 38 Set. 616.

16 111 SCRA 238.

Republic of the Philippines

SUPREME COURT

Manila

FIRST DIVISION

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.

Footnotes

1 60 AmJur 2d 462.

2 40 AmJur 547.

3 Maguan v. Court of Appeals, No. L-45101, 28 November 1986, 146 SCRA 107.

4 60 AmJur 2d 573.

5 Sec. 55. RA No. 165, as amended.

6 Rollo, pp. 143-167.

7 Id., pp. 204-214.

8 Aguas v. de Leon, No. L-32160, 30 January 1982, 111 SCRA 238.

9 60 AmJur 2d 573.

10 Id., p. 582.

11 Bernardo v. Court of Appeals, G.R. No. 101680, 2 December 1992, 216 SCRA 224.