G.R. No. 164324 August 14, 2009 CARPIO, J.:

TANDUAY DISTILLERS, INC., Petitioner, vs.

GINEBRA SAN MIGUEL, INC., Respondent.

The Case

Tanduay Distillers, Inc. (Tanduay) filed this Petition for Review on Certiorari1 assailing the Court of Appeals’ Decision dated 9 January 20042 as well as the Resolution dated 2 July 20043 in CA-G.R. SP No. 79655 denying the Motion for Reconsideration. In the assailed decision, the Court of Appeals (CA) affirmed the Regional Trial Court’s Orders4

dated 23 September 2003 and 17 October 2003 which respectively granted Ginebra San Miguel, Inc.’s (San Miguel) prayer for the issuance of a temporary restraining order (TRO) and writ of preliminary injunction. The Regional Trial Court of Mandaluyong City, Branch 214 (trial court), enjoined Tanduay "from committing the acts complained of, and, specifically, to cease and desist from manufacturing, distributing, selling, offering for sale, advertising, or otherwise using in commerce the mark "Ginebra," and manufacturing, producing, distributing, or otherwise dealing in gin products which have the general appearance of, and which are confusingly similar with," San Miguel’s marks, bottle design, and label for its gin products.5

The Facts

Tanduay, a corporation organized and existing under Philippine laws, has been engaged in the liquor business since 1854. In 2002, Tanduay developed a new gin product distinguished by its sweet smell, smooth taste, and affordable price. Tanduay claims that it engaged the services of an advertising firm to develop a brand name and a label for its new gin product. The brand name eventually chosen was "Ginebra Kapitan" with the representation of a revolutionary Kapitan on horseback as the dominant feature of its label. Tanduay points out that the label design of "Ginebra Kapitan" in terms of color scheme, size and arrangement of text, and other label features were precisely selected to distinguish it from the leading gin brand in the Philippine market, "Ginebra San Miguel." Tanduay also states that the "Ginebra Kapitan" bottle uses a resealable twist cap to distinguish it from "Ginebra San Miguel" and other local gin products with bottles which use the crown cap or tansan.6

After filing the trademark application for "Ginebra Kapitan" with the Intellectual Property Office (IPO) and after securing the approval of the permit to manufacture and sell "Ginebra Kapitan" from the Bureau of Internal Revenue, Tanduay began selling "Ginebra Kapitan" in Northern and Southern Luzon areas in May 2003. In June 2003, "Ginebra Kapitan" was also launched in Metro Manila.7

On 13 August 2003, Tanduay received a letter from San Miguel’s counsel. The letter informed Tanduay to immediately cease and desist from using the mark "Ginebra" and from committing acts that violate San Miguel’s intellectual property rights.8

On 15 August 2003, San Miguel filed a complaint for trademark infringement, unfair competition and damages, with applications for issuance of TRO and Writ of Preliminary Injunction against Tanduay before the Regional Trial Court of Mandaluyong. The case was raffled to Branch 214 and docketed as IP Case No. MC-03-01 and Civil Case No. MC-03-073.9

On 25 and 29 August and 4 September 2003, the trial court conducted hearings on the TRO. San Miguel submitted five affidavits, but only one affiant, Mercedes Abad, was presented for cross-examination because the trial court ruled that such examination would be inconsistent with

the summary nature of a TRO hearing.10 San Miguel submitted the following pieces of evidence:11

1. Affidavit of Mercedes Abad, President and Managing Director of the research firm NFO Trends, Inc. (NFO Trends), to present, among others, market survey results which prove that gin drinkers associate the term "Ginebra" with San Miguel, and that the consuming public is being misled that "Ginebra Kapitan" is a product of San Miguel;

2. Market Survey results conducted by NFO Trends to determine the brand associations of the mark "Ginebra" and to prove that the consuming public is confused as to the manufacturer of "Ginebra Kapitan";

3. Affidavit of Ramon Cruz, San Miguel’s Group Product Manager, to prove, among others, the prior right of San Miguel to the mark "Ginebra" as shown in various applications for, and registrations of, trademarks that contain the mark "Ginebra." His affidavit included documents showing that the mark "Ginebra" has been used on San Miguel’s gin products since 1834;

4. Affidavits of Leopoldo Guanzon, Jr., San Miguel’s Trade and Promo Merchandising Head for North Luzon Area, and Juderick Crescini, San Miguel’s District Sales Supervisor for South Luzon-East Area, to prove, among others, that Tanduay’s salesmen or distributors misrepresent "Ginebra Kapitan" as San Miguel’s product and that numerous retailers of San Miguel’s gin products are confused as to the manufacturer of "Ginebra Kapitan"; and

5. Affidavit of Jose Reginald Pascual, San Miguel’s District Sales Supervisor for the North-Greater Manila Area, to prove, among others, that gin drinkers confuse San Miguel to be the manufacturer of "Ginebra Kapitan" due to the use of the dominant feature "Ginebra."

Tanduay filed a Motion to Strike Out Hearsay Affidavits and Evidence, which motion was denied by the trial court. Tanduay presented witnesses who affirmed their affidavits in open court, as follows:12

1. Ramoncito Bugia, General Services Manager of Tanduay. Attached to his affidavit were various certificates of registration of trademarks containing the word "Ginebra" obtained by Tanduay and other liquor companies, to prove that the word "Ginebra" is required to be disclaimed by the IPO. The affidavit also attested that there are other liquor companies using the word "Ginebra" as part of their trademarks for gin products aside from San Miguel and Tanduay.

2. Herbert Rosales, Vice President of J. Salcedo and Associates, Inc., the advertising and promotions company hired by Tanduay to design the label of "Ginebra Kapitan." His affidavit attested that the label was designed to make it "look absolutely different from the Ginebra San Miguel label."

On 23 September 2003, the trial court issued a TRO prohibiting Tanduay from manufacturing, selling and advertising "Ginebra Kapitan."13 The dispositive portion reads in part:

WHEREFORE, the application for temporary restraining order is hereby GRANTED and made effective immediately. Plaintiff is directed to post a bond of ONE MILLION PESOS (Php 1,000,000.00) within five (5) days from issuance hereof, otherwise, this restraining order shall lose its efficacy. Accordingly, defendant Tanduay Distillers, Inc., and all persons and agents acting for and in behalf are enjoined to cease and desist from manufacturing, distributing, selling, offering for sale and/or advertising or otherwise using in commerce the mark "GINEBRA KAPITAN" which employs, thereon, or in the wrappings, sundry items, cartons and packages thereof, the mark "GINEBRA" as well as from

using the bottle design and labels for its gin products during the effectivity of this temporary restraining order unless a contrary order is issued by this Court.14

On 3 October 2003, Tanduay filed a petition for certiorari with the CA. 15

Despite Tanduay’s Urgent Motion to Defer Injunction Hearing, the trial court continued to conduct hearings on 8, 9, 13 and 14 October 2003 for Tanduay to show cause why no writ of preliminary injunction should be issued.16 On 17 October 2003, the trial court granted San Miguel’s application for the issuance of a writ of preliminary injunction.17 The dispositive portion of the Order reads:

WHEREFORE, the plaintiff’s application for a writ of preliminary injunction is GRANTED. Upon plaintiff’s filing of an injunctive bond executed to the defendant in the amount of P20,000,000.00 (TWENTY MILLION) PESOS, let a Writ of Preliminary Injunction issue enjoining the defendant, its employees, agents, representatives, dealers, retailers or assigns, and any all persons acting on its behalf, from committing the acts complained of, and, specifically, to cease and desist from manufacturing, distributing, selling, offering for sale, advertising, or otherwise using in commerce the mark "GINEBRA", and manufacturing, producing, distributing or otherwise dealing in gin products which have the general appearance of, and which are confusingly similar with, plaintiff’s marks, bottle design and label for its gin products.

SO ORDERED.18

On 22 October 2003, Tanduay filed a supplemental petition in the CA assailing the injunction order. On 10 November 2003, the CA issued a TRO enjoining the trial court from implementing its injunction order and from further proceeding with the case.19 On 23 December 2003, the CA issued a resolution directing the parties to appear for a hearing on 6 January 2004 to determine the need for the issuance of a writ of preliminary injunction.20

On 9 January 2004, the CA rendered a Decision dismissing Tanduay’s petition and supplemental petition. On 28 January 2004, Tanduay moved for reconsideration which was denied in a Resolution dated 2 July 2004.21

Aggrieved by the decision dismissing the petition and supplemental petition and by the resolution denying the Motion for Reconsideration, Tanduay elevated the case before this Court.

The Trial Court’s Orders

In the Order dated 23 September 2003, the trial court stated that during the hearings conducted on 25 and 29 August and on 4 and 11 September 2003, the following facts have been established:

1. San Miguel has registered the trademark "Ginebra San Miguel";

2. There is a close resemblance between "Ginebra San Miguel" and "Ginebra Kapitan";

3. The close similarity between "Ginebra San Miguel" and "Ginebra Kapitan" may give rise to confusion of goods since San Miguel and Tanduay are competitors in the business of manufacturing and selling liquors; and

"Ginebra," which is a well-known trademark, was adopted by Tanduay to benefit from the reputation and advertisement of the originator of the mark "Ginebra San Miguel," and to convey to the public the impression of some supposed connection between the manufacturer of the gin product sold under the name "Ginebra San Miguel" and the new gin product "Ginebra Kapitan."22

Based on these facts, the trial court concluded that San Miguel had demonstrated a clear, positive, and existing right to be protected by a TRO. Otherwise, San Miguel would suffer irreparable injury if infringement would not be enjoined. Hence, the trial court granted the application for a TRO and set the hearing for preliminary injunction.23

In the Order dated 17 October 2003, the trial court granted the application for a writ of preliminary injunction. The trial court ruled that while a corporation acquires a trade name for its product by choice, it should not select a name that is confusingly similar to any other name already protected by law or is patently deceptive, confusing, or contrary to existing law.24

The trial court pointed out that San Miguel and its predecessors have continuously used "Ginebra" as the dominant feature of its gin products since 1834. On the other hand, Tanduay filed its trademark application for "Ginebra Kapitan" only on 7 January 2003. The trial court declared that San Miguel is the prior user and registrant of "Ginebra" which has become closely associated to all of San Miguel’s gin products, thereby gaining popularity and goodwill from such name.25

The trial court noted that while the subject trademarks are not identical, it is obviously clear that the word "Ginebra" is the dominant feature in the trademarks. The trial court stated that there is a strong indication that confusion is likely to occur since one would inevitably be led to conclude that both products are affiliated with San Miguel due to the distinctive mark "Ginebra" which is readily identified with San Miguel. The trial court concluded that ordinary purchasers would not examine the letterings or features printed on the label but would simply be guided by the presence of the dominant mark "Ginebra." Any difference would pale in significance in the face of evident similarities in the dominant features and overall appearance of the products. The trial court emphasized that the determinative factor was whether the use of such mark would likely cause confusion on the part of the buying public, and not whether it would actually cause confusion on the part of the purchasers. Thus, Tanduay’s choice of "Ginebra" as part of the trademark of "Ginebra Kapitan" tended to show Tanduay’s intention to ride on the popularity and established goodwill of "Ginebra San Miguel."26

The trial court held that to constitute trademark infringement, it was not necessary that every word should be appropriated; it was sufficient that enough be taken to deceive the public in the purchase of a protected article.27

The trial court conceded to Tanduay’s assertion that the term "Ginebra" is a generic word; hence, it is non-registrable because generic words are by law free for all to use. However, the trial court relied on the principle that even if a word is incapable of appropriation as a trademark, the word may still acquire a proprietary connotation through long and exclusive use by a business entity with reference to its products. The purchasing public would associate the word to the products of a business entity. The word thus associated would be entitled to protection against infringement and unfair competition. The trial court held that this principle could be made to apply to this case because San Miguel has shown that it has established goodwill of considerable value, such that its gin products have acquired a well-known reputation as just "Ginebra." In essence, the word "Ginebra" has become a popular by-word among the consumers and they had closely associated it with San Miguel.28

On the other hand, the trial court held that Tanduay failed to substantiate its claim against the issuance of the injunctive relief.29

The Ruling of the Court of Appeals

In resolving the petition and supplemental petition, the CA stated that it is constrained to limit itself to the determination of whether the TRO and the writ of preliminary injunction were issued by the trial court with grave abuse of discretion amounting to lack of jurisdiction.30

To warrant the issuance of a TRO, the CA ruled that the affidavits of San Miguel’s witnesses and the fact that the registered trademark "Ginebra San Miguel" exists are enough to make a finding that San Miguel has a clear and unmistakable right to prevent irreparable injury because gin drinkers confuse San Miguel to be the manufacturer of "Ginebra Kapitan."31

The CA enumerated the requisites for an injunction: (1) there must be a right in esse or the existence of a right to be protected and (2) the act against which the injunction is to be directed is a violation of such right. The CA stated that the trademarks "Ginebra San Miguel" and "Ginebra Kapitan" are not identical, but it is clear that the word "Ginebra" is the dominant feature in both trademarks. There was a strong indication that confusion was likely to occur. One would be led to conclude that both products are affiliated with San Miguel because the distinctive mark "Ginebra" is identified with San Miguel. It is the mark which draws the attention of the buyer and leads him to conclude that the goods originated from the same manufacturer.32

The CA observed that the gin products of "Ginebra San Miguel" and "Ginebra Kapitan" possess the same physical attributes with reference to their form, composition, texture, or quality. The CA upheld the trial court’s ruling that San Miguel has sufficiently established its right to prior use and registration of the mark "Ginebra" as a dominant feature of its trademark. "Ginebra" has been identified with San Miguel’s goods, thereby, it acquired a right in such mark, and if another infringed the trademark, San Miguel could invoke its property right.33

The Issue

The central question for resolution is whether San Miguel is entitled to the writ of preliminary injunction granted by the trial court as affirmed by the CA. For this reason, we shall deal only with the questioned writ and not with the merits of the case pending before the trial court.

The Ruling of the Court

Clear and Unmistakable Right

Section 1, Rule 58 of the Rules of Court defines a preliminary injunction as an order granted at any stage of a proceeding prior to the judgment or final order, requiring a party or a court, agency, or a person to refrain from a particular act or acts.

A preliminary injunction is a provisional remedy for the protection of substantive rights and interests. It is not a cause of action in itself but merely an adjunct to the main case. Its objective is to prevent a threatened or continuous irreparable injury to some of the parties before their claims can be thoroughly investigated and advisedly adjudicated. It is resorted to only when there is a pressing need to avoid injurious consequences which cannot be remedied under any standard compensation.34

Section 3, Rule 58 of the Rules of Court provides:

SECTION 3. Grounds for issuance of a writ of preliminary injunction.—A preliminary injunction may be granted when it is established:

(a) That the applicant is entitled to the relief demanded, and the whole or part of such relief consists in restraining the commission or continuance of the act or acts complained of, or in requiring the performance of an act or acts, either for a limited period or perpetually;

(b) That the commission, continuance or non-performance of the act or acts complained of during the litigation would probably work injustice to the applicant; or

(c) That a party, court, agency or a person is doing, threatening, or is attempting to do, or is procuring or suffering to be done, some act or acts probably in violation of the rights of the applicant respecting the subject of the action or proceeding, and tending to render the judgment ineffectual.

Before an injunctive writ is issued, it is essential that the following requisites are present: (1) the existence of a right to be protected and (2) the acts against which the injunction is directed are violative of the right. The onus probandi is on the movant to show that the invasion of the right sought to be protected is material and substantial, that the right of the movant is clear and unmistakable, and that there is an urgent and paramount necessity for the writ to prevent serious damage.35

San Miguel claims that the requisites for the valid issuance of a writ of preliminary injunction were clearly established. The clear and unmistakable right to the exclusive use of the mark "Ginebra" was proven through the continuous use of "Ginebra" in the manufacture, distribution, marketing and sale of gin products throughout the Philippines since 1834. To the gin-drinking public, the word "Ginebra" does not simply indicate a kind of beverage; it is now synonymous with San Miguel’s gin products.36

San Miguel contends that "Ginebra" can be appropriated as a trademark, and there was no error in the trial court’s provisional ruling based on the evidence on record. Assuming that "Ginebra" is a generic word which is proscribed to be registered as a trademark under Section 123.1(h)37 of Republic Act No. 8293 or the Intellectual Property Code (IP Code),38 it can still be appropriated and registered as a trademark under Section 123.1(j)39 in relation to Section 123.240 of the IP Code, considering that "Ginebra" is also a mark which designates the kind of goods produced by San Miguel.41 San Miguel alleges that although "Ginebra," the Spanish word for "gin," may be a term originally incapable of exclusive appropriation, jurisprudence dictates that the mark has become distinctive of San Miguel’s products due to its substantially exclusive and continuous use as the dominant feature of San Miguel’s trademarks since 1834. Hence, San Miguel is entitled to a finding that the mark is deemed to have acquired a secondary meaning.42 San Miguel states that Tanduay failed to present any evidence to disprove its claims; thus, there is no basis to set aside the grant of the TRO and writ of preliminary injunction.43

San Miguel states that its disclaimer of the word "Ginebra" in some of its registered marks is without prejudice to, and did not affect, its existing or future rights over "Ginebra," especially since "Ginebra" has demonstrably become distinctive of San Miguel’s products.44 San Miguel adds that it did not disclaim "Ginebra" in all of its trademark registrations and applications like its registration for "Ginebra Cruz de Oro," "Ginebra Ka Miguel," "Ginebra San Miguel" bottle, "Ginebra San Miguel," and "Barangay Ginebra."45

Tanduay asserts that not one of the requisites for the valid issuance of a preliminary injunction is present in this case. Tanduay argues that San Miguel cannot claim the exclusive right to use the generic word "Ginebra" for its gin products based on its registration of the composite marks "Ginebra San Miguel," "Ginebra S. Miguel 65," and "La Tondeña Cliq! Ginebra Mix," because in all of these registrations, San Miguel disclaimed any exclusive right to use the non-registrable word "Ginebra" for gin products.46 Tanduay explains that the word "Ginebra,"

which is disclaimed by San Miguel in all of its registered trademarks, is an unregistrable component of the composite mark "Ginebra San Miguel." Tanduay argues that this disclaimer further means that San Miguel does not have an exclusive right to the generic word "Ginebra."47

Tanduay states that the word "Ginebra" does not indicate the source of the product, but it is merely descriptive of the name of the product itself and not the manufacturer thereof.48

Tanduay submits that it has been producing gin products under the brand names Ginebra 65, Ginebra Matador, and Ginebra Toro without any complaint from San Miguel. Tanduay alleges that San Miguel has not filed any complaint against other liquor companies which use "Ginebra" as part of their brand names such as Ginebra Pinoy, a registered trademark of Webengton Distillery; Ginebra Presidente and Ginebra Luzon as registered trademarks of Washington Distillery, Inc.; and Ginebra Lucky Nine and Ginebra Santiago as registered trademarks of Distileria Limtuaco & Co., Inc.49 Tanduay claims that the existence of these products, the use and registration of the word "Ginebra" by other companies as part of their trademarks belie San Miguel’s claim that it has been the exclusive user of the trademark containing the word "Ginebra" since 1834.

Tanduay argues that before a court can issue a writ of preliminary injunction, it is imperative that San Miguel must establish a clear and unmistakable right that is entitled to protection. San Miguel’s alleged exclusive right to use the generic word "Ginebra" is far from clear and unmistakable. Tanduay claims that the injunction issued by the trial court was based on its premature conclusion that "Ginebra Kapitan" infringes "Ginebra San Miguel."50

In Levi Strauss & Co. v. Clinton Apparelle, Inc.,51 we held:

While the matter of the issuance of a writ of preliminary injunction is addressed to the sound discretion of the trial court, this discretion must be exercised based upon the grounds and in the manner provided by law. The exercise of discretion by the trial court in injunctive matters is generally not interfered with save in cases of manifest abuse. And to determine whether there was grave abuse of discretion, a scrutiny must be made of the bases, if any, considered by the trial court in granting injunctive relief. Be it stressed that injunction is the strong arm of equity which must be issued with great caution and deliberation, and only in cases of great injury where there is no commensurate remedy in damages.52

The CA upheld the trial court’s ruling that San Miguel has sufficiently established its right to prior use and registration of the word "Ginebra" as a dominant feature of its trademark. The CA ruled that based on San Miguel’s extensive, continuous, and substantially exclusive use of the word "Ginebra," it has become distinctive of San Miguel’s gin products; thus, a clear and unmistakable right was shown.

We hold that the CA committed a reversible error. The issue in the main case is San Miguel’s right to the exclusive use of the mark "Ginebra." The two trademarks "Ginebra San Miguel" and "Ginebra Kapitan" apparently differ when taken as a whole, but according to San Miguel, Tanduay appropriates the word "Ginebra" which is a dominant feature of San Miguel’s mark.

It is not evident whether San Miguel has the right to prevent other business entities from using the word "Ginebra." It is not settled (1) whether "Ginebra" is indeed the dominant feature of the trademarks, (2) whether it is a generic word that as a matter of law cannot be appropriated, or (3) whether it is merely a descriptive word that may be appropriated based on the fact that it has acquired a secondary meaning.

The issue that must be resolved by the trial court is whether a word like "Ginebra" can acquire a secondary meaning for gin products so as to prohibit the use of the word "Ginebra" by other gin manufacturers or sellers. This boils down to whether the word "Ginebra" is a generic mark that is incapable of appropriation by gin manufacturers.

In Asia Brewery, Inc. v. Court of Appeals,53 the Court ruled that "pale pilsen" are generic words, "pale" being the actual name of the color and "pilsen" being the type of beer, a light bohemian beer with a strong hops flavor that originated in Pilsen City in Czechoslovakia and became famous in the Middle Ages, and hence incapable of appropriation by any beer manufacturer.54 Moreover, Section 123.1(h) of the IP Code states that a mark cannot be registered if it "consists exclusively of signs that are generic for the goods or services that they seek to identify."1avvphi1

In this case, a cloud of doubt exists over San Miguel’s exclusive right relating to the word "Ginebra." San Miguel’s claim to the exclusive use of the word "Ginebra" is clearly still in dispute because of Tanduay’s claim that it has, as others have, also registered the word "Ginebra" for its gin products. This issue can be resolved only after a full-blown trial.

In Ong Ching Kian Chuan v. Court of Appeals,55 we held that in the absence of proof of a legal right and the injury sustained by the movant, the trial court’s order granting the issuance of an injunctive writ will be set aside, for having been issued with grave abuse of discretion.

We find that San Miguel’s right to injunctive relief has not been clearly and unmistakably demonstrated. The right to the exclusive use of the word "Ginebra" has yet to be determined in the main case. The trial court’s grant of the writ of preliminary injunction in favor of San Miguel, despite the lack of a clear and unmistakable right on its part, constitutes grave abuse of discretion amounting to lack of jurisdiction.

Prejudging the Merits of the Case

Tanduay alleges that the CA, in upholding the issuance of the writ of preliminary injunction, has prejudged the merits of the case since nothing is left to be decided by the trial court except the amount of damages to be awarded to San Miguel.56

San Miguel claims that neither the CA nor the trial court prejudged the merits of the case. San Miguel states that the CA did not rule on the ultimate correctness of the trial court’s evaluation and appreciation of the evidence before it, but merely found that the assailed Orders of the trial court are supported by the evidence on record and that Tanduay was not denied due process.57 San Miguel argues that the CA only upheld the trial court’s issuance of the TRO and writ of preliminary injunction upon a finding that there was sufficient evidence on record, as well as legal authorities, to warrant the trial court’s preliminary findings of fact.58

The instructive ruling in Manila International Airport Authority v. Court of Appeals59 states:

Considering the far-reaching effects of a writ of preliminary injunction, the trial court should have exercised more prudence and judiciousness in its issuance of the injunction order. We remind trial courts that while generally the grant of a writ of preliminary injunction rests on the sound discretion of the court taking cognizance of the case, extreme caution must be observed in the exercise of such discretion. The discretion of the court a quo to grant an injunctive writ must be exercised based on the grounds and in the manner provided by law. Thus, the Court declared in Garcia v. Burgos:

"It has been consistently held that there is no power the exercise of which is more delicate, which requires greater caution, deliberation and sound discretion, or more dangerous in a doubtful case, than the issuance of an injunction. It is the strong arm of equity that should never be extended unless to cases of great injury, where courts of law cannot afford an adequate or commensurate remedy in damages.

Every court should remember that an injunction is a limitation upon the freedom of action of the defendant and should not be granted lightly or precipitately. It should be granted only when the court is fully satisfied that the law permits it and the emergency demands it." (Emphasis in the original)

We believe that the issued writ of preliminary injunction, if allowed, disposes of the case on the merits as it effectively enjoins the use of the word "Ginebra" without the benefit of a full-blown trial. In Rivas v. Securities and Exchange Commission,60 we ruled that courts should avoid issuing a writ of preliminary injunction which would in effect dispose of the main case without trial. The issuance of the writ of preliminary injunction had the effect of granting the main prayer of the complaint such that there is practically nothing left for the trial court to try except the plaintiff’s claim for damages.

Irreparable Injury

Tanduay points out that the supposed damages that San Miguel will suffer as a result of Tanduay’s infringement or unfair competition cannot be considered irreparable because the damages are susceptible of mathematical computation. Tanduay invokes Section 156.1 of the IP Code61 as the basis for the computation of damages.62

San Miguel avers that it stands to suffer irreparable injury if the manufacture and sale of Tanduay’s "Ginebra Kapitan" are not enjoined. San Miguel claims that the rough estimate of the damages63 it would incur is simply a guide for the trial court in computing the appropriate docket fees. San Miguel asserts that the full extent of the damage it would suffer is difficult to measure with any reasonable accuracy because it has invested hundreds of millions over a period of 170 years to establish goodwill and reputation now being enjoyed by the "Ginebra San Miguel" mark.64 San Miguel refutes Tanduay’s claim that the injury which San Miguel stands to suffer can be measured with reasonable accuracy as the legal formula to determine such injury is provided in Section 156.1 of the IP Code. San Miguel reasons that if Tanduay’s claim is upheld, then there would never be a proper occasion to issue a writ of preliminary injunction in relation to complaints for infringement and unfair competition, as the injury which the owner of the mark suffers, or stands to suffer, will always be susceptible of mathematical computation.65

In Levi Strauss & Co. v. Clinton Apparelle, Inc.,66 this Court upheld the appellate court’s ruling that the damages Levi Strauss & Co. had suffered or continues to suffer may be compensated in terms of monetary consideration. This Court, quoting Government Service Insurance System v. Florendo,67 held:

x x x a writ of injunction should never issue when an action for damages would adequately compensate the injuries caused. The very foundation of the jurisdiction to issue the writ of injunction rests in the probability of irreparable injury, inadequacy of pecuniary compensation and the prevention of the multiplicity of suits, and where facts are not shown to bring the case within these conditions, the relief of injunction should be refused.

Based on the affidavits and market survey report submitted during the injunction hearings, San Miguel has failed to prove the probability of

irreparable injury which it will stand to suffer if the sale of "Ginebra Kapitan" is not enjoined. San Miguel has not presented proof of damages incapable of pecuniary estimation. At most, San Miguel only claims that it has invested hundreds of millions over a period of 170 years to establish goodwill and reputation now being enjoyed by the "Ginebra San Miguel" mark such that the full extent of the damage cannot be measured with reasonable accuracy. Without the submission of proof that the damage is irreparable and incapable of pecuniary estimation, San Miguel’s claim cannot be the basis for a valid writ of preliminary injunction.

Wherefore, we GRANT the petition. We SET ASIDE the Decision of the Court of Appeals dated 9 January 2004 and the Resolution dated 2 July 2004 in CA-G.R. SP No. 79655. We declare VOID the Order dated 17 October 2003 and the corresponding writ of preliminary injunction issued by Branch 214 of the Regional Trial Court of Mandaluyong City in IP Case No. MC-03-01 and Civil Case No. MC-03-073.

The Regional Trial Court of Mandaluyong City, Branch 214, is directed to continue expeditiously with the trial to resolve the merits of the case.

G.R. No. 170891 November 24, 2009 ABAD, J.:

MANUEL C. ESPIRITU, JR., AUDIE LLONA, FREIDA F. ESPIRITU, CARLO F. ESPIRITU, RAFAEL F. ESPIRITU, ROLANDO M. MIRABUNA, HERMILYN A. MIRABUNA, KIM ROLAND A. MIRABUNA, KAYE ANN A. MIRABUNA, KEN RYAN A. MIRABUNA, JUANITO P. DE CASTRO,

GERONIMA A. ALMONITE and MANUEL C. DEE, who are the officers and directors of BICOL GAS REFILLING PLANT CORPORATION,

Petitioners, vs.

PETRON CORPORATION and CARMEN J. DOLOIRAS, doing business under the name "KRISTINA PATRICIA ENTERPRISES," Respondents.

DECISION

This case is about the offense or offenses that arise from the reloading of the liquefied petroleum gas cylinder container of one brand with the liquefied petroleum gas of another brand.

The Facts and the Case

Respondent Petron Corporation (Petron) sold and distributed liquefied petroleum gas (LPG) in cylinder tanks that carried its trademark "Gasul."1 Respondent Carmen J. Doloiras owned and operated Kristina Patricia Enterprises (KPE), the exclusive distributor of Gasul LPGs in the whole of Sorsogon.2 Jose Nelson Doloiras (Jose) served as KPE’s manager.

Bicol Gas Refilling Plant Corporation (Bicol Gas) was also in the business of selling and distributing LPGs in Sorsogon but theirs carried the trademark "Bicol Savers Gas." Petitioner Audie Llona managed Bicol Gas.

In the course of trade and competition, any given distributor of LPGs at times acquired possession of LPG cylinder tanks belonging to other distributors operating in the same area. They called these "captured cylinders." According to Jose, KPE’s manager, in April 2001 Bicol Gas agreed with KPE for the swapping of "captured cylinders" since one distributor could not refill captured cylinders with its own brand of LPG. At one time, in the course of implementing this arrangement, KPE’s Jose visited the Bicol Gas refilling plant. While there, he noticed several Gasul tanks in Bicol Gas’ possession. He requested a swap but Audie Llona of Bicol Gas replied that he first needed to ask the permission of the Bicol Gas owners. That permission was given and they had a swap involving around 30 Gasul tanks held by Bicol Gas in exchange for assorted tanks held by KPE.

KPE’s Jose noticed, however, that Bicol Gas still had a number of Gasul tanks in its yard. He offered to make a swap for these but Llona declined, saying the Bicol Gas owners wanted to send those tanks to Batangas. Later Bicol Gas told Jose that it had no more Gasul tanks left in its possession. Jose observed on almost a daily basis, however, that Bicol Gas’ trucks which plied the streets of the province carried a load of Gasul tanks. He noted that KPE’s volume of sales dropped significantly from June to July 2001.

On August 4, 2001 KPE’s Jose saw a particular Bicol Gas truck on the Maharlika Highway. While the truck carried mostly Bicol Savers LPG tanks, it had on it one unsealed 50-kg Gasul tank and one 50-kg Shellane tank. Jose followed the truck and when it stopped at a store, he asked the driver, Jun Leorena, and the Bicol Gas sales representative, Jerome Misal, about the Gasul tank in their truck. They said it was empty but, when Jose turned open its valve, he noted that it was not. Misal and Leorena then admitted that the Gasul and Shellane tanks on their truck belonged to a customer who had them filled up by Bicol Gas. Misal then mentioned that his manager was a certain Rolly Mirabena.

Because of the above incident, KPE filed a complaint3 for violations of Republic Act (R.A.) 623 (illegally filling up registered cylinder tanks), as amended, and Sections 155 (infringement of trade marks) and 169.1 (unfair competition) of the Intellectual Property Code (R.A. 8293). The complaint charged the following: Jerome Misal, Jun Leorena, Rolly Mirabena, Audie Llona, and several John and Jane Does, described as the directors, officers, and stockholders of Bicol Gas. These directors, officers, and stockholders were eventually identified during the preliminary investigation.

Subsequently, the provincial prosecutor ruled that there was probable cause only for violation of R.A. 623 (unlawfully filling up registered tanks) and that only the four Bicol Gas employees, Mirabena, Misal, Leorena, and petitioner Llona, could be charged. The charge against the other petitioners who were the stockholders and directors of the company was dismissed.

Dissatisfied, Petron and KPE filed a petition for review with the Office of the Regional State Prosecutor, Region V, which initially denied the petition but partially granted it on motion for reconsideration. The Office of the Regional State Prosecutor ordered the filing of additional informations against the four employees of Bicol Gas for unfair competition. It ruled, however, that no case for trademark infringement was present. The Secretary of Justice denied the appeal of Petron and KPE and their motion for reconsideration.

Undaunted, Petron and KPE filed a special civil action for certiorari with the Court of Appeals4 but the Bicol Gas employees and stockholders concerned opposed it, assailing the inadequacy in its certificate of non-forum shopping, given that only Atty. Joel Angelo C. Cruz signed it on behalf of Petron. In its Decision5 dated October 17, 2005, the Court of Appeals ruled, however, that Atty. Cruz’s certification constituted sufficient compliance. As to the substantive aspect of the case, the Court of Appeals reversed the Secretary of Justice’s ruling. It held that unfair competition does not necessarily absorb trademark infringement. Consequently, the court ordered the filing of additional charges of trademark infringement against the concerned Bicol Gas employees as well.

Since the Bicol Gas employees presumably acted under the direct order and control of its owners, the Court of Appeals also ordered the inclusion of the stockholders of Bicol Gas in the various charges, bringing to 16 the number of persons to be charged, now including petitioners Manuel C. Espiritu, Jr., Freida F. Espiritu, Carlo F. Espiritu, Rafael F. Espiritu, Rolando M. Mirabuna, Hermilyn A. Mirabuna, Kim Roland A. Mirabuna, Kaye Ann A. Mirabuna, Ken Ryan A. Mirabuna, Juanito P. de Castro, Geronima A. Almonite, and Manuel C. Dee (together with Audie Llona), collectively, petitioners Espiritu, et al. The court denied the motion for reconsideration of these employees and stockholders in its Resolution dated January 6, 2006, hence, the present petition for review6 before this Court.

The Issues Presented

The petition presents the following issues:

1. Whether or not the certificate of non-forum shopping that accompanied the petition filed with the Court of Appeals, signed only by Atty. Cruz on behalf of Petron, complied with what the rules require;

2. Whether or not the facts of the case warranted the filing of charges against the Bicol Gas people for:

a) Filling up the LPG tanks registered to another manufacturer without the latter’s consent in violation of R.A. 623, as amended;

b) Trademark infringement consisting in Bicol Gas’ use of a trademark that is confusingly similar to Petron’s registered "Gasul" trademark in violation of section 155 also of R.A. 8293; and

c) Unfair competition consisting in passing off Bicol Gas-produced LPGs for Petron-produced Gasul LPG in violation of Section 168.3 of R.A. 8293.

The Court’s Rulings

First. Petitioners Espiritu, et al. point out that the certificate of non-forum shopping that respondents KPE and Petron attached to the petition they filed with the Court of Appeals was inadequate, having been signed only by Petron, through Atty. Cruz.

But, while procedural requirements such as that of submittal of a certificate of non-forum shopping cannot be totally disregarded, they may be deemed substantially complied with under justifiable circumstances.7 One of these circumstances is where the petitioners filed a collective action in which they share a common interest in its subject matter or raise a common cause of action. In such a case, the certification by one of the petitioners may be deemed sufficient.8

Here, KPE and Petron shared a common cause of action against petitioners Espiritu, et al., namely, the violation of their proprietary rights with respect to the use of Gasul tanks and trademark. Furthermore, Atty. Cruz said in his certification that he was executing it "for and on behalf of the Corporation, and co-petitioner Carmen J. Doloiras."9 Thus, the object of the requirement – to ensure that a party takes no recourse to multiple forums – was substantially achieved. Besides, the failure of KPE to sign the certificate of non-forum shopping does not render the petition defective with respect to Petron which signed it through Atty. Cruz.10 The Court of Appeals, therefore, acted correctly in giving due course to the petition before it.

Second. The Court of Appeals held that under the facts of the case, there is probable cause that petitioners Espiritu, et al. committed all three crimes: (a) illegally filling up an LPG tank registered to Petron without the latter’s consent in violation of R.A. 623, as amended; (b) trademark infringement which consists in Bicol Gas’ use of a trademark that is confusingly similar to Petron’s registered "Gasul" trademark in violation of Section 155 of R.A. 8293; and (c) unfair competition which consists in petitioners Espiritu, et al. passing off Bicol Gas-produced LPGs for Petron-produced Gasul LPG in violation of Section 168.3 of R.A. 8293.

Here, the complaint adduced at the preliminary investigation shows that the one 50-kg Petron Gasul LPG tank found on the Bicol Gas’ truck "belonged to [a Bicol Gas] customer who had the same filled up by BICOL GAS."11 In other words, the customer had that one Gasul LPG tank brought to Bicol Gas for refilling and the latter obliged.

R.A. 623, as amended,12 punishes any person who, without the written consent of the manufacturer or seller of gases contained in duly registered steel cylinders or tanks, fills the steel cylinder or tank, for the purpose of sale, disposal or trafficking, other than the purpose for which the manufacturer or seller registered the same. This was what happened in this case, assuming the allegations of KPE’s manager to be true. Bicol Gas employees filled up with their firm’s gas the tank registered to Petron and bearing its mark without the latter’s written authority. Consequently, they may be prosecuted for that offense.

But, as for the crime of trademark infringement, Section 155 of R.A. 8293 (in relation to Section 17013 ) provides that it is committed by any person who shall, without the consent of the owner of the registered mark:

1. Use in commerce any reproduction, counterfeit, copy or colorable imitation of a registered mark or the same container or a dominant feature thereof in connection with the sale, offering for sale, distribution, advertising of any goods or services including other preparatory steps necessary to carry out the sale of any goods or services on or in connection with which such use is likely to cause confusion, or to cause mistake, or to deceive; or

2. Reproduce, counterfeit, copy or colorably imitate a registered mark or a dominant feature thereof and apply such reproduction, counterfeit, copy or colorable imitation to labels, signs, prints, packages, wrappers, receptacles or advertisements intended to be used in commerce upon or in connection with the sale, offering for sale, distribution, or advertising of goods or services on or in connection with which such use is likely to cause confusion, or to cause mistake, or to deceive.

KPE and Petron have to show that the alleged infringer, the responsible officers and staff of Bicol Gas, used Petron’s Gasul trademark or a confusingly similar trademark on Bicol Gas tanks with intent to deceive the public and defraud its competitor as to what it is selling.14 Examples of this would be the acts of an underground shoe manufacturer in Malabon producing "Nike" branded rubber shoes or the acts of a local shirt company with no connection to La Coste, producing and selling shirts that bear the stitched logos of an open-jawed alligator.

Here, however, the allegations in the complaint do not show that Bicol Gas painted on its own tanks Petron’s Gasul trademark or a confusingly similar version of the same to deceive its customers and cheat Petron. Indeed, in this case, the one tank bearing the mark of Petron Gasul found in a truck full of Bicol Gas tanks was a genuine Petron Gasul tank, more of a captured cylinder belonging to competition. No proof has been shown that Bicol Gas has gone into the business of distributing imitation Petron Gasul LPGs.

As to the charge of unfair competition, Section 168.3 (a) of R.A. 8293 (also in relation to Section 170) describes the acts constituting the offense as follows:

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;

Essentially, what the law punishes is the act of giving one’s goods the general appearance of the goods of another, which would likely mislead the buyer into believing that such goods belong to the latter. Examples of this would be the act of manufacturing or selling shirts bearing the logo of an alligator, similar in design to the open-jawed alligator in La Coste shirts, except that the jaw of the alligator in the former is closed, or the act of a producer or seller of tea bags with red tags showing the shadow of a black dog when his competitor is producing or selling popular tea bags with red tags showing the shadow of a black cat.

Here, there is no showing that Bicol Gas has been giving its LPG tanks the general appearance of the tanks of Petron’s Gasul. As already stated, the truckfull of Bicol Gas tanks that the KPE manager arrested on a road in Sorsogon just happened to have mixed up with them one authentic Gasul tank that belonged to Petron.

The only point left is the question of the liability of the stockholders and members of the board of directors of Bicol Gas with respect to the charge of unlawfully filling up a steel cylinder or tank that belonged to Petron. The Court of Appeals ruled that they should be charged along with the Bicol Gas employees who were pointed to as directly involved in overt acts constituting the offense.1avvphi1

Bicol Gas is a corporation. As such, it is an entity separate and distinct from the persons of its officers, directors, and stockholders. It has been held, however, that corporate officers or employees, through whose act, default or omission the corporation commits a crime, may themselves be individually held answerable for the crime.15

Jose claimed in his affidavit that, when he negotiated the swapping of captured cylinders with Bicol Gas, its manager, petitioner Audie Llona, claimed that he would be consulting with the owners of Bicol Gas about it. Subsequently, Bicol Gas declined the offer to swap cylinders for the reason that the owners wanted to send their captured cylinders to Batangas. The Court of Appeals seized on this as evidence that the employees of Bicol Gas acted under the direct orders of its owners and that "the owners of Bicol Gas have full control of the operations of the business."16

The "owners" of a corporate organization are its stockholders and they are to be distinguished from its directors and officers. The petitioners here, with the exception of Audie Llona, are being charged in their capacities as stockholders of Bicol Gas. But the Court of Appeals forgets that in a corporation, the management of its business is generally vested in its board of directors, not its stockholders.17 Stockholders are basically investors in a corporation. They do not have a hand in running the day-to-day business operations of the corporation unless they are at the same time directors or officers of the corporation. Before a stockholder may be held criminally liable for acts committed by the corporation, therefore, it must be shown that he had knowledge of the criminal act committed in the name of the corporation and that he took part in the same or gave his consent to its commission, whether by action or inaction.

The finding of the Court of Appeals that the employees "could not have committed the crimes without the consent, [abetment], permission, or participation of the owners of Bicol Gas"18 is a sweeping speculation especially since, as demonstrated above, what was involved was just one Petron Gasul tank found in a truck filled with Bicol Gas tanks. Although the KPE manager heard petitioner Llona say that he was going to consult the owners of Bicol Gas regarding the offer to swap additional captured cylinders, no indication was given as to which Bicol Gas stockholders Llona consulted. It would be unfair to charge all the stockholders involved, some of whom were proved to be minors.19 No evidence was presented establishing the names of the stockholders who were charged with running the operations of Bicol Gas. The complaint even failed to allege who among the stockholders sat in the board of directors of the company or served as its officers.

The Court of Appeals of course specifically mentioned petitioner stockholder Manuel C. Espiritu, Jr. as the registered owner of the truck that the KPE manager brought to the police for investigation because that truck carried a tank of Petron Gasul. But the act that R.A. 623 punishes is the unlawful filling up of registered tanks of another. It does

not punish the act of transporting such tanks. And the complaint did not allege that the truck owner connived with those responsible for filling up that Gasul tank with Bicol Gas LPG.

WHEREFORE, the Court REVERSES and SETS ASIDE the Decision of the Court of Appeals in CA-G.R. SP 87711 dated October 17, 2005 as well as its Resolution dated January 6, 2006, the Resolutions of the Secretary of Justice dated March 11, 2004 and August 31, 2004, and the Order of the Office of the Regional State Prosecutor, Region V, dated February 19, 2003. The Court REINSTATES the Resolution of the Office of the Provincial Prosecutor of Sorsogon in I.S. 2001-9231 (inadvertently referred in the Resolution itself as I.S. 2001-9234), dated February 26, 2002. The names of petitioners Manuel C. Espiritu, Jr., Freida F. Espititu, Carlo F. Espiritu, Rafael F. Espiritu, Rolando M. Mirabuna, Hermilyn A. Mirabuna, Kim Roland A. Mirabuna, Kaye Ann A. Mirabuna, Ken Ryan A. Mirabuna, Juanito P. De Castro, Geronima A. Almonite and Manuel C. Dee are ORDERED excluded from the charge.

G.R. No. 182147 December 15, 2010 VELASCO, JR., J.:

ARNEL U. TY, MARIE ANTONETTE TY, JASON ONG, WILLY DY, and ALVIN TY, Petitioners,

vs.NBI SUPERVISING AGENT MARVIN E. DE JEMIL, PETRON GASUL

DEALERS ASSOCIATION, and TOTALGAZ DEALERS ASSOCIATION, Respondents.

The Case

In this Petition for Review on Certiorari under Rule 45, petitioners seek the reversal of the Decision1 dated September 28, 2007 of the Court of Appeals (CA) in CA-G.R. SP No. 98054, which reversed and set aside the Resolutions dated October 9, 20062 and December 14, 20063 of the Secretary of Justice, and reinstated the November 7, 2005 Joint Resolution4 of the Office of the Chief State Prosecutor. Petitioners assail also the CA Resolution5 dated March 14, 2008, denying their motion for reconsideration.

The Facts

Petitioners are stockholders of Omni Gas Corporation (Omni) as per Omni’s General Information Sheet6 (GIS) dated March 6, 2004 submitted to the Securities and Exchange Commission (SEC). Omni is in the business of trading and refilling of Liquefied Petroleum Gas (LPG) cylinders and holds Pasig City Mayor’s Permit No. RET-04-001256 dated February 3, 2004.

The case all started when Joaquin Guevara Adarlo & Caoile Law Offices (JGAC Law Offices) sent a letter dated March 22, 20047 to the NBI requesting, on behalf of their clients Shellane Dealers Association, Inc., Petron Gasul Dealers Association, Inc., and Totalgaz Dealers Association, Inc., for the surveillance, investigation, and apprehension of persons or establishments in Pasig City that are engaged in alleged illegal trading of petroleum products and underfilling of branded LPG cylinders in violation of Batas Pambansa Blg. (BP) 33,8 as amended by Presidential Decree No. (PD) 1865.9

Earlier, the JGAC Law Offices was furnished by several petroleum producers/brand owners their respective certifications on the dealers/plants authorized to refill their respective branded LPG cylinders, to wit: (1) On October 3, 2003, Pilipinas Shell Petroleum Corporation (Pilipinas Shell) issued a certification10 of the list of entities duly authorized to refill Shellane LPG cylinders; (2) on December 4, 2003, Petron Corporation (Petron) issued a certification11 of their dealers in Luzon, Visayas, and Mindanao authorized to refill Petron Gasul LPG cylinders; and (3) on January 5, 2004, Total (Philippines) Corporation (Total) issued two certifications12 of the refilling stations and plants authorized to refill their Totalgaz and Superkalan Gaz LPG cylinders.

Agents De Jemil and Kawada attested to conducting surveillance of Omni in the months of March and April 2004 and doing a test-buy on April 15, 2004. They brought eight branded LPG cylinders of Shellane, Petron Gasul, Totalgaz, and Superkalan Gaz to Omni for refilling. The branded LPG cylinders were refilled, for which the National Bureau of Investigation (NBI) agents paid PhP 1,582 as evidenced by Sales Invoice No. 9004013 issued by Omni on April 15, 2004. The refilled LPG cylinders were without LPG valve seals and one of the cylinders was actually underfilled, as found by LPG Inspector Noel N. Navio of the Liquefied Petroleum Gas Industry Association (LPGIA) who inspected the eight branded LPG cylinders on April 23, 2004 which were properly marked by the NBI after the test-buy.

The NBI’s test-buy yielded positive results for violations of BP 33, Section 2(a) in relation to Secs. 3(c) and 4, i.e., refilling branded LPG cylinders without authority; and Sec. 2(c) in relation to Sec. 4, i.e., underdelivery or underfilling of LPG cylinders. Thus, on April 28, 2004, Agent De Jemil filed an Application for Search Warrant (With Request for Temporary Custody of the Seized Items)14 before the Regional Trial Court (RTC) in Pasig City, attaching, among others, his affidavit15 and the affidavit of Edgardo C. Kawada,16 an NBI confidential agent.

On the same day of the filing of the application for search warrants on April 28, 2004, the RTC, Branch 167 in Pasig City issued Search Warrants No. 262417 and 2625.18 The NBI served the warrants the next day or on April 29, 2004 resulting in the seizure of several items from Omni’s premises duly itemized in the NBI’s Receipt/Inventory of Property/Item Seized.19 On May 25, 2004, Agent De Jemil filed his Consolidated Return of Search Warrants with Ex-Parte Motion to Retain Custody of the Seized Items20 before the RTC Pasig City.

Subsequently, Agent De Jemil filed before the Department of Justice (DOJ) his Complaint-Affidavits against petitioners for: (1) Violation of Section 2(a), in relation to Sections 3(c) and 4, of B.P. Blg. 33, as amended by P.D. 1865;21 and (2) Violation of Section 2(c), in relation to Section 4, of B.P. Blg. 33, as amended by P.D. 1865,22 docketed as I.S. Nos. 2004-616 and 2004-618, respectively.

During the preliminary investigation, petitioners submitted their Joint Counter-Affidavit,23 which was replied24 to by Agent De Jemil with a corresponding rejoinder25 from petitioners.

The Ruling of the Office of the Chief State Prosecutorin I.S. No. 2004-616 and I.S. No. 2004-618

On November 7, 2005, the 3rd Assistant City Prosecutor Leandro C. Catalo of Manila issued a Joint Resolution,26 later approved by the Chief State Prosecutor Jovencito R. Zuño upon the recommendation of the Head of the Task Force on Anti-Intellectual Property Piracy (TFAIPP), Assistant Chief State Prosecutor Leah C. Tanodra-Armamento, finding probable cause to charge petitioners with violations of pertinent sections of BP 33, as amended, resolving as follows:

WHEREFORE, premises considered, it is hereby recommended that two (2) Informations for violations of Section 2 [a] (illegal trading in petroleum and/or petroleum products) and Section 2 [c] (underfilling of LPG cylinders), both of Batas Pambansa Bilang 33, as amended, be filed against respondents [herein petitioners] ARNEL TY, MARIE ANTONETTE TY, JASON ONG, WILLY DY and ALVIN TY.27

Assistant City Prosecutor Catalo found the existence of probable cause based on the evidence submitted by Agent De Jemil establishing the fact that Omni is not an authorized refiller of Shellane, Petron Gasul, Totalgaz and Superkalan Gaz LPG cylinders. Debunking petitioners’ contention that the branded LPG cylinders are already owned by consumers who are free to do with them as they please, the law is clear that the stamped markings on the LPG cylinders show who are the real owners thereof and they cannot be refilled sans authority from Pilipinas Shell, Petron or Total, as the case may be. On the underfilling of one LPG cylinder, the findings of LPG Inspector Navio of the LPGIA were uncontroverted by petitioners.

Petitioners’ motion for reconsideration,28 was denied through a Resolution29 by the Office of the Chief State Prosecutor issued on May 3, 2006.

In time, petitioners appealed to the Office of the Secretary of Justice.30

The Ruling of the DOJ Secretaryin I.S. No. 2004-616 and I.S. No. 2004-618

On October 9, 2006, the Office of the Secretary of Justice issued a Resolution31 reversing and setting aside the November 7, 2005 Joint Resolution of the Office of the Chief State Prosecutor, the dispositive portion of which reads:

WHEREFORE, the assailed resolution is hereby REVERSED and SET ASIDE. The Chief State Prosecutor is directed to cause the withdrawal of the informations for violations of Sections 2(a) and 2(c) of B.P. Blg. 33, as amended by P.D. 1865, against respondents Arnel Ty, Mari Antonette Ty, Jason Ong, Willy Dy and Alvin Ty and report the action taken within ten (10) days from receipt hereof.

SO ORDERED.32

The Office of the Secretary of Justice viewed, first, that the underfilling of one of the eight LPG cylinders was an isolated incident and cannot give rise to a conclusion of underfilling, as the phenomenon may have been caused by human error, oversight or technical error. Being an isolated case, it ruled that there was no showing of a clear pattern of deliberate underfilling. Second, on the alleged violation of refilling branded LPG cylinders sans written authority, it found no sufficient basis to hold petitioners responsible for violation of Sec. 2 (c) of BP 33, as amended, since there was no proof that the branded LPG cylinders seized from Omni belong to another company or firm, holding that the simple fact that the LPG cylinders with markings or stamps of other petroleum producers cannot by itself prove ownership by said firms or companies as the consumers who take them to Omni fully owned them having purchased or acquired them beforehand.

Agent De Jemil moved but was denied reconsideration33 through another Resolution34 dated December 14, 2006 prompting him to repair to the CA via a petition for certiorari35 under Rule 65 of the Rules of Court, docketed as CA-G.R. SP No. 98054.

The Ruling of the CA

The Office of the Solicitor General (OSG), in its Comment36 on Agent De Jemil’s appeal, sought the dismissal of the latter’s petition viewing that the determination by the Office of the Secretary of Justice of probable cause is entitled to respect owing to the exercise of his prerogative to prosecute or not.

On August 31, 2007, Petron filed a Motion to Intervene and to Admit Attached Petition-in-Intervention37 and Petition-in-Intervention38

before the CA in CA-G.R. SP No. 98054. And much earlier, the Nationwide Association of Consumers, Inc. (NACI) also filed a similar motion.

On September 28, 2007, the appellate court rendered the assailed Decision39 revoking the resolutions of the Office of the Secretary of Justice and reinstated the November 7, 2005 Joint Resolution of the Office of the Chief State Prosecutor. The fallo reads:

WHEREFORE, the instant petition is GRANTED. The assailed resolutions dated October 9, 2006 and December 14, 2006 are hereby REVERSED and SET ASIDE. The Joint Resolution dated November 7, 2005 of the Office of the Chief State Prosecutor finding probable cause against private respondents Arnel Ty, Marie Antonette Ty, Jason Ong, Willy Dy, and Alvin Ty is hereby REINSTATED.

SO ORDERED.40

Citing Sec. 1 (1) and (3) of BP 33, as amended, which provide for the presumption of underfilling, the CA held that the actual underfilling of

an LPG cylinder falls under the prohibition of the law which does not require for the underfilling to be substantial and deliberate.

Moreover, the CA found strong probable violation of "refilling of another company’s or firm’s cylinders without such company’s or firm’s written authorization" under Sec. 3 (c) of BP 33, as amended. The CA relied on the affidavits of Agents De Jemil and Kawada, the certifications from various LPG producers that Omni is not authorized to refill their branded LPG cylinders, the results of the test-buy operation as attested to by the NBI agents and confirmed by the examination of LPG Inspector Navio of the LPGIA, the letter-opinion41 of the Department of Energy (DOE) to Pilipinas Shell confirming that branded LPG cylinders are properties of the companies whose stamp markings appear thereon, and Department Circular No. 2000-05-00742

of the DOE on the required stamps or markings by the manufacturers of LPG cylinders.

After granting the appeal of Agent De Jemil, however, the motions to intervene filed by Petron and NACI were simply noted by the appellate court.

Petitioners’ motion for reconsideration was rebuffed by the CA through the equally assailed March 14, 2008 Resolution.43

Thus, the instant petition.

The Issues

I. WHETHER OR NOT RESPONDENTS WERE ENTITLED TO THE SPECIAL CIVIL ACTION OF CERTIORARI IN THE COURT OF APPEALS.

II. WHETHER OR NOT UNDER THE CIRCUMSTANCES THERE WAS PROBABLE CAUSE TO BELIEVE THAT PETITIONERS VIOLATED SECTION 2(A) OF BATAS PAMBANSA BLG. 33, AS AMENDED.

III. WHETHER OR NOT UNDER THE CIRCUMSTANCES THERE WAS PROBABLE CAUSE TO BELIEVE THAT PETITIONERS VIOLATED SECTION 2(C) OF BATAS PAMBANSA BLG. 33, AS AMENDED.

IV. WHETHER OR NOT PETITIONERS CAN BE HELD LIABLE UNDER BATAS PAMBANSA BLG. 33, AS AMENDED, FOR BEING MERE DIRECTORS, NOT ACTUALLY IN CHARGE OF THE MANAGEMENT OF THE BUSINESS AFFAIRS OF THE CORPORATION.44

The foregoing issues can be summarized into two core issues: first, whether probable cause exists against petitioners for violations of Sec. 2 (a) and (c) of BP 33, as amended; and second, whether petitioners can be held liable therefor. We, however, will tackle at the outset the sole procedural issue raised: the propriety of the petition for certiorari under Rule 65 availed of by public respondent Agent De Jemil to assail the resolutions of the Office of the Secretary of Justice.

Petron’s Comment-in-Intervention

On April 14, 2009, Petron entered its appearance by filing a Motion for Leave to Intervene and to Admit Comment-in-Intervention45 and its Comment-in-Intervention [To petition for Review on Certiorari dated 13 May 2008].46 It asserted vested interest in the seizure of several Gasul LPG cylinders and the right to prosecute petitioners for unauthorized refilling of its branded LPG cylinders by Omni. Petitioners duly filed their Comment/Opposition47 to Petron’s motion to intervene. It is clear, however, that Petron has substantial interest to protect in so far as its business relative to the sale and refilling of Petron Gasul LPG cylinders is concerned, and therefore its intervention in the instant case is proper.

The Court’s Ruling

We partially grant the petition.

Procedural Issue: Petition for Certiorari under Rule 65 Proper

Petitioners raise the sole procedural issue of the propriety of the legal remedy availed of by public respondent Agent De Jemil. They strongly maintain that the Office of the Secretary of Justice properly assumed jurisdiction and did not gravely abuse its discretion in its determination of lack of probable cause—the exercise thereof being its sole prerogative—which, they lament, the appellate court did not accord proper latitude. Besides, they assail the non-exhaustion of administrative remedies when Agent De Jemil immediately resorted to court action through a special civil action for certiorari under Rule 65 before the CA without first appealing the resolutions of the Office of the Secretary of Justice to the Office of the President (OP).

We cannot agree with petitioners.

For one, while it is the consistent principle in this jurisdiction that the determination of probable cause is a function that belongs to the public prosecutor48 and, ultimately, to the Secretary of Justice, who may direct the filing of the corresponding information or move for the dismissal of the case;49 such determination is subject to judicial review where it is established that grave abuse of discretion tainted the determination.

For another, there is no question that the Secretary of Justice is an alter ego of the President who may opt to exercise or not to exercise his or her power of review over the former’s determination in criminal investigation cases. As aptly noted by Agent De Jemil, the determination of probable cause by the Secretary of Justice is, under the doctrine of qualified political agency, presumably that of the Chief Executive unless disapproved or reprobated by the latter.

Chan v. Secretary of Justice50 delineated the proper remedy from the determination of the Secretary of Justice. Therein, the Court, after expounding on the policy of non-interference in the determination of the existence of probable cause absent any showing of arbitrariness on the part of the public prosecutor and the Secretary of Justice, however, concluded, citing Alcaraz v. Gonzalez51 and Preferred Home Specialties, Inc. v. Court of Appeals,52 that an aggrieved party from the resolution of the Secretary of Justice may directly resort to judicial review on the ground of grave abuse of discretion, thus:

x x x [T]he findings of the Justice Secretary may be reviewed through a petition for certiorari under Rule 65 based on the allegation that he acted with grave abuse of discretion. This remedy is available to the aggrieved party.53 (Emphasis supplied.)

It is thus clear that Agent De Jemil, the aggrieved party in the assailed resolutions of the Office of the Secretary of Justice, availed of and pursued the proper legal remedy of a judicial review through a petition for certiorari under Rule 65 in assailing the latter’s finding of lack of probable cause on the ground of grave abuse of discretion.

First Core Issue: Existence of Probable Cause

Petitioners contend that there is no probable cause that Omni violated Sec. 2 (a), in relation to Secs. 3 (c) and 4 of BP 33, as amended, prohibiting the refilling of another company’s or firm’s LPG cylinders without its written authorization. First, the branded LPG cylinders seized were not traded by Omni as its representative annotated in the NBI receipt of seized items that the filled LPG cylinders came from customers’ trucks and the empty ones were taken from the warehouse or swapping section of the refilling plant and not from the refilling section. Second, the branded LPG cylinders are owned by end-user customers and not by the major petroleum companies, i.e., Petron,

Pilipinas Shell and Total. And even granting arguendo that Omni is selling these LPG cylinders, still there cannot be a prima facie case of violation since there is no proof that the refilled branded LPG cylinders are owned by another company or firm.

Third, granting that Petron, Total and Pilipinas Shell still own their respective branded LPG cylinders already sold to consumers, still such fact will not bind third persons, like Omni, who is not privy to the agreement between the buying consumers and said major petroleum companies. Thus, a subsequent transfer by the customers of Petron, Total and Pilipinas Shell of the duly marked or stamped LPG cylinders through swapping, for example, will effectively transfer ownership of the LPG cylinders to the transferee, like Omni.

Fourth, LPG cylinder exchange or swapping is a common industry practice that the DOE recognizes. They point to a series of meetings conducted by the DOE for institutionalizing the validity of swapping of all and any kind of LPG cylinders among the industry players. The meetings resulted in a draft Memorandum of Agreement (MOA) which unfortunately was not signed due to the withdrawal of petroleum major players Petron, Total and Pilipinas Shell. Nonetheless, the non-signing of the MOA does not diminish the fact of the recognized industry practice of cylinder exchange or swapping. Relying on Republic Act No. (RA) 8479,54 petitioners maintain that said law promotes and encourages the entry of new participants in the petroleum industry such as Omni. And in furtherance of this mandate is the valid practice of cylinder exchange or swapping in the LPG industry.

We are not persuaded by petitioners’ strained rationalizations.

Probable violation of Sec. 2 (a) of BP 33, amended

First. The test-buy conducted on April 15, 2004 by the NBI agents, as attested to by their respective affidavits, tends to show that Omni illegally refilled the eight branded LPG cylinders for PhP 1,582. This is a clear violation of Sec. 2 (a), in relation to Secs. 3 (c) and 4 of BP 33, as amended. It must be noted that the criminal complaints, as clearly shown in the complaint-affidavits of Agent De Jemil, are not based solely on the seized items pursuant to the search warrants but also on the test-buy earlier conducted by the NBI agents.

Second. The written certifications from Pilipinas Shell, Petron and Total show that Omni has no written authority to refill LPG cylinders, embossed, marked or stamped Shellane, Petron Gasul, Totalgaz and Superkalan Gaz. In fact, petitioners neither dispute this nor claim that Omni has authority to refill these branded LPG cylinders.

Third. Belying petitioners’ contention, the seized items during the service of the search warrants tend to show that Omni illegally refilled branded LPG cylinders without authority.

On April 29, 2004, the NBI agents who served the search warrants on Omni seized the following:

Quantity/Unit Description

7 LPG cylinders Totalgaz, 11.0 kg [filled]

1 LPG cylinder Petron Gasul, 11.0 kg [filled]

1 LPG cylinder Shellane, 11.0 kg [filled]

29 LPG cylinders Superkalan Gaz, 2.7 kg

[empty]

17 LPG cylinders Petron Gasul, 11.0 kg [emptly]

8 LPG cylinders Marked as Omnigas with Shell emboss, 11.0 kg [empty]

5 LPG cylinders Marked as Omnigas with Totalgaz emboss, 11.0 kg [empty]

23 LPG cylinders Shellane, 11.0 kg [empty]

3 LPG cylinders Marked as Omnigas with Gasul emboss, 11.0 kg [empty]

21 LPG cylindersTotalgaz, 11.0 kg [empty]

The foregoing list is embodied in the NBI’s Receipt/Inventory of Property/Item Seized55 signed by NBI Agent Edwin J. Roble who served and implemented the search warrants. And a copy thereof was duly received by Atty. Allan U. Ty, representative of Omni, who signed the same "under protest" and made the annotation at the bottom part thereon: "The above items/cylinders were taken at customers’ trucks and the empty cylinders taken at the warehouse (swapping section) of the company."56

Even considering that the filled LPG cylinders were indeed already loaded on customers’ trucks when confiscated, yet the fact that these refilled LPG cylinders consisting of nine branded LPG cylinders, specifically Totalgaz, Petron Gasul and Shellane, tends to show that Omni indeed refilled these branded LPG cylinders without authorization from Total, Petron and Pilipinas Shell. Such a fact is bolstered by the test-buy conducted by Agent De Jemil and NBI confidential agent Kawada: Omni’s unauthorized refilling of branded LPG cylinders, contrary to Sec. 2 (a) in relation to Sec. 3 (c) of BP 33, as amended. Said provisos provide:

Sec. 2. Prohibited Acts.—The following acts are prohibited and penalized:

(a) Illegal trading in petroleum and/or petroleum products;

x x x x

Sec. 3. Definition of terms.—For the purpose of this Act, the following terms shall be construed to mean:

Illegal trading in petroleum and/or petroleum products—

x x x x

(c) Refilling of liquefied petroleum gas cylinders without authority from said Bureau, or refilling of another company’s or firm’s cylinders without such company’s or firm’s written authorization; (Emphasis supplied.)

As petitioners strongly argue, even if the branded LPG cylinders were indeed owned by customers, such fact does not authorize Omni to refill these branded LPG cylinders without written authorization from the brand owners Pilipinas Shell, Petron and Total. In Yao, Sr. v. People,57 a case involving criminal infringement of property rights under Sec. 155 of RA 8293,58 in affirming the courts a quo’s determination of the presence of probable cause, this Court held that from Sec. 155.159 of RA

8293 can be gleaned that "mere unauthorized use of a container bearing a registered trademark in connection with the sale, distribution or advertising of goods or services which is likely to cause confusion, mistake or deception among the buyers/consumers can be considered as trademark infringement."60 The Court affirmed the presence of infringement involving the unauthorized sale of Gasul and Shellane LPG cylinders and the unauthorized refilling of the same by Masagana Gas Corporation as duly attested to and witnessed by NBI agents who conducted the surveillance and test-buys.

Similarly, in the instant case, the fact that Omni refilled various branded LPG cylinders even if owned by its customers but without authority from brand owners Petron, Pilipinas Shell and Total shows palpable violation of BP 33, as amended. As aptly noted by the Court in Yao, Sr. v. People, only the duly authorized dealers and refillers of Shellane, Petron Gasul and, by extension, Total may refill these branded LPG cylinders. Our laws sought to deter the pernicious practices of unscrupulous businessmen.

Fourth. The issue of ownership of the seized branded LPG cylinders is irrelevant and hence need no belaboring. BP 33, as amended, does not require ownership of the branded LPG cylinders as a condition sine qua non for the commission of offenses involving petroleum and petroleum products. Verily, the offense of refilling a branded LPG cylinder without the written consent of the brand owner constitutes the offense regardless of the buyer or possessor of the branded LPG cylinder.

After all, once a consumer buys a branded LPG cylinder from the brand owner or its authorized dealer, said consumer is practically free to do what he pleases with the branded LPG cylinder. He can simply store the cylinder once it is empty or he can even destroy it since he has paid a deposit for it which answers for the loss or cost of the empty branded LPG cylinder. Given such fact, what the law manifestly prohibits is the refilling of a branded LPG cylinder by a refiller who has no written authority from the brand owner. Apropos, a refiller cannot and ought not to refill branded LPG cylinders if it has no written authority from the brand owner.1avvphi1

Besides, persuasive are the opinions and pronouncements by the DOE: brand owners are deemed owners of their duly embossed, stamped and marked LPG cylinders even if these are possessed by customers or consumers. The Court recognizes this right pursuant to our laws, i.e., Intellectual Property Code of the Philippines. Thus the issuance by the DOE Circular No. 2000-05-007,61 the letter-opinion62 dated December 9, 2004 of then DOE Secretary Vincent S. Perez addressed to Pilipinas Shell, the June 6, 2007 letter63 of then DOE Secretary Raphael P.M. Lotilla to the LPGIA, and DOE Department Circular No. 2007-10-000764

on LPG Cylinder Ownership and Obligations Related Thereto issued on October 13, 2007 by DOE Secretary Angelo T. Reyes.

Fifth. The ownership of the seized branded LPG cylinders, allegedly owned by Omni customers as petitioners adamantly profess, is of no consequence.

The law does not require that the property to be seized should be owned by the person against whom the search warrants is directed. Ownership, therefore, is of no consequence, and it is sufficient that the person against whom the warrant is directed has control or possession of the property sought to be seized.65 Petitioners cannot deny that the seized LPG cylinders were in the possession of Omni, found as they were inside the Omni compound.

In fine, we also note that among those seized by the NBI are 16 LPG cylinders bearing the embossed brand names of Shellane, Gasul and Totalgaz but were marked as Omnigas. Evidently, this pernicious

practice of tampering or changing the appearance of a branded LPG cylinder to look like another brand violates the brand owners’ property rights as infringement under Sec. 155.1 of RA 8293. Moreover, tampering of LPG cylinders is a mode of perpetrating the criminal offenses under BP 33, as amended, and clearly enunciated under DOE Circular No. 2000-06-010 which provided penalties on a per cylinder basis for each violation.

Foregoing considered, in the backdrop of the quantum of evidence required to support a finding of probable cause, we agree with the appellate court and the Office of the Chief State Prosecutor, which conducted the preliminary investigation, that there exists probable cause for the violation of Sec. 2 (a) in relation to Sec. 3 (c) of BP 33, as amended. Probable cause has been defined as the existence of such facts and circumstances as would excite belief in a reasonable mind, acting on the facts within the knowledge of the prosecutor, that the person charged was guilty of the crime for which he was prosecuted.66

After all, probable cause need not be based on clear and convincing evidence of guilt, as the investigating officer acts upon reasonable belief—probable cause implies probability of guilt and requires more than bare suspicion but less than evidence which would justify a conviction.67

Probable violation of Sec. 2 (c) of BP 33, as amended

Anent the alleged violation of Sec. 2 (c) in relation to Sec. 4 of BP 33, as amended, petitioners strongly argue that there is no probable cause for said violation based upon an underfilling of a lone cylinder of the eight branded LPG cylinders refilled during the test-buy. Besides, they point out that there was no finding of underfilling in any of the filled LPG cylinders seized during the service of the search warrants. Citing DOE’s Bureau of Energy Utilization Circular No. 85-3-348, they maintain that some deviation is allowed from the exact filled weight. Considering the fact that an isolated underfilling happened in so many LPG cylinders filled, petitioners are of the view that such is due to human or equipment error and does not in any way constitute deliberate underfilling within the contemplation of the law.

Moreover, petitioners cast aspersion on the report and findings of LPG Inspector Navio of the LPGIA by assailing his independence for being a representative of the major petroleum companies and that the inspection he conducted was made without the presence of any DOE representative or any independent body having technical expertise in determining LPG cylinder underfilling beyond the authorized quantity.

Again, we are not persuaded.

Contrary to petitioners’ arguments, a single underfilling constitutes an offense under BP 33, as amended by PD 1865, which clearly criminalizes these offenses. In Perez v. LPG Refillers Association of the Philippines, Inc.,68 the Court affirmed the validity of DOE Circular No. 2000-06-010 which provided penalties on a per cylinder basis for each violation, thus:

B.P. Blg. 33, as amended, criminalizes illegal trading, adulteration, underfilling, hoarding, and overpricing of petroleum products. Under this general description of what constitutes criminal acts involving petroleum products, the Circular merely lists the various modes by which the said criminal acts may be perpetrated, namely: no price display board, no weighing scale, no tare weight or incorrect tare weight markings, no authorized LPG seal, no trade name, unbranded LPG cylinders, no serial number, no distinguishing color, no embossed identifying markings on cylinder, underfilling LPG cylinders, tampering LPG cylinders, and unauthorized decanting of LPG cylinders. These specific acts and omissions are obviously within the

contemplation of the law, which seeks to curb the pernicious practices of some petroleum merchants.69 (Emphasis supplied.)

Moreover, in denying the motion for reconsideration of the LPG Refillers Association of the Philippines, Inc., the Court upheld the basis of said DOE Circular No. 2000-06-010 on the imposition of penalties on a per cylinder basis, thus:

Respondent’s position is untenable. The Circular is not confiscatory in providing penalties on a per cylinder basis. Those penalties do not exceed the ceiling prescribed in Section 4 of B.P. Blg. 33, as amended, which penalizes "any person who commits any act [t]herein prohibited." Thus, violation on a per cylinder basis falls within the phrase "any act" as mandated in Section 4. To provide the same penalty for one who violates a prohibited act in B.P. Blg. 33, as amended, regardless of the number of cylinders involved would result in an indiscriminate, oppressive and impractical operation of B.P. Blg. 33, as amended. The equal protection clause demands that "all persons subject to such legislation shall be treated alike, under like circumstances and conditions, both in the privileges conferred and in the liabilities imposed."70

The Court made it clear that a violation, like underfilling, on a per cylinder basis falls within the phrase of any act as mandated under Sec. 4 of BP 33, as amended. Ineluctably, the underfilling of one LPG cylinder constitutes a clear violation of BP 33, as amended. The finding of underfilling by LPG Inspector Navio of the LPGIA, as aptly noted by Manila Assistant City Prosecutor Catalo who conducted the preliminary investigation, was indeed not controverted by petitioners.

On the issue of manifest bias and partiality, suffice it to say that aside from the allegation by petitioners, they have not shown that LPG Inspector Navio is neither an expert nor qualified to determine underfilling. Besides, it must be noted that the inspection by LPG Inspector Navio was conducted in the presence of NBI agents on April 23, 2004 who attested to that fact through their affidavits. Moreover, no rules require and petitioners have not cited any that the inspection be conducted in the presence of DOE representatives.

Second Core Issue: Petitioners’ Liability for Violations

Sec. 4 of BP 33, as amended, provides for the penalties and persons who are criminally liable, thus:

Sec. 4. Penalties. — Any person who commits any act herein prohibited shall, upon conviction, be punished with a fine of not less than twenty thousand pesos (P20,000) but not more than fifty thousand pesos (P50,000), or imprisonment of at least two (2) years but not more than five (5) years, or both, in the discretion of the court. In cases of second and subsequent conviction under this Act, the penalty shall be both fine and imprisonment as provided herein. Furthermore, the petroleum and/or petroleum products, subject matter of the illegal trading, adulteration, shortselling, hoarding, overpricing or misuse, shall be forfeited in favor of the Government: Provided, That if the petroleum and/or petroleum products have already been delivered and paid for, the offended party shall be indemnified twice the amount paid, and if the seller who has not yet delivered has been fully paid, the price received shall be returned to the buyer with an additional amount equivalent to such price; and in addition, if the offender is an oil company, marketer, distributor, refiller, dealer, sub-dealer and other retail outlets, or hauler, the cancellation of his license.

Trials of cases arising from this Act shall be terminated within thirty (30) days after arraignment.

When the offender is a corporation, partnership, or other juridical person, the president, the general manager, managing partner, or such other officer charged with the management of the business affairs thereof, or employee responsible for the violation shall be criminally liable; in case the offender is an alien, he shall be subject to deportation after serving the sentence.

If the offender is a government official or employee, he shall be perpetually disqualified from office. (Emphasis supplied.)

Relying on the third paragraph of the above statutory proviso, petitioners argue that they cannot be held liable for any perceived violations of BP 33, as amended, since they are mere directors of Omni who are not in charge of the management of its business affairs. Reasoning that criminal liability is personal, liability attaches to a person from his personal act or omission but not from the criminal act or negligence of another. Since Sec. 4 of BP 33, as amended, clearly provides and enumerates who are criminally liable, which do not include members of the board of directors of a corporation, petitioners, as mere members of the board of directors who are not in charge of Omni’s business affairs, maintain that they cannot be held liable for any perceived violations of BP 33, as amended. To bolster their position, they attest to being full-time employees of various firms as shown by the Certificates of Employment71 they submitted tending to show that they are neither involved in the day-to-day business of Omni nor managing it. Consequently, they posit that even if BP 33, as amended, had been violated by Omni they cannot be held criminally liable thereof not being in any way connected with the commission of the alleged violations, and, consequently, the criminal complaints filed against them based solely on their being members of the board of directors as per the GIS submitted by Omni to SEC are grossly discriminatory.

On this point, we agree with petitioners except as to petitioner Arnel U. Ty who is indisputably the President of Omni.

It may be noted that Sec. 4 above enumerates the persons who may be held liable for violations of the law, viz: (1) the president, (2) general manager, (3) managing partner, (4) such other officer charged with the management of the business affairs of the corporation or juridical entity, or (5) the employee responsible for such violation. A common thread of the first four enumerated officers is the fact that they manage the business affairs of the corporation or juridical entity. In short, they are operating officers of a business concern, while the last in the list is self-explanatory.

It is undisputed that petitioners are members of the board of directors of Omni at the time pertinent. There can be no quibble that the enumeration of persons who may be held liable for corporate violators of BP 33, as amended, excludes the members of the board of directors. This stands to reason for the board of directors of a corporation is generally a policy making body. Even if the corporate powers of a corporation are reposed in the board of directors under the first paragraph of Sec. 2372 of the Corporation Code, it is of common knowledge and practice that the board of directors is not directly engaged or charged with the running of the recurring business affairs of the corporation. Depending on the powers granted to them by the Articles of Incorporation, the members of the board generally do not concern themselves with the day-to-day affairs of the corporation, except those corporate officers who are charged with running the business of the corporation and are concomitantly members of the board, like the President. Section 2573 of the Corporation Code requires the president of a corporation to be also a member of the board of directors.

Thus, the application of the legal maxim expressio unius est exclusio alterius, which means the mention of one thing implies the exclusion of another thing not mentioned. If a statute enumerates the thing upon which it is to operate, everything else must necessarily and by implication be excluded from its operation and effect.74 The fourth officer in the enumerated list is the catch-all "such other officer charged with the management of the business affairs" of the corporation or juridical entity which is a factual issue which must be alleged and supported by evidence.

A scrutiny of the GIS reveals that among the petitioners who are members of the board of directors are the following who are likewise elected as corporate officers of Omni: (1) Petitioner Arnel U. Ty (Arnel) as President; (2) petitioner Mari Antonette Ty as Treasurer; and (3) petitioner Jason Ong as Corporate Secretary. Sec. 4 of BP 33, as amended, clearly indicated firstly the president of a corporation or juridical entity to be criminally liable for violations of BP 33, as amended.

Evidently, petitioner Arnel, as President, who manages the business affairs of Omni, can be held liable for probable violations by Omni of BP 33, as amended. The fact that petitioner Arnel is ostensibly the operations manager of Multi-Gas Corporation, a family owned business, does not deter him from managing Omni as well. It is well-settled that where the language of the law is clear and unequivocal, it must be taken to mean exactly what it says.75 As to the other petitioners, unless otherwise shown that they are situated under the catch-all "such other officer charged with the management of the business affairs," they may not be held liable under BP 33, as amended, for probable violations. Consequently, with the exception of petitioner Arnel, the charges against other petitioners must perforce be dismissed or dropped.

WHEREFORE, premises considered, we PARTIALLY GRANT the instant petition. Accordingly, the assailed September 28, 2007 Decision and March 14, 2008 Resolution of the Court of Appeals in CA-G.R. SP No. 98054 are AFFIRMED with MODIFICATION that petitioners Mari Antonette Ty, Jason Ong, Willy Dy and Alvin Ty are excluded from the two Informations charging probable violations of Batas Pambansa Bilang 33, as amended. The Joint Resolution dated November 7, 2005 of the Office of the Chief State Prosecutor is modified accordingly.

G.R. No. 181571 December 16, 2009 BERSAMIN, J.:

JUNO BATISTIS, Petitioner, vs.

PEOPLE OF THE PHILIPPINES, Respondent.

On January 23, 2006, the Regional Trial Court (RTC), Branch 24, in Manila convicted Juno Batistis for violations of Section 155 (infringement of trademark) and Section 168 (unfair competition) of the Intellectual Property Code (Republic Act No. 8293).1

On September 13, 2007, the Court of Appeals (CA) affirmed the conviction for infringement of trademark, but reversed the conviction for unfair competition for failure of the State to prove guilt beyond reasonable doubt.2

Batistis now appeals via petition for review on certiorari to challenge the CA’s affirmance of his conviction for infringement of trademark.

We affirm the conviction, but we modify the penalty by imposing an indeterminate sentence, conformably with the Indeterminate Sentence Law and pertinent jurisprudence.

Antecedents

The Fundador trademark characterized the brandy products manufactured by Pedro Domecq, S.A. of Cadiz, Spain.3 It was duly registered in the Principal Register of the Philippines Patent Office on July 12, 1968 under Certificate of Registration No. 15987,4 for a term of 20 years from November 5, 1970. The registration was renewed for another 20 years effective November 5, 1990.5

Allied Domecq Philippines, Inc., a Philippine corporation exclusively authorized6 to distribute Fundador brandy products imported from Spain wholly in finished form,7 initiated this case against Batistis. Upon its request, agents of the National Bureau of Investigation (NBI) conducted a test-buy in the premises of Batistis, and thereby confirmed that he was actively engaged in the manufacture, sale and distribution of counterfeit Fundador brandy products.8 Upon application of the NBI agents based on the positive results of the test-buy,9 Judge Antonio M. Eugenio, Jr. of the Manila RTC issued on December 20, 2001 Search Warrant No. 01-2576,10 authorizing the search of the premises of Batistis located at No.1664 Onyx St., San Andres Bukid, Sta. Ana, Manila. The search yielded 20 empty Carlos I bottles, 10 empty bottles of Black Label whiskey, two empty bottles of Johnny Walker Swing, an empty bottle of Remy Martin XO, an empty bottle of Chabot, 241 empty Fundador bottles, 163 boxes of Fundador, a half sack of Fundador plastic caps, two filled bottles of Fundador brandy, and eight cartons of empty Jose Cuervo bottles.11

The Office of the City Prosecutor of Manila formally charged Batistis in the RTC in Manila with two separate offenses, namely, infringement of trademark and unfair competition, through the following information, to wit:

That on or about December 20, 2001, in the City of Manila, Philippines, the said accused, being then in possession of two hundred forty one (241) empty Fundador bottles, one hundred sixty three Fundador boxes, one half (1/2) sack of Fundador plastic caps, and two (2) Fundador bottles with intention of deceiving and defrauding the public in general and Allied Domecq Spirits and Wines and Allied Domecq Philippines, Inc. represented by Atty. Leonardo P. Salvador, a corporation duly organized and existing under the laws of the Republic of the Philippines and engaged in manufacturing of Fundador Brandy under license of Pedro Domecq, S.A. Cadiz, Spain, and/or copyright owner of the said product, did then and there wilfully, unlawfully and feloniously reproduce, sell and offer for sale, without prior authority and consent of said manufacturing company, the accused giving their

own low quality product the general appearance and other features of the original Fundador Brandy of the said manufacturing company which would be likely induce the public to believe that the said fake Fundador Brandy reproduced and/or sold are the real Fundador Brandy produced or distributed by the Allied Domecq Spirits and Wines Limited, U.K. and Allied Domecq Philippines, Inc. to the damage and prejudice of the latter and the public.

Contrary to law.12

With Batistis pleading not guilty on June 3, 2003,13 the RTC proceeded to trial. On January 23, 2006, the RTC found Batistis guilty beyond reasonable doubt of infringement of trademark and unfair competition, viz:

ACCORDINGLY, this Court finds the accused JUNO BATISTIS Guilty Beyond Reasonable Doubt of the crime of Violation of Section 155 of the Intellectual Property Code and hereby sentences him to suffer the penalty of imprisonment of TWO (2) YEARS and to pay a fine of FIFTY THOUSAND (P50,000.00) PESOS.

This Court likewise finds accused JUNO BATISTIS Guilty Beyond Reasonable Doubt of the crime of Violation of Section 168 (sic) penalty of imprisonment of TWO (2) YEARS and to pay a fine of FIFTY THOUSAND (Php50,000.00) PESOS.

Accused is further ordered to indemnify the private complainant the sum of TWENTY-FIVE (Php25,000.00) PESOS as actual damages.

The following items recovered from the premises of the accused and subject of the case are hereby ordered destroyed, pursuant to existing rules and regulations:

Twenty (20) empty Carlos 1 bottles

Ten (10) Black Label empty bottles

Two (2) empty bottles of Jhonny (sic) Walker Swing

One(1) empty bottle of Remy Martin XO

One (1) empty bottle of Chabot

Two hundred forty-one (241) empty Fundador bottles

One hundred sixty-three (163) Fundador boxes

One half (1/2 sack of Fundador plastic caps, and

Two (2) filled Fundador bottles

Eight (8) boxes of empty Jose Cuervo bottles

WITH COSTS AGAINST ACCUSED

SO ORDERED.14

Batistis appealed to the CA, which, on September 13, 2007, affirmed his conviction for infringement of trademark, but acquitted him of unfair competition,15 disposing:

WHEREFORE, premises considered, the Appeal of Appellant JUNO BATISTIS is hereby PARTIALLY GRANTED. The challenged Decision is AFFIRMED in so far as the charge against him for Violation of Section 155 of the Intellectual Property Code is concerned.

However, for failure of the prosecution to prove to a moral certainty the guilt of the said Appellant, for violation of Section 168 of the same code a judgment of ACQUITTAL is hereby rendered in his favor.

SO ORDERED.16

After the CA denied his motion for reconsideration, Batistis brought this appeal.

Issue

Batistis contends that:

THE REGIONAL TRIAL COURT ERRED IN CONVICTING THE ACCUSED ON THE BASIS OF THE SELF-SERVING AFFIDAVITS AND TESTIMONIES OF THE POLICE OFFICERS WHO CONDUCTED THE RAID ON THE HOUSE OF THE ACCUSED.

He submits that the only direct proofs of his guilt were the self-serving testimonies of the NBI raiding team; that he was not present during the search; that one of the NBI raiding agents failed to immediately identify him in court; and that aside from the two bottles of Fundador brandy, the rest of the confiscated items were not found in his house.

Ruling

The petition for review has no merit.

1.

Appeal confined only to Questions of Law

Pursuant to Section 3,17 Rule 122, and Section 9,18 Rule 45, of the Rules of Court, the review on appeal of a decision in a criminal case, wherein the CA imposes a penalty other than death, reclusion perpetua, or life imprisonment, is by petition for review on certiorari.

A petition for review on certiorari raises only questions of law. Sec. 1, Rule 45, Rules of Court, explicitly so provides, viz:

Section 1. Filing of petition with Supreme Court.—A party desiring to appeal by certiorari from a judgment, final order or resolution of the Court of Appeals, the Sandiganbayan, the Court of Tax Appeals, 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 may include an application for a writ of preliminary injunction or other provisional remedies and shall raise only questions of law, which must be distinctly set forth. The petitioner may seek the same provisional remedies by verified motion filed in the same action or proceeding at any time during its pendency.

Accordingly, we reject the appeal for the following reasons:

Firstly: The petition for review replicates Batistis’ appellant's brief filed in the CA,19 a true indication that the errors he submits for our review and reversal are those he had attributed to the RTC. He thereby rests his appeal on his rehashed arguments that the CA already discarded. His appeal is, therefore, improper, considering that his petition for review on certiorari should raise only the errors committed by the CA as the appellate court, not the errors of the RTC.

Secondly: Batistis’ assigned errors stated in the petition for review on certiorari require a re-appreciation and re-examination of the trial evidence. As such, they raise issues evidentiary and factual in nature. The appeal is dismissible on that basis, because, one, the petition for review thereby violates the limitation of the issues to only legal questions, and, two, the Court, not being a trier of facts, will not disturb the factual findings of the CA, unless they were mistaken, absurd, speculative, conflicting, tainted with grave abuse of discretion, or contrary to the findings reached by the court of origin.20

Whether a question of law or a question of fact is involved is explained in Belgica v. Belgica:21

xxx [t]here exists a question of law when there is doubt on what the law applicable to a certain set of facts is. Questions of fact, on the other hand, arise when there is an issue regarding the truth or falsity of the statement of facts. Questions on whether certain pieces of evidence should be accorded probative value or whether the proofs presented by one party are clear, convincing and adequate to establish a proposition are issues of fact. Such questions are not subject to review by this Court. As a general rule, we review cases decided by the CA only if they involve questions of law raised and distinctly set forth in the petition.22

Thirdly: The factual findings of the RTC, its calibration of the testimonies of the witnesses, and its assessment of their probative weight are given high respect, if not conclusive effect, unless cogent facts and circumstances of substance, which if considered, would alter the outcome of the case, were ignored, misconstrued or misinterpreted.23

To accord with the established doctrine of finality and bindingness of the trial court’s findings of fact, we do not disturb such findings of fact of the RTC, particularly after their affirmance by the CA, for Batistis, as appellant, did not sufficiently prove any extraordinary circumstance justifying a departure from such doctrine.

2.

Findings of fact were even correct

A review of the decision of the CA, assuming that the appeal is permissible, even indicates that both the RTC and the CA correctly appreciated the evidence against the accused, and correctly applied the pertinent law to their findings of fact.

Article 155 of the Intellectual Property Code identifies the acts constituting infringement of trademark, viz:

Section 155. Remedies; Infringement. — Any person who shall, without the consent of the owner of the registered mark:

155.1. Use in commerce any reproduction, counterfeit, copy, or colorable imitation of a registered mark or the same container or a dominant feature thereof in connection with the sale, offering for sale, distribution, advertising of any goods or services including other preparatory steps necessary to carry out the sale of any goods or services on or in connection with which such use is likely to cause confusion, or to cause mistake, or to deceive; or

155.2. Reproduce, counterfeit, copy or colorably imitate a registered mark or a dominant feature thereof and apply such reproduction, counterfeit, copy or colorable imitation to labels, signs, prints, packages, wrappers, receptacles or advertisements intended to be used in commerce upon or in connection with the sale, offering for sale, distribution, or advertising of goods or services on or in connection with which such use is likely to cause confusion, or to cause mistake, or to deceive, shall be liable in a civil action for infringement by the registrant for the remedies hereinafter set forth: Provided, That the infringement takes place at the moment any of the acts stated in Subsection 155.1 or this subsection are committed regardless of whether there is actual sale of goods or services using the infringing material.

Harvey Tan, Operations Manager of Pedro Domecq, S.A. whose task involved the detection of counterfeit products in the Philippines, testified that the seized Fundador brandy, when compared with the genuine product, revealed several characteristics of counterfeiting, namely: (a) the Bureau of Internal Revenue (BIR) seal label attached to the confiscated products did not reflect the word tunay when he flashed

a black light against the BIR label; (b) the "tamper evident ring" on the confiscated item did not contain the word Fundador; and (c) the word Fundador on the label was printed flat with sharper edges, unlike the raised, actually embossed, and finely printed genuine Fundador trademark.24

There is no question, therefore, that Batistis exerted the effort to make the counterfeit products look genuine to deceive the unwary public into regarding the products as genuine. The buying public would be easy to fall for the counterfeit products due to their having been given the appearance of the genuine products, particularly with the difficulty of detecting whether the products were fake or real if the buyers had no experience and the tools for detection, like black light. He thereby infringed the registered Fundador trademark by the colorable imitation of it through applying the dominant features of the trademark on the fake products, particularly the two bottles filled with Fundador brandy.25 His acts constituted infringement of trademark as set forth in Section 155, supra.

3.

Penalty Imposed should be an Indeterminate Penalty and Fine

Section 170 of the Intellectual Property Code provides the penalty for infringement of trademark, to wit:

Section 170. Penalties. - Independent of the civil and administrative sanctions imposed by law, a criminal penalty of imprisonment from two (2) years to five (5) years and a fine ranging from Fifty thousand pesos (P50,000) to Two hundred thousand pesos(P200,000), shall be imposed on any person who is found guilty of committing any of the acts mentioned in Section 155, Section 168 and Subsection 169.1. (Arts. 188 and 189, Revised Penal Code).

The CA affirmed the decision of the RTC imposing the "the penalty of imprisonment of TWO (2) YEARS and to pay a fine of FIFTY THOUSAND (P50,000.00) PESOS."

We rule that the penalty thus fixed was contrary to the Indeterminate Sentence Law,26 as amended by Act No. 4225. We modify the penalty.

Section 1 of the Indeterminate Sentence Law, as amended, provides:

Section 1. Hereafter, in imposing a prison sentence for an offense punished by the Revised Penal Code, or its amendments, the court shall sentence the accused to an indeterminate sentence the maximum term of which shall be that which, in view of the attending circumstances, could be properly imposed under the rules of the said Code, and the minimum which shall be within the range of the penalty next lower to that prescribed by the Code for the offense; and if the offense is punished by any other law, the court shall sentence the accused to an indeterminate sentence, the maximum term of which shall not exceed the maximum fixed by said law and the minimum shall not be less than the minimum term prescribed by the same.

The straight penalty the CA imposed was contrary to the Indeterminate Sentence Law, whose Section 1 requires that the penalty of imprisonment should be an indeterminate sentence. According to Spouses Bacar v. Judge de Guzman,Jr.,27 the imposition of an indeterminate sentence with maximum and minimum periods in criminal cases not excepted from the coverage of the Indeterminate Sentence Law pursuant to its Section 228 is mandatory, viz:

The need for specifying the minimum and maximum periods of the indeterminate sentence is to prevent the unnecessary and excessive deprivation of liberty and to enhance the economic usefulness of the

accused, since he may be exempted from serving the entire sentence, depending upon his behavior and his physical, mental, and moral record. The requirement of imposing an indeterminate sentence in all criminal offenses whether punishable by the Revised Penal Code or by special laws, with definite minimum and maximum terms, as the Court deems proper within the legal range of the penalty specified by the law must, therefore, be deemed mandatory.

Indeed, the imposition of an indeterminate sentence is mandatory. For instance, in Argoncillo v. Court of Appeals,29 three persons were prosecuted for and found guilty of illegal fishing (with the use of explosives) as defined in Section 33, Presidential Decree No. 704, as amended by Presidential Decree No. 1058, for which the prescribed penalty was imprisonment from 20 years to life imprisonment. The trial court imposed on each of the accused a straight penalty of 20 years imprisonment, and the CA affirmed the trial court. On appeal, however, this Court declared the straight penalty to be erroneous, and modified it by imposing imprisonment ranging from 20 years, as minimum, to 25 years, as maximum.

We are aware that an exception was enunciated in People v. Nang Kay,30

a prosecution for illegal possession of firearms punished by a special law (that is, Section 2692, Revised Administrative Code, as amended by Commonwealth Act 56 and Republic Act No. 4) with imprisonment of not less than five years nor more than ten years. There, the Court sustained the straight penalty of five years and one day imposed by the trial court (Court of First Instance of Rizal) because the application of the Indeterminate Sentence Law would be unfavorable to the accused by lengthening his prison sentence. Yet, we cannot apply the Nang Kay exception herein, even if this case was a prosecution under a special law like that in Nang Kay. Firstly, the trial court in Nang Kay could well and lawfully have given the accused the lowest prison sentence of five years because of the mitigating circumstance of his voluntary plea of guilty, but, herein, both the trial court and the CA did not have a similar circumstance to justify the lenity towards the accused. Secondly, the large number of Fundador articles confiscated from his house (namely, 241 empty bottles of Fundador, 163 Fundador boxes, a half sack full of Fundador plastic caps, and two filled bottles of Fundador Brandy) clearly demonstrated that Batistis had been committing a grave economic offense over a period of time, thereby deserving for him the indeterminate, rather than the straight and lower, penalty.

ACCORDINGLY, we affirm the decision dated September 13, 2007 rendered in C.A.-G.R. CR No. 30392 entitled People of the Philippines v. Juno Batistis, but modify the penalty to imprisonment ranging from two years, as minimum, to three years, as maximum, and a fine of P50,000.00.

G.R. No. 169504 March 3, 2010 CARPIO, J.:

COFFEE PARTNERS, INC., Petitioner, vs.

SAN FRANCISCO COFFEE & ROASTERY, INC., Respondent.

The Case

This is a petition for review1 of the 15 June 2005 Decision2 and the 1 September 2005 Resolution3 of the Court of Appeals in CA-G.R. SP No. 80396. In its 15 June 2005 Decision, the Court of Appeals set aside the 22 October 2003 Decision4 of the Office of the Director General-Intellectual Property Office and reinstated the 14 August 2002 Decision5 of the Bureau of Legal Affairs-Intellectual Property Office. In its 1 September 2005 Resolution, the Court of Appeals denied petitioner’s motion for reconsideration and respondent’s motion for partial reconsideration.

The Facts

Petitioner Coffee Partners, Inc. is a local corporation engaged in the business of establishing and maintaining coffee shops in the country. It registered with the Securities and Exchange Commission (SEC) in January 2001. It has a franchise agreement6 with Coffee Partners Ltd. (CPL), a business entity organized and existing under the laws of British Virgin Islands, for a non-exclusive right to operate coffee shops in the Philippines using trademarks designed by CPL such as "SAN FRANCISCO COFFEE."

Respondent is a local corporation engaged in the wholesale and retail sale of coffee. It registered with the SEC in May 1995. It registered the business name "SAN FRANCISCO COFFEE & ROASTERY, INC." with the Department of Trade and Industry (DTI) in June 1995. Respondent had since built a customer base that included Figaro Company, Tagaytay Highlands, Fat Willy’s, and other coffee companies.

In 1998, respondent formed a joint venture company with Boyd Coffee USA under the company name Boyd Coffee Company Philippines, Inc. (BCCPI). BCCPI engaged in the processing, roasting, and wholesale selling of coffee. Respondent later embarked on a project study of setting up coffee carts in malls and other commercial establishments in Metro Manila.

In June 2001, respondent discovered that petitioner was about to open a coffee shop under the name "SAN FRANCISCO COFFEE" in Libis, Quezon City. According to respondent, petitioner’s shop caused confusion in the minds of the public as it bore a similar name and it also engaged in the business of selling coffee. Respondent sent a letter to petitioner demanding that the latter stop using the name "SAN FRANCISCO COFFEE." Respondent also filed a complaint with the Bureau of Legal Affairs-Intellectual Property Office (BLA-IPO) for infringement and/or unfair competition with claims for damages.

In its answer, petitioner denied the allegations in the complaint. Petitioner alleged it filed with the Intellectual Property Office (IPO) applications for registration of the mark "SAN FRANCISCO COFFEE & DEVICE" for class 42 in 1999 and for class 35 in 2000. Petitioner maintained its mark could not be confused with respondent’s trade name because of the notable distinctions in their appearances. Petitioner argued respondent stopped operating under the trade name "SAN FRANCISCO COFFEE" when it formed a joint venture with Boyd Coffee USA. Petitioner contended respondent did not cite any specific acts that would lead one to believe petitioner had, through fraudulent means, passed off its mark as that of respondent, or that it had diverted business away from respondent.

Mr. David Puyat, president of petitioner corporation, testified that the coffee shop in Libis, Quezon City opened sometime in June 2001 and that another coffee shop would be opened in Glorietta Mall, Makati City. He stated that the coffee shop was set up pursuant to a franchise agreement executed in January 2001 with CPL, a British Virgin Island Company owned by Robert Boxwell. Mr. Puyat said he became involved in the business when one Arthur Gindang invited him to invest in a

coffee shop and introduced him to Mr. Boxwell. For his part, Mr. Boxwell attested that the coffee shop "SAN FRANCISCO COFFEE" has branches in Malaysia and Singapore. He added that he formed CPL in 1997 along with two other colleagues, Shirley Miller John and Leah Warren, who were former managers of Starbucks Coffee Shop in the United States. He said they decided to invest in a similar venture and adopted the name "SAN FRANCISCO COFFEE" from the famous city in California where he and his former colleagues once lived and where special coffee roasts came from.

The Ruling of the Bureau of Legal Affairs-Intellectual Property Office

In its 14 August 2002 Decision, the BLA-IPO held that petitioner’s trademark infringed on respondent’s trade name. It ruled that the right to the exclusive use of a trade name with freedom from infringement by similarity is determined from priority of adoption. Since respondent registered its business name with the DTI in 1995 and petitioner registered its trademark with the IPO in 2001 in the Philippines and in 1997 in other countries, then respondent must be protected from infringement of its trade name.

The BLA-IPO also held that respondent did not abandon the use of its trade name as substantial evidence indicated respondent continuously used its trade name in connection with the purpose for which it was organized. It found that although respondent was no longer involved in blending, roasting, and distribution of coffee because of the creation of BCCPI, it continued making plans and doing research on the retailing of coffee and the setting up of coffee carts. The BLA-IPO ruled that for abandonment to exist, the disuse must be permanent, intentional, and voluntary.

The BLA-IPO held that petitioner’s use of the trademark "SAN FRANCISCO COFFEE" will likely cause confusion because of the exact similarity in sound, spelling, pronunciation, and commercial impression of the words "SAN FRANCISCO" which is the dominant portion of respondent’s trade name and petitioner’s trademark. It held that no significant difference resulted even with a diamond-shaped figure with a cup in the center in petitioner's trademark because greater weight is given to words – the medium consumers use in ordering coffee products.

On the issue of unfair competition, the BLA-IPO absolved petitioner from liability. It found that petitioner adopted the trademark "SAN FRANCISCO COFFEE" because of the authority granted to it by its franchisor. The BLA-IPO held there was no evidence of intent to defraud on the part of petitioner.

The BLA-IPO also dismissed respondent’s claim of actual damages because its claims of profit loss were based on mere assumptions as respondent had not even started the operation of its coffee carts. The BLA-IPO likewise dismissed respondent’s claim of moral damages, but granted its claim of attorney’s fees.

Both parties moved for partial reconsideration. Petitioner protested the finding of infringement, while respondent questioned the denial of actual damages. The BLA-IPO denied the parties’ partial motion for reconsideration. The parties appealed to the Office of the Director General-Intellectual Property Office (ODG-IPO).

The Ruling of the Office of the Director General-

Intellectual Property Office

In its 22 October 2003 Decision, the ODG-IPO reversed the BLA-IPO. It ruled that petitioner’s use of the trademark "SAN FRANCISCO COFFEE"

did not infringe on respondent's trade name. The ODG-IPO found that respondent had stopped using its trade name after it entered into a joint venture with Boyd Coffee USA in 1998 while petitioner continuously used the trademark since June 2001 when it opened its first coffee shop in Libis, Quezon City. It ruled that between a subsequent user of a trade name in good faith and a prior user who had stopped using such trade name, it would be inequitable to rule in favor of the latter.

The Ruling of the Court of Appeals

In its 15 June 2005 Decision, the Court of Appeals set aside the 22 October 2003 decision of the ODG-IPO in so far as it ruled that there was no infringement. It reinstated the 14 August 2002 decision of the BLA-IPO finding infringement. The appellate court denied respondent’s claim for actual damages and retained the award of attorney’s fees. In its 1 September 2005 Resolution, the Court of Appeals denied petitioner’s motion for reconsideration and respondent’s motion for partial reconsideration.

The Issue

The sole issue is whether petitioner’s use of the trademark "SAN FRANCISCO COFFEE" constitutes infringement of respondent’s trade name "SAN FRANCISCO COFFEE & ROASTERY, INC.," even if the trade name is not registered with the Intellectual Property Office (IPO).

The Court’s Ruling

The petition has no merit.

Petitioner contends that when a trade name is not registered, a suit for infringement is not available. Petitioner alleges respondent has abandoned its trade name. Petitioner points out that respondent’s registration of its business name with the DTI expired on 16 June 2000 and it was only in 2001 when petitioner opened a coffee shop in Libis, Quezon City that respondent made a belated effort to seek the renewal of its business name registration. Petitioner stresses respondent’s failure to continue the use of its trade name to designate its goods negates any allegation of infringement. Petitioner claims no confusion is likely to occur between its trademark and respondent’s trade name because of a wide divergence in the channels of trade, petitioner serving ready-made coffee while respondent is in wholesale blending, roasting, and distribution of coffee. Lastly, petitioner avers the proper noun "San Francisco" and the generic word "coffee" are not capable of exclusive appropriation.

Respondent maintains the law protects trade names from infringement even if they are not registered with the IPO. Respondent claims Republic Act No. 8293 (RA 8293)7 dispensed with registration of a trade name with the IPO as a requirement for the filing of an action for infringement. All that is required is that the trade name is previously used in trade or commerce in the Philippines. Respondent insists it never abandoned the use of its trade name as evidenced by its letter to petitioner demanding immediate discontinuation of the use of its trademark and by the filing of the infringement case. Respondent alleges petitioner’s trademark is confusingly similar to respondent’s trade name. Respondent stresses ordinarily prudent consumers are likely to be misled about the source, affiliation, or sponsorship of petitioner’s coffee.

As to the issue of alleged abandonment of trade name by respondent, the BLA-IPO found that respondent continued to make plans and do research on the retailing of coffee and the establishment of coffee carts, which negates abandonment. This finding was upheld by the Court of Appeals, which further found that while respondent stopped using its

trade name in its business of selling coffee, it continued to import and sell coffee machines, one of the services for which the use of the business name has been registered. The binding effect of the factual findings of the Court of Appeals on this Court applies with greater force when both the quasi-judicial body or tribunal like the BLA-IPO and the Court of Appeals are in complete agreement on their factual findings. It is also settled that absent any circumstance requiring the overturning of the factual conclusions made by the quasi-judicial body or tribunal, particularly if affirmed by the Court of Appeals, the Court necessarily upholds such findings of fact.8

Coming now to the main issue, in Prosource International, Inc. v. Horphag Research Management SA,9 this Court laid down what constitutes infringement of an unregistered trade name, thus:

(1) The trademark being infringed is registered in the Intellectual Property Office; however, in infringement of trade name, the same need not be registered;

(2) The trademark or trade name is reproduced, counterfeited, copied, or colorably imitated by the infringer;

(3) The infringing mark or trade name is used in connection with the sale, offering for sale, or advertising of any goods, business or services; or the infringing mark or trade name is applied to labels, signs, prints, packages, wrappers, receptacles, or advertisements intended to be used upon or in connection with such goods, business, or services;

(4) The use or application of the infringing mark or trade name is likely to cause confusion or mistake or to deceive purchasers or others as to the goods or services themselves or as to the source or origin of such goods or services or the identity of such business; and

(5) It is without the consent of the trademark or trade name owner or the assignee thereof.10 (Emphasis supplied)

Clearly, a trade name need not be registered with the IPO before an infringement suit may be filed by its owner against the owner of an infringing trademark. All that is required is that the trade name is previously used in trade or commerce in the Philippines.11

Section 22 of Republic Act No. 166,12 as amended, required registration of a trade name as a condition for the institution of an infringement suit, to wit:

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)

However, RA 8293, which took effect on 1 January 1998, has dispensed with the registration requirement. Section 165.2 of RA 8293 categorically states that trade names shall be protected, even prior to or without registration with the IPO, against any unlawful act including any subsequent use of the trade name by a third party, whether as a trade name or a trademark likely to mislead the public.1avvph!1 Thus:

SEC. 165.2 (a) Notwithstanding any laws or regulations providing for any obligation to register trade names, such names shall be protected, even prior to or without registration, against any unlawful act committed by third parties.

(b) In particular, any subsequent use of a trade name by a third party, whether as a trade name or a mark or collective mark, or any such use of a similar trade name or mark, likely to mislead the public, shall be deemed unlawful. (Emphasis supplied)

It is the likelihood of confusion that is the gravamen of infringement. But there is no absolute standard for likelihood of confusion. Only the particular, and sometimes peculiar, circumstances of each case can determine its existence. Thus, in infringement cases, precedents must be evaluated in the light of each particular case.13

In determining similarity and likelihood of confusion, our jurisprudence has developed two tests: the dominancy test and the holistic test. The dominancy test focuses on the similarity of the prevalent features of the competing trademarks that might cause confusion and deception, thus constituting infringement. If the competing trademark contains the main, essential, and dominant features of another, and confusion or deception is likely to result, infringement occurs. Exact duplication or imitation is not required. The question is whether the use of the marks involved is likely to cause confusion or mistake in the mind of the public or to deceive consumers.14

In contrast, the holistic test entails a consideration of the entirety of the marks as applied to the products, including the labels and packaging, in determining confusing similarity.15 The discerning eye of the observer must focus not only on the predominant words but also on the other features appearing on both marks in order that the observer may draw his conclusion whether one is confusingly similar to the other.16

Applying either the dominancy test or the holistic test, petitioner’s "SAN FRANCISCO COFFEE" trademark is a clear infringement of respondent’s "SAN FRANCISCO COFFEE & ROASTERY, INC." trade name. The descriptive words "SAN FRANCISCO COFFEE" are precisely the dominant features of respondent’s trade name. Petitioner and respondent are engaged in the same business of selling coffee, whether wholesale or retail. The likelihood of confusion is higher in cases where the business of one corporation is the same or substantially the same as that of another corporation. In this case, the consuming public will likely be confused as to the source of the coffee being sold at petitioner’s coffee shops. Petitioner’s argument that "San Francisco" is just a proper name referring to the famous city in California and that "coffee" is simply a generic term, is untenable. Respondent has acquired an exclusive right to the use of the trade name "SAN FRANCISCO COFFEE & ROASTERY, INC." since the registration of the business name with the DTI in 1995. Thus, respondent’s use of its trade name from then on must be free from any infringement by similarity. Of course, this does not mean that respondent has exclusive use of the geographic word "San Francisco" or the generic word "coffee." Geographic or generic words are not, per se, subject to exclusive appropriation. It is only the combination of the words "SAN FRANCISCO COFFEE," which is respondent’s trade name in its coffee business, that is protected against infringement on matters related to the coffee business to avoid confusing or deceiving the public.

In Philips Export B.V. v. Court of Appeals,17 this Court held that a corporation has an exclusive right to the use of its name. The right proceeds from the theory that it is a fraud on the corporation which has acquired a right to that name and perhaps carried on its business

thereunder, that another should attempt to use the same name, or the same name with a slight variation in such a way as to induce persons to deal with it in the belief that they are dealing with the corporation which has given a reputation to the name.18

This Court is not just a court of law, but also of equity. We cannot allow petitioner to profit by the name and reputation so far built by respondent without running afoul of the basic demands of fair play. Not only the law but equity considerations hold petitioner liable for infringement of respondent’s trade name.

The Court of Appeals was correct in setting aside the 22 October 2003 Decision of the Office of the Director General-Intellectual Property Office and in reinstating the 14 August 2002 Decision of the Bureau of Legal Affairs-Intellectual Property Office.

WHEREFORE, we DENY the petition for review. We AFFIRM the 15 June 2005 Decision and 1 September 2005 Resolution of the Court of Appeals in CA-G.R. SP No. 80396.

G.R. No. 180595 March 5, 2010 ABAD, J.:

ARTHUR DEL ROSARIO and ALEXANDER DEL ROSARIO, Petitioners, vs.

HELLENOR D. DONATO, JR. and RAFAEL V. GONZAGA, Respondents.

This case is about the need for plaintiff to state the facts constituting his cause of action and the correct forum for actions for damages arising from alleged wrongful procurement and enforcement of a search

warrant issued in connection with an alleged criminal violation of the intellectual property law.

The Facts and the Case

On January 23, 2002 Philip Morris Products, Inc. (Philip Morris) wrote the National Bureau of Investigation (NBI), requesting assistance in curtailing the proliferation of fake Marlboro cigarettes in Angeles City, Pampanga. After doing surveillance work in that city, respondent Hellenor Donato, Jr., the NBI agent assigned to the case, succeeded in confirming the storage and sale of such fake cigarettes at the house at 51 New York Street, Villasol Subdivision, Angeles City, that belonged to petitioner Alexander del Rosario.

On March 5, 2002 respondent Donato applied for a search warrant with Branch 57 of the Regional Trial Court (RTC) of Angeles City to search the subject premises. But it took a week later or on March 12, 2002 for the RTC to hear the application and issue the search warrant. Although Donato felt that the delayed hearing compromised the operation, the NBI agents led by respondent Rafael V. Gonzaga proceeded to implement the warrant. Their search yielded no fake Marlboro cigarettes.

Subsequently, petitioners Alexander and Arthur del Rosario (the Del Rosarios) filed a complaint for P50 million in damages against respondents NBI agents Donato and Gonzaga and two others before the RTC of Angeles City, Branch 62, in Civil Case 10584. On August 6, 2003 respondents NBI agents answered the complaint with a motion to dismiss on the grounds of: a) the failure of the complaint to state a cause of action; b) forum shopping; and c) the NBI agents’ immunity from suit, they being sued as such agents. The RTC denied the motion on March 25, 2003. The NBI agents filed a motion for reconsideration but the RTC denied the same on June 27, 2003.

Dissatisfied, respondents NBI agents filed a special civil action of certiorari before the Court of Appeals (CA) in CA-G.R. SP 79496. On June 29, 2007 the latter court granted the petition and annulled the RTC’s orders, first, in alleging merely that the NBI agents unlawfully procured the search warrant without stating the facts that made the procurement unlawful, the complaint failed to state a cause of action; and second, the Del Rosarios were guilty of forum shopping in that they should have filed their claim for damages against the NBI agents through a motion for compensation with the court that issued the search warrant.

The Del Rosarios sought reconsideration of the decision but the CA denied it on November 19, 2007, prompting them to file this petition for review.

The Issues Presented

The petition presents two issues:

1. Whether or not the CA correctly ruled that the complaint of the Del Rosarios did not state a cause of action; and

2. Whether or not the CA correctly ruled that the Del Rosarios were guilty of forum shopping.

The Court’s Rulings

One. The CA held that the Del Rosarios’ complaint before the RTC failed to state a cause of action against respondents NBI agents. Such complaint said that the NBI agents unlawfully procured and enforced the search warrant issued against the Del Rosarios but it failed to state the ultimate facts from which they drew such conclusion.

The test of sufficiency of a complaint is whether or not, assuming the truth of the facts that plaintiff alleges in it, the court can render judgment granting him the judicial assistance he seeks.1 And judgment would be right only if the facts he alleges constitute a cause of action that consists of three elements: (1) the plaintiff’s legal right in the matter; (2) the defendant’s corresponding obligation to honor or respect such right; and (3) the defendant’s subsequent violation of the right. Absent any of these, the complaint would have failed to state a cause of action.2

According to the Del Rosarios, the following allegations in their complaint state a cause or causes of action against respondents NBI agents:

2.4 On 12 March 2002, elements of the [NBI] x x x led by Defendant Rafael I. Gonzaga x x x entered by force the premises belonging to Plaintiff Alexander del Rosario situated at No. 51 New York Street, Villasol Subdivision, Angeles City, pursuant to a Search Warrant unlawfully obtained from the [RTC] of Angeles City, Branch 57 x x x.

x x x x

2.6 Contrary to the sworn statements given before the court by defendants Hellenor D. Donato Jr. x x x and contrary to the allegation in Search Warrant No. 02-09A, no ‘fake Marlboro cigarettes and their packaging’ were found at No. 51 New York Street, Villasol Subdivision, Angeles City x x x.

2.7 The inclusion of Plaintiff Arthur del Rosario in Search Warrant No. 02-09 had no factual basis considering that the premises searched is the property solely of Plaintiff Alexander del Rosario.

2.8 Worse the enforcement of Searched [sic] Warrant No. 02-09 was just part of the series of raids and searches that was conducted in Angeles City and Pampanga, which was done with much publicity in the community and had tended to include the Plaintiffs in the same category as other persons and entities who were in fact found to be dealing with fake Marlboro cigarettes.

x x x x

3.2 The baseless sworn allegations that Plaintiffs had under their control and possession counterfeit Marlboro cigarettes and packaging to obtain a search warrant, and the malicious service of the such warrant at the residential premises of Plaintiff Alexander del Rosario in full and plain view of members of the community, as part of the series of raids and operations conducted within Angeles City and Pampanga during that period, has tainted irreversibly the good names which Plaintiffs have painstakingly built and maintained over the years.

x x x x

3.4 Plaintiffs were subjected to so much humiliation and embarrassment by the raid conducted on the subject residential premises, and subjected them to much unwarranted speculation of engaging in the sale of fake merchandise.

Essentially, however, all that the Del Rosarios allege is that respondents NBI agents used an unlawfully obtained search warrant against them, evidenced by the fact that, contrary to the sworn statements used to get such warrant, the NBI agents found no fake Marlboro cigarettes in petitioner Alexander del Rosario’s premises.

But a judicially ordered search that fails to yield the described illicit article does not of itself render the court’s order "unlawful." The Del Rosarios did not allege that respondents NBI agents violated their right by fabricating testimonies to convince the RTC of Angeles City to issue

the search warrant. Their allegation that the NBI agents used an unlawfully obtained search warrant is a mere conclusion of law. While a motion to dismiss assumes as true the facts alleged in the complaint, such admission does not extend to conclusions of law.3 Statements of mere conclusions of law expose the complaint to a motion to dismiss on ground of failure to state a cause of action.4

Further, the allegation that the search warrant in this case was served in a malicious manner is also not sufficient. Allegations of bad faith, malice, and other related words without ultimate facts to support the same are mere conclusions of law.5

The Del Rosarios’ broad assertion in their complaint that the search was conducted "in full and plain view of members of the community" does not likewise support their claim that such search was maliciously enforced. There is nothing inherently wrong with search warrants being enforced in full view of neighbors. In fact, when the respondent or his representative is not present during the search, the rules require that it be done in the presence of two residents of the same locality. These safeguards exist to protect persons from possible abuses that may occur if searches were done surreptitiously or clandestinely.

Two. Invoking Section 21 of this Court’s Administrative Matter (A.M.) 02-1-06-SC (not A.O. 01-1-06-SC as cited), the CA held that, rather than file a separate action for damages, the Del Rosarios should have filed their claim for compensation in the same proceeding and with the same court that issued the writ of search and seizure. The Del Rosarios were thus guilty of forum shopping.

A.M. 02-1-06-SC, the Rule on Search and Seizure in Civil Actions for Infringement of Intellectual Property Rights, provides:

SEC. 21. Claim for damages. – Where the writ [of search and seizure] is discharged on any of the grounds provided in this Rule, or where it is found after trial that there has been no infringement or threat of infringement of an intellectual property right, the court, upon motion of the alleged infringing defendant or expected adverse party and after due hearing, shall order the applicant to compensate the defendant or expected adverse party upon the cash bond, surety bond or other equivalent security for any injury or damage the latter suffered by the issuance and enforcement of the writ. Should the damages exceed the amount of the bond, the applicant shall be liable for the payment of the excess.

When a complaint is already filed in court, the motion shall be filed with the same court during the trial or before appeal is perfected or before judgment becomes executory, with due notice to the applicant, setting forth the facts showing the defendant’s right to damages and the amount thereof. The award of damages shall be included in the judgment in the main case.

Where no complaint is filed against the expected adverse party, the motion shall be filed with the court which issued the writ. In such a case, the court shall set the motion for summary hearing and immediately determine the expected adverse party’s right to damages.

A judgment in favor of the applicant in its principal claim should not necessarily bar the alleged infringing defendant from recovering damages where he suffered losses by reason of the wrongful issuance or enforcement of the writ.

The damages provided for in this section shall be independent from the damages claimed by the defendant in his counterclaim.

But the subject search warrant was not issued under A.M. 02-1-06-SC, which governed the issuance of a writ of search and seizure in a civil

action for infringement filed by an intellectual property right owner against the supposed infringer of his trademark or name. Philip Morris, the manufacturer of Marlboro cigarettes, did not go by this route. Philip Morris did not file a civil action for infringement of its trademark against the Del Rosarios before the RTC of Angeles City.

Instead, Philip Morris sought assistance from the NBI for the apprehension and criminal prosecution of those reportedly appropriating its trademark and selling fake Marlboro cigarettes. In turn, the NBI instituted a police action that included applying for a search and seizure warrant under Sections 3, 4, 5 and 6 of Rule 126 of the Rules of Criminal Procedure (not under the provisions of A.M. 02-1-06-SC) against the Del Rosarios upon the belief that they were storing and selling fake Marlboro cigarettes in violation of the penal provisions of the intellectual property law.

The proceeding under Rule 126, a limited criminal one, does not provide for the filing of counterclaims for damages against those who may have improperly sought the issuance of the search warrant. Consequently, the Del Rosarios had the right to seek damages, if the circumstances warranted, by separate civil action for the wrong inflicted on them by an improperly obtained or enforced search warrant. Unfortunately, their complaint, as worded, failed to state a proper cause of action.

Petitioner Arthur del Rosario claims that respondents NBI agents wrongfully included him as respondent in their application for a search warrant since he neither owned the house at 51 New York Street nor resided in it. But the rules do not require respondents in search warrant proceedings to be residents of the premises to be searched. If this were the case, criminals in possession of illegal articles could simply use other people’s residence for storing such articles to avoid being raided and searched.

The Del Rosarios raise a number of procedural issues: a) the supposed failure of respondents NBI agents to file their motion for reconsideration of the RTC order denying their motion to dismiss within 15 days of receipt of the order; b) their resort to a special civil action of certiorari to challenge the RTC’s denial of their motion to dismiss; c) the propriety of their inclusion of a motion to dismiss in their answer; d) the CA’s grant to them in 2003 of a 15-day extension to file a petition for certiorari after the lapse of 60 days when the Court did not yet come out with a ruling that barred such extension; and e) their being represented by private counsel rather than by the Office of the Solicitor General.

With the Court’s rulings in the principal issues raised in this case, it finds no sufficient reason to further dwell on the lesser issues that the Del Rosarios raise above. Besides, the Court finds no error in the CA’s disposition of the same.

WHEREFORE, the Court DENIES the petition and AFFIRMS the Decision of the Court of Appeals in CA-G.R. SP 79496 dated June 29, 2007 and its Resolution dated November 19, 2007 for the reasons stated in this Decision, with the MODIFICATION that Civil Case 10584 is DISMISSED without prejudice.

G.R. No. 172276 August 8, 2010 CARPIO, J.:

SOCIETE DES PRODUITS NESTLE, S.A., Petitioner, vs.

MARTIN T. DY, JR., Respondent.

The Case

This is a petition for review on certiorari under Rule 45 of the Rules of Court. The petition challenges the 1 September 2005 Decision and 4 April 2006 Resolution of the Court of Appeals in CA-G.R. CV No. 62730, finding respondent Martin T. Dy, Jr. (Dy, Jr.) not liable for trademark infringement. The Court of Appeals reversed the 18 September 1998 Decision of the Regional Trial Court (RTC), Judicial Region 7, Branch 9, Cebu City, in Civil Case No. CEB-19345.

The Facts

Petitioner Societe Des Produits Nestle, S.A. (Nestle) is a foreign corporation organized under the laws of Switzerland. It manufactures food products and beverages. As evidenced by Certificate of Registration No. R-14621 issued on 7 April 1969 by the then Bureau of Patents, Trademarks and Technology Transfer, Nestle owns the "NAN" trademark for its line of infant powdered milk products, consisting of PRE-NAN, NAN-H.A., NAN-1, and NAN-2. NAN is classified under Class 6 — "diatetic preparations for infant feeding."

Nestle distributes and sells its NAN milk products all over the Philippines. It has been investing tremendous amounts of resources to train its sales force and to promote the NAN milk products through advertisements and press releases.

Dy, Jr. owns 5M Enterprises. He imports Sunny Boy powdered milk from Australia and repacks the powdered milk into three sizes of plastic packs bearing the name "NANNY." The packs weigh 80, 180 and 450 grams and are sold for P8.90, P17.50 and P39.90, respectively. NANNY is is also classified under Class 6 — "full cream milk for adults in [sic] all ages." Dy, Jr. distributes and sells the powdered milk in Dumaguete, Negros Oriental, Cagayan de Oro, and parts of Mindanao.

In a letter dated 1 August 1985, Nestle requested Dy, Jr. to refrain from using "NANNY" and to undertake that he would stop infringing the "NAN" trademark. Dy, Jr. did not act on Nestle’s request. On 1 March 1990, Nestle filed before the RTC, Judicial Region 7, Branch 31, Dumaguete City, a complaint against Dy, Jr. for infringement. Dy, Jr. filed a motion to dismiss alleging that the complaint did not state a cause of action. In its 4 June 1990 order, the trial court dismissed the complaint. Nestle appealed the 4 June 1990 order to the Court of Appeals. In its 16 February 1993 Resolution, the Court of Appeals set aside the 4 June 1990 order and remanded the case to the trial court for further proceedings.

Pursuant to Supreme Court Administrative Order No. 113-95, Nestle filed with the trial court a motion to transfer the case to the RTC, Judicial Region 7, Branch 9, Cebu City, which was designated as a special court for intellectual property rights.

The RTC’s Ruling

In its 18 September 1998 Decision, the trial court found Dy, Jr. liable for infringement. The trial court held:

If determination of infringement shall only be limited on whether or not the mark used would likely cause confusion or mistake in the minds of the buying public or deceive customers, such in [sic] the most considered view of this forum would be highly unlikely to happen in the instant case. This is because upon comparison of the plaintiff’s NAN and defendant’s NANNY, the following features would reveal the absence of any deceptive tendency in defendant’s NANNY: (1) all NAN products are contained tin cans [sic], while NANNY are contained in plastic packs; (2) the predominant colors used in the labels of NAN products are blue and white, while the predominant colors in the plastic packings of NANNY are blue and green; (3) the labels of NAN products have at the bottom portion an elliptical shaped figure containing inside

it a drawing of nestling birds, which is overlapped by the trade-name "Nestle", while the plastic packs of NANNY have a drawing of milking cows lazing on a vast green field, back-dropped with snow covered mountains; (4) the word NAN are [sic] all in large, formal and conservative-like block letters, while the word NANNY are [sic] all in small and irregular style of letters with curved ends; and (5) all NAN products are milk formulas intended for use of [sic] infants, while NANNY is an instant full cream powdered milk intended for use of [sic] adults.

The foregoing has clearly shown that infringement in the instant case cannot be proven with the use of the "test of dominancy" because the deceptive tendency of the unregistered trademark NANNY is not apparent from the essential features of the registered trademark NAN.

However, in Esso Standard Eastern, Inc. vs. Court of Appeals, et al. L-29971, Aug. 31, 1982, the Supreme Court took the occasion of discussing what is implied in the definition of "infringement" when it stated: "Implicit in this definition is the concept that the goods must be so related that there is likelihood either of confusion of goods or business. x x x But as to whether trademark infringement exists depends for the most part upon whether or not the goods are so related that the public may be, or is actually, deceived and misled that they came from the same maker or manufacturer. For non-competing goods may be those which, though they are not in actual competition, are so related to each other that it might reasonably be assumed that they originate from one manufacturer. Non-competing goods may also be those which, being entirely unrelated, could not reasonably be assumed to have a common source. In the former case of related goods, confusion of business could arise out of the use of similar marks; in the latter case of non-related goods, it could not."

Furthermore, in said case the Supreme Court as well discussed on when goods may become so related for purposes of infringement when it stated: "Goods are related when they belong to the same class or have same descriptive properties; when they possess the same physical attributes or essential characteristics with reference to their form, composition, texture or quality. They may also be related because they serve the same purpose or are sold in grocery stores. x x x

Considering that defendant’s NANNY belongs to the same class as that of plaintiff’s NAN because both are food products, the defendant’s unregistered trade mark NANNY should be held an infringement to plaintiff’s registered trademark NAN because defendant’s use of NANNY would imply that it came from the manufacturer of NAN. Furthermore, since the word "nanny" means a "child’s nurse," there might result the not so remote probability that defendant’s NANNY may be confused with infant formula NAN despite the aparent [sic] disparity between the features of the two products.

Dy, Jr. appealed the 18 September 1998 Decision to the Court of Appeals.

The Court of Appeals’ Ruling

In its 1 September 2005 Decision, the Court of Appeals reversed the trial court’s 18 September 1998 Decision and found Dy, Jr. not liable for infringement. The Court of Appeals held:

[T]he trial court appeared to have made a finding that there is no colorable imitation of the registered mark "NAN" in Dy’s use of "NANNY" for his own milk packs. Yet it did not stop there. It continued on applying the "concept of related goods."

The Supreme Court utlilized the "concept of related goods" in the said case of Esso Standard Easter, Inc. versus Court of Appeals, et al. wherein

two contending parties used the same trademark "ESSO" for two different goods, i.e. petroleum products and cigarettes. It rules that there is infringement of trademark involving two goods bearing the same mark or label, even if the said goods are non-competing, if and only if they are so related that the public may be, or is actually, deceived that they originate from the one maker or manufacturer. Since petroleum products and cigarettes, in kind and nature, flow through different trade channels, and since the possibility of confusion is unlikely in the general appearances of each mark as a whole, the Court held in this case that they cannot be so related in the context of infringement.

In applying the concept of related goods in the present case, the trial court haphazardly concluded that since plaintiff-appellee’s NAN and defendant-appellant’s NANNY belong to the same class being food products, the unregistered NANNY should be held an infringement of Nestle’s NAN because "the use of NANNY would imply that it came from the manufacturer of NAN." Said court went on to elaborate further: "since the word "NANNY" means a "child’s nurse," there might result the not so remote probability that defendant’s NANNY may be confused with infant formula NAN despite the aparent (sic) disparity between the features of the two products as discussed above."

The trial court’s application of the doctrine laid down by the Supreme Court in the Esso Standard case aforementioned and the cases cited therein is quite misplaced. The goods of the two contending parties in those cases bear similar marks or labels: "Esso" for petroleum products and cigarettes, "Selecta" for biscuits and milk, "X-7" for soap and perfume, lipstick and nail polish. In the instant case, two dissimilar marks are involved — plaintiff-appellee’s "NAN" and defendant-appellant’s "NANNY." Obviously, the concept of related goods cannot be utilized in the instant case in the same way that it was used in the Esso Standard case.

In the Esso Standard case, the Supreme Court even cautioned judges that in resolving infringement or trademark cases in the Philippines, particularly in ascertaining whether one trademark is confusingly similar to or is a colorable imitation of another, precedent must be studied in the light of the facts of the particular case. Each case must be decided on its own merits. In the more recent case of Societe Des Produits Nestle S.A. Versus Court of Appeals, the High Court further stressed that due to the peculiarity of the facts of each infringement case, a judicial forum should not readily apply a certain test or standard just because of seeming similarities. The entire panoply of elements constituting the relevant factual landscape should be comprehensively examined.

While it is true that both NAN and NANNY are milk products and that the word "NAN" is contained in the word "NANNY," there are more glaring dissimilarities in the entirety of their trademarks as they appear in their respective labels and also in relation to the goods to which they are attached. The discerning eye of the observer must focus not only on the predominant words but also on the other features appearing in both labels in order that he may draw his conclusion whether one is confusingly similar to the other. Even the trial court found these glaring dissimilarities as above-quoted. We need not add more of these factual dissimilarities.

NAN products, which consist of Pre-NAN, NAN-H-A, NAN-1 and NAN-2, are all infant preparations, while NANNY is a full cream milk for adults in [sic] all ages. NAN milk products are sold in tin cans and hence, far expensive than the full cream milk NANNY sold in three (3) plastic packs containing 80, 180 and 450 grams and worth P8.90, P17.50 and P39.90 per milk pack. The labels of NAN products are of the colors blue

and white and have at the bottom portion an elliptical shaped figure containing inside it a drawing of nestling birds, which is overlapped by the trade-name "Nestle." On the other hand, the plastic packs NANNY have a drawing of milking cows lazing on a vast green field, back-dropped with snow-capped mountains and using the predominant colors of blue and green. The word NAN are [sic] all in large, formal and conservative-like block letters, while the word NANNY are [sic] all in small and irregular style of letters with curved ends. With these material differences apparent in the packaging of both milk products, NANNY full cream milk cannot possibly be an infringement of NAN infant milk.1avvphi1

Moreover, NAN infant milk preparation is more expensive than NANNY instant full cream milk. The cheaper price of NANNY would give, at the very first instance, a considerable warning to the ordinary purchaser on whether he is buying an infant milk or a full cream milk for adults. A cursory examination of the packaging would confirm the striking differences between the products in question.

In view of the foregoing, we find that the mark NANNY is not confusingly similar to NAN. Dy therefore cannot be held liable for infringement.

Nestle filed a motion for reconsideration. In its 4 April 2006 Resolution, the Court of Appeals denied the motion for lack of merit. Hence, the present petition.

Issue

The issue is whether Dy, Jr. is liable for infringement.

The Court’s Ruling

The petition is meritorious.

Section 22 of Republic Act (R.A.) No. 166, as amended, states:

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.

Section 155 of R.A. No. 8293 states:

Remedies; Infringement. — Any person who shall, without the consent of the owner of the registered mark:

155.1. Use in commerce any reproduction, counterfeit, copy, or colorable imitation of a registered mark or the same container or a dominant feature thereof in connection with the sale, offering for sale, distribution, advertising of any goods or services including other preparatory steps necessary to carry out the sale of any goods or services on or in connection with which such use is likely to cause confusion, or to cause mistake, or to deceive; or

155.2. Reproduce, counterfeit, copy or colorably imitate a registered mark or a dominant feature thereof and apply such reproduction, counterfeit, copy or colorable imitation to labels, signs, prints,

packages, wrappers, receptacles or advertisements intended to be used in commerce upon or in connection with the sale, offering for sale, distribution, or advertising of goods or services on or in connection with which such use is likely to cause confusion, or to cause mistake, or to deceive, shall be liable in a civil action for infringement by the registrant for the remedies hereinafter set forth: Provided, That the infringement takes place at the moment any of the acts stated in Subsection 155.1 or this subsection are committed regardless of whether there is actual sale of goods or services using the infringing material.

In Prosource International, Inc. v. Horphag Research Management SA, the Court laid down the elements of infringement under R.A. Nos. 166 and 8293:

In accordance with Section 22 of R.A. No. 166, as well as Sections 2, 2-A, 9-A, and 20 thereof, the following constitute the elements of trademark infringement:

"(a) A trademark actually used in commerce in the Philippines and registered in the principal register of the Philippine Patent Office[;]

(b) [It] is used by another person in connection with the sale, offering for sale, or advertising of any goods, business or services or in connection with which such use is likely to cause confusion or mistake or to deceive purchasers or others as to the source or origin of such goods or services, or identity of such business; or such trademark is reproduced, counterfeited, copied or colorably imitated by another person and such reproduction, counterfeit, copy or colorable imitation is applied to labels, signs, prints, packages, wrappers, receptacles or advertisements intended to be used upon or in connection with such goods, business or services as to likely cause confusion or mistake or to deceive purchasers[;]

(c) [T]he trademark is used for identical or similar goods[;] and

(d) [S]uch act is done without the consent of the trademark registrant or assignee."

On the other hand, the elements of infringement under R.A. No. 8293 are as follows:

·The trademark being infringed is registered in the Intellectual Property Office; however, in infringement of trade name, the same need not be registered;

·The trademark or trade name is reproduced, counterfeited, copied, or colorably imitated by the infringer;

·The infringing mark or trade name is used in connection with the sale, offering for sale, or advertising of any goods, business or services; or the infringing mark or trade name is applied to labels, signs, prints, packages, wrappers, receptacles or advertisements intended to be used upon or in connection with such goods, business or services;

·The use or application of the infringing mark or trade name is likely to cause confusion or mistake or to deceive purchasers or others as to the goods or services themselves or as to the source or origin of such goods or services or the idenity of such business; and

·It is without the consent of the trademark or trade name owner or the assignee thereof.

Among the elements, the element of likelihood of confusion is the gravamen of trademark infringement. There are two types of confusion in trademark infringement: confusion of goods and confusion of business. In Sterling Products International, Inc. v. Farbenfabriken Bayer Aktiengesellschaft, the Court distinguished the two types of confusion:

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." In which case, "defendant’s goods are then bought as the plaintiff’s, and the poorer quality of the former reflects adversely on the plaintiff’s reputation." 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."

There are two tests to determine likelihood of confusion: the dominancy test and holistic test. The dominancy test focuses on the similarity of the main, prevalent or essential features of the competing trademarks that might cause confusion. Infringement takes place when the competing trademark contains the essential features of another. Imitation or an effort to imitate is unnecessary. The question is whether the use of the marks is likely to cause confusion or deceive purchasers.

The holistic test considers the entirety of the marks, including labels and packaging, in determining confusing similarity. The focus is not only on the predominant words but also on the other features appearing on the labels.

In cases involving trademark infringement, no set of rules can be deduced. Each case must be decided on its own merits. Jurisprudential precedents must be studied in the light of the facts of each particular case. In McDonald’s Corporation v. MacJoy Fastfood Corporation, the Court held:

In trademark cases, particularly in ascertaining whether one trademark is confusingly similar to another, no set rules can be deduced because each case must be decided on its merits. In such cases, even more than in any other litigation, precedent must be studied in the light of the facts of the particular case. That is the reason why in trademark cases, jurisprudential precedents should be applied only to a case if they are specifically in point.

In the light of the facts of the present case, the Court holds that the dominancy test is applicable. In recent cases with similar factual milieus, the Court has consistently applied the dominancy test. In Prosource International, Inc., the Court applied the dominancy test in holding that "PCO-GENOLS" is confusingly similar to "PYCNOGENOL." The Court held:

The trial and appellate courts applied the Dominancy Test in determining whether there was a confusing similarity between the marks PYCNOGENOL and PCO-GENOL. Applying the test, the trial court found, and the CA affirmed, that:

"Both the word[s] PYCNOGENOL and PCO-GENOLS have the same suffix "GENOL" which on evidence, appears to be merely descriptive and furnish no indication of the origin of the article and hence, open for trademark registration by the plaintiff through combination with another word or phrase such as PYCNOGENOL, Exhibits "A" to "A-3." Furthermore, although the letters "Y" between P and C, "N" between O and C and "S" after L are missing in the [petitioner’s] mark PCO-GENOLS, nevertheless, when the two words are pronounced, the sound effects are confusingly similar not to mention that they are both described by their manufacturers as a food supplement and thus, identified as such by their public consumers. And although there were dissimilarities in the trademark due to the type of letters used as well as the size, color and design employed on their individual packages/bottles, still the close relationship of the competing product’s

name is sounds as they were pronounced, clearly indicates that purchasers could be misled into believing that they are the same and/or originates from a common source and manufacturer."

We find no cogent reason to depart from such conclusion.

This is not the first time the Court takes into account the aural effects of the words and letters contained in the marks in determining the issue of confusing similarity. In Marvex Commercial Co., Inc. v. Petra Hawpia & Co., et al., cited in McDonald’s Corporation v. L.C. Big Mak Burger, Inc., 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 [sic], 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 "Condura" 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."

In McDonald’s Corporation v. MacJoy Fastfood Corporation, the Court applied the dominancy test in holding that "MACJOY" is confusingly similar to "MCDONALD’S." The Court held:

While we agree with the CA’s detailed enumeration of differences between the two (2) competing trademarks herein involved, we believe that the holistic test is not the one applicable in this case, the dominancy test being the one more suitable. In recent cases with a similar factual milieu as here, the Court has consistently used and applied the dominancy test in determining confusing similarity or likelihood of confusion between competing trademarks.

x x x x

Applying the dominancy test to the instant case, the Court finds that herein petitioner’s "MCDONALD’S" and respondent’s "MACJOY" marks are are confusingly similar with each other that an ordinary purchaser can conclude an association or relation between the marks.

To begin with, both marks use the corporate "M" design logo and the prefixes "Mc" and/or "Mac" as dominant features. x x x

For sure, it is the prefix "Mc," and abbreviation of "Mac," which visually and aurally catches the attention of the consuming public. Verily, the word "MACJOY" attracts attention the same way as did "McDonalds," "MacFries," "McSpaghetti," "McDo," "Big Mac" and the rest of the MCDONALD’S marks which all use the prefixes Mc and/or Mac.

Besides and most importantly, both trademarks are used in the sale of fastfood products. Indisputably, the respondent’s trademark application for the "MACJOY & DEVICE" trademark covers goods under Classes 29 and 30 of the International Classification of Goods, namely, fried chicken, chicken barbeque, burgers, fries, spaghetti, etc. Likewise, the petitioner’s trademark registration for the MCDONALD’S marks in the Philippines covers goods which are similar if not identical to those covered by the respondent’s application.

In McDonald’s Corporation v. L.C. Big Mak Burger, Inc., the Court applied the dominancy test in holding that "BIG MAK" is confusingly similar to "BIG MAC." The Court held:

This Court x x x 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. 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, the Court ruled:

x x x 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; x x x)

x x x x

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 x x x 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 "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 Societe Des Produits Nestle, S.A v. Court of Appeals, the Court applied the dominancy test in holding that "FLAVOR MASTER" is confusingly similar to "MASTER ROAST" and "MASTER BLEND." The Court held:

While this Court agrees with the Court of Appeals’ detailed enumeration of differences between the respective trademarks of the two coffee products, this Court cannot agree that totality test is the one applicable in this case. Rather, this Court believes that the dominancy test is more suitable to this case in light of its peculiar factual milieu.

Moreover, the totality or holistic test is contrary to the elementary postulate of the law on trademarks and unfair competition that confusing similarity is to be determined on the basis of visual, aural, connotative comparisons and overall impressions engendered by the marks in controversy as they are encountered in the realities of the marketplace. The totality or holistic test only relies on visual comparison between two trademarks whereas the dominancy test relies not only on the visual but also on the aural and connotative comparisons and overall impressions between the two trademarks.

For this reason, this Court agrees with the BPTTT when it applied the test of dominancy and held that:

From the evidence at hand, it is sufficiently established that the word MASTER is the dominant feature of opposer’s mark. The word MASTER is printed across the middle portion of the label in bold letters almost twice the size of the printed word ROAST. Further, the word MASTER has always been given emphasis in the TV and radio commercials and other advertisements made in promoting the product. x x x In due time, because of these advertising schemes the mind of the buying public had come to learn to associate the word MASTER with the opposer’s goods.

x x x. It is the observation of this Office that much of the dominance which the word MASTER has acquired through Opposer’s advertising schemes is carried over when the same is incorporated into respondent-applicant’s trademark FLAVOR MASTER. Thus, when one looks at the label bearing the trademark FLAVOR MASTER (exh. 4) one’s attention is easily attracted to the word MASTER, rather than to the dissimilarities that exist. Therefore, the possibility of confusion as to the goods which bear the competing marks or as to the origins thereof is not farfetched.

Applying the dominancy test in the present case, the Court finds that "NANNY" is confusingly similar to "NAN." "NAN" is the prevalent feature of Nestle’s line of infant powdered milk products. It is written in bold letters and used in all products. The line consists of PRE-NAN, NAN-H.A., NAN-1, and NAN-2. Clearly, "NANNY" contains the prevalent feature "NAN." The first three letters of "NANNY" are exactly the same as the letters of "NAN." When "NAN" and "NANNY" are pronounced, the aural effect is confusingly similar.

In determining the issue of confusing similarity, the Court takes into account the aural effect of the letters contained in the marks. In Marvex Commercial Company, Inc. v. Petra Hawpia & Company, the Court held:

It is our considered view that the trademarks "SALONPAS" and "LIONPAS" are confusingly similar in sound.

Both these words have the same suffix, "PAS", which is used to denote a plaster that adheres to the body with curative powers. "PAS," being merely descriptive, furnishes no indication of the origin of the article and therefore is open for appropriation by anyone (Ethepa vs. Director of Patents, L-20635, March 31, 1966) and may properly become the subject of a trademark by combination with another word or phrase.

x x x x

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 [sic], 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 "Condura" 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.

The scope of protection afforded to registered trademark owners is not limited to protection from infringers with identical goods. The scope of

protection extends to protection from infringers with related goods, and to market areas that are the normal expansion of business of the registered trademark owners. Section 138 of R.A. No. 8293 states:

Certificates of Registration. — A certificate of registration of a mark shall be prima facie evidence of validity of the registration, the registrant’s ownership of the mark, and of the registrant’s exclusive right to use the same in connection with the goods or services and those that are related thereto specified in the certificate. (Emphasis supplied)

In Mighty Corporation v. E. & J. Gallo Winery, the Court held that, "Non-competing goods may be those which, though they are not in actual competition, are so related to each other that it can reasonably be assumed that they originate from one manufacturer, in which case, confusion of business can arise out of the use of similar marks." In that case, the Court enumerated factors in determining whether goods are related: (1) classification of the goods; (2) nature of the goods; (3) descriptive properties, physical attributes or essential characteristics of the goods, with reference to their form, composition, texture or quality; and (4) style of distribution and marketing of the goods, including how the goods are displayed and sold.

NANNY and NAN have the same classification, descriptive properties and physical attributes. Both are classified under Class 6, both are milk products, and both are in powder form. Also, NANNY and NAN are displayed in the same section of stores — the milk section.

The Court agrees with the lower courts that there are differences between NAN and NANNY: (1) NAN is intended for infants while NANNY is intended for children past their infancy and for adults; and (2) NAN is more expensive than NANNY. However, as the registered owner of the "NAN" mark, Nestle should be free to use its mark on similar products, in different segments of the market, and at different price levels. In McDonald’s Corporation v. L.C. Big Mak Burger, Inc., the Court held that the scope of protection afforded to registered trademark owners extends to market areas that are the normal expansion of business:

x x x

Even respondent’s 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 sq; 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). (Emphasis supplied)

WHEREFORE, we GRANT the petition. We SET ASIDE the 1 September 2005 Decision and 4 April 2006 Resolution of the Court of Appeals in CA-G.R. CV No. 62730 and REINSTATE the 18 September 1998 Decision of the Regional Trial Court, Judicial Region 7, Branch 9, Cebu City, in Civil Case No. CEB-19345.

G.R. No. 190065 August 16, 2010 NACHURA, J.:

DERMALINE, INC., Petitioner, vs.

MYRA PHARMACEUTICALS, INC. Respondent.

This is a petition for review on certiorari1 seeking to reverse and set aside the Decision dated August 7, 20092 and the Resolution dated October 28, 20093 of the Court of Appeals (CA) in CA-G.R. SP No. 108627.

The antecedent facts and proceedings—

On October 21, 2006, petitioner Dermaline, Inc. (Dermaline) filed before the Intellectual Property Office (IPO) an application for registration of the trademark "DERMALINE DERMALINE, INC." (Application No. 4-2006011536). The application was published for Opposition in the IPO E-Gazette on March 9, 2007.

On May 8, 2007, respondent Myra Pharmaceuticals, Inc. (Myra) filed a Verified Opposition4 alleging that the trademark sought to be registered by Dermaline so resembles its trademark "DERMALIN" and will likely cause confusion, mistake and deception to the purchasing public. Myra said that the registration of Dermaline’s trademark will violate Section 1235 of Republic Act (R.A.) No. 8293 (Intellectual Property Code of the Philippines). It further alleged that Dermaline’s use and registration of its applied trademark will diminish the distinctiveness and dilute the goodwill of Myra’s "DERMALIN," registered with the IPO way back July 8, 1986, renewed for ten (10) years on July 8, 2006. Myra has been extensively using "DERMALIN" commercially since October 31, 1977, and said mark is still valid and subsisting.

Myra claimed that, despite Dermaline’s attempt to differentiate its applied mark, the dominant feature is the term "DERMALINE," which is practically identical with its own "DERMALIN," more particularly that the first eight (8) letters of the marks are identical, and that notwithstanding the additional letter "E" by Dermaline, the pronunciation for both marks are identical. Further, both marks have three (3) syllables each, with each syllable identical in sound and appearance, even if the last syllable of "DERMALINE" consisted of four (4) letters while "DERMALIN" consisted only of three (3).

Myra also pointed out that Dermaline applied for the same mark "DERMALINE" on June 3, 2003 and was already refused registration by the IPO. By filing this new application for registration, Dermaline appears to have engaged in a fishing expedition for the approval of its mark. Myra argued that its intellectual property right over its trademark is protected under Section 1476 of R.A. No. 8293.

Myra asserted that the mark "DERMALINE DERMALINE, INC." is aurally similar to its own mark such that the registration and use of Dermaline’s applied mark will enable it to obtain benefit from Myra’s reputation, goodwill and advertising and will lead the public into believing that Dermaline is, in any way, connected to Myra. Myra added that even if the subject application was under Classification 447 for various skin treatments, it could still be connected to the "DERMALIN" mark under Classification 58 for pharmaceutical products, since ultimately these goods are very closely related.

In its Verified Answer,9 Dermaline countered that a simple comparison of the trademark "DERMALINE DERMALINE, INC." vis-à-vis Myra’s "DERMALIN" trademark would show that they have entirely different features and distinctive presentation, thus it cannot result in confusion, mistake or deception on the part of the purchasing public. Dermaline contended that, in determining if the subject trademarks are confusingly similar, a comparison of the words is not the only determinant, but their entirety must be considered in relation to the goods to which they are attached, including the other features appearing in both labels. It claimed that there were glaring and striking dissimilarities between the two trademarks, such that its trademark "DERMALINE DERMALINE, INC." speaks for itself (Res ipsa loquitur). Dermaline further argued that there could not be any relation between its trademark for health and beauty services from Myra’s trademark classified under medicinal goods against skin disorders.

The parties failed to settle amicably. Consequently, the preliminary conference was terminated and they were directed to file their respective position papers.10

On April 10, 2008, the IPO-Bureau of Legal Affairs rendered Decision No. 2008-7011 sustaining Myra’s opposition pursuant to Section 123.1(d) of R.A. No. 8293. It disposed—

WHEREFORE, the Verified Opposition is, as it is, hereby SUSTAINED. Consequently, Application Serial No. 4-2006-011536 for the mark ‘DERMALINE, DERMALINE, INC. Stylized Wordmark’ for Dermaline, Inc. under class 44 covering the aforementioned goods filed on 21 October 2006, is as it is hereby, REJECTED.

Let the file wrapper of ‘DERMALINE, DERMALINE, INC. Stylized Wordmark’ subject matter of this case be forwarded to the Bureau of Trademarks (BOT) for appropriate action in accordance with this Decision.

SO ORDERED.12

Aggrieved, Dermaline filed a motion for reconsideration, but it was denied under Resolution No. 2009-12(D)13 dated January 16, 2009.

Expectedly, Dermaline appealed to the Office of the Director General of the IPO. However, in an Order14 dated April 17, 2009, the appeal was dismissed for being filed out of time.

Undaunted, Dermaline appealed to the CA, but it affirmed and upheld the Order dated April 17, 2009 and the rejection of Dermaline’s application for registration of trademark. The CA likewise denied Dermaline’s motion for reconsideration; hence, this petition raising the issue of whether the CA erred in upholding the IPO’s rejection of Dermaline’s application for registration of trademark.

The petition is without merit.

A trademark is any distinctive word, name, symbol, emblem, sign, or device, or any combination thereof, adopted and used by a manufacturer or merchant on his goods to identify and distinguish them from those manufactured, sold, or dealt by others.15 Inarguably, it is an intellectual property deserving protection by law. In trademark controversies, each case must be scrutinized according to its peculiar circumstances, such that jurisprudential precedents should only be made to apply if they are specifically in point.16

As Myra correctly posits, as a registered trademark owner, it has the right under Section 147 of R.A. No. 8293 to prevent third parties from using a trademark, or similar signs or containers for goods or services, without its consent, identical or similar to its registered trademark, where such use would result in a likelihood of confusion.

In determining likelihood of confusion, case law has developed two (2) tests, the Dominancy Test and the Holistic or Totality Test.

The Dominancy Test focuses on the similarity of the prevalent features of the competing trademarks that might cause confusion or deception.17

It is applied when the trademark sought to be registered contains the main, essential and dominant features of the earlier registered trademark, and confusion or deception is likely to result. Duplication or imitation is not even required; neither is it necessary that the label of the applied mark for registration should suggest an effort to imitate. The important issue is whether the use of the marks involved would likely cause confusion or mistake in the mind of or deceive the ordinary purchaser, or one who is accustomed to buy, and therefore to some extent familiar with, the goods in question.18 Given greater consideration are 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.19 The test of dominancy is now explicitly incorporated into law in Section 155.1 of R.A. No. 8293 which provides—

155.1. Use in commerce any reproduction, counterfeit, copy, or colorable imitation of a registered mark or the same container or a dominant feature thereof in connection with the sale, offering for sale, distribution, advertising of any goods or services including other preparatory steps necessary to carry out the sale of any goods or services on or in connection with which such use is likely to cause confusion, or to cause mistake, or to deceive; (emphasis supplied)

On the other hand, the Holistic Test entails a consideration of the entirety of the marks as applied to the products, including labels and packaging, in determining confusing similarity. The scrutinizing eye of the observer must focus not only on the predominant words but also on the other features appearing in both labels so that a conclusion may be drawn as to whether one is confusingly similar to the other.20

Relative to the question on confusion of marks and trade names, jurisprudence has noted two (2) types of confusion, viz: (1) confusion of goods (product confusion), where the ordinarily prudent purchaser would be induced to purchase one product in the belief that he was purchasing the other; and (2) confusion of business (source or origin confusion), where, although the goods of the parties are different, the product, the mark of which registration is applied for by one party, is such as might reasonably be assumed to originate with the registrant of an earlier product, and the public would then be deceived either into that belief or into the belief that there is some connection between the two parties, though inexistent.21

In rejecting the application of Dermaline for the registration of its mark "DERMALINE DERMALINE, INC.," the IPO applied the Dominancy Test. It declared that both confusion of goods and service and confusion of business or of origin were apparent in both trademarks. It also noted that, per Bureau Decision No. 2007-179 dated December 4, 2007, it already sustained the opposition of Myra involving the trademark "DERMALINE" of Dermaline under Classification 5. The IPO also upheld Myra’s right under Section 138 of R.A. No. 8293, which provides that a certification of registration of a mark is prima facie evidence of the validity of the registration, the registrant’s ownership of the mark, and of the registrant’s exclusive right to use the same in connection with the goods and those that are related thereto specified in the certificate.

We agree with the findings of the IPO. As correctly applied by the IPO in this case, while there are no set rules that can be deduced as what constitutes a dominant feature with respect to trademarks applied for registration; usually, what are taken into account are signs, color, design, peculiar shape or name, or some special, easily remembered earmarks of the brand that readily attracts and catches the attention of the ordinary consumer.22

Dermaline’s insistence that its applied trademark "DERMALINE DERMALINE, INC." had differences "too striking to be mistaken" from Myra’s "DERMALIN" cannot, therefore, be sustained. While it is true that the two marks are presented differently – Dermaline’s mark is written with the first "DERMALINE" in script going diagonally upwards from left to right, with an upper case "D" followed by the rest of the letters in lower case, and the portion "DERMALINE, INC." is written in upper case letters, below and smaller than the long-hand portion; while Myra’s mark "DERMALIN" is written in an upright font, with a capital "D" and followed by lower case letters – the likelihood of confusion is still apparent. This is because they are almost spelled in the same way,

except for Dermaline’s mark which ends with the letter "E," and they are pronounced practically in the same manner in three (3) syllables, with the ending letter "E" in Dermaline’s mark pronounced silently. Thus, when an ordinary purchaser, for example, hears an advertisement of Dermaline’s applied trademark over the radio, chances are he will associate it with Myra’s registered mark.

Further, Dermaline’s stance that its product belongs to a separate and different classification from Myra’s products with the registered trademark does not eradicate the possibility of mistake on the part of the purchasing public to associate the former with the latter, especially considering that both classifications pertain to treatments for the skin.1avvphi1

Indeed, the registered trademark owner may use its 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 is cognizant that the registered trademark owner enjoys protection in product and market areas that are the normal potential expansion of his business. Thus, we have held –

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).23 (Emphasis supplied)

Thus, the public may mistakenly think that Dermaline is connected to or associated with Myra, such that, considering the current proliferation of health and beauty products in the market, the purchasers would likely be misled that Myra has already expanded its business through Dermaline from merely carrying pharmaceutical topical applications for the skin to health and beauty services.

Verily, when one applies for the registration of a trademark or label which is almost the same or that very closely resembles one already used and registered by another, the application should be rejected and dismissed outright, even without any opposition on the part of the owner and user of a previously registered label or trademark. This is intended not only to avoid confusion on the part of the public, but also to protect an already used and registered trademark and an established goodwill.24

Besides, the issue on protection of intellectual property, such as trademarks, is factual in nature. The findings of the IPO, upheld on appeal by the same office, and further sustained by the CA, bear great weight and deserves respect from this Court. Moreover, the decision of the IPO had already attained finality when Dermaline failed to timely file its appeal with the IPO Office of the Director General.

WHEREFORE, the petition is DENIED. The Decision dated August 7, 2009 and the Resolution dated October 28, 2009 of the Court of Appeals in CA-G.R. SP No. 108627 are AFFIRMED. Costs against petitioner.

G.R. No. 164321 March 23, 2011 PERALTA, J.:

SKECHERS, U.S.A., INC., Petitioner, vs.

INTER PACIFIC INDUSTRIAL TRADING CORP., and/or INTER PACIFIC TRADING CORP. and/or STRONG SPORTS GEAR CO., LTD.,

and/or STRONGSHOES WAREHOUSE and/or STRONG FASHION SHOES TRADING and/or TAN TUAN HONG and/or VIOLETA T.

MAGAYAGA and/or JEFFREY R. MORALES and/or any of its other proprietor/s, directors, officers, employees and/or occupants of

its premises located at S-7, Ed & Joe's Commercial Arcade, No. 153 Quirino Avenue, Parañaque City, Respondents.

x - - - - - - - - - - - - - - - - - - - - - - -x

TRENDWORKS INTERNATIONAL CORPORATION, Petitioner-Intervenor,

vs.INTER PACIFIC INDUSTRIAL TRADING CORP. and/or INTER

PACIFIC TRADING CORP. and/or STRONG SPORTS GEAR CO., LTD., and/or STRONGSHOES WAREHOUSE and/or STRONG FASHION SHOES TRADING and/or TAN TUAN HONG and/or VIOLETA T.

MAGAYAGA and/or JEFFREY R. MORALES and/or any of its other proprietor/s, directors, officers, employees and/or occupants of

its premises located at S-7, Ed & Joe's Commercial Arcade, No. 153 Quirino Avenue, Parañaque City, Respondents.

For resolution are the twin Motions for Reconsideration1 filed by petitioner and petitioner-intervenor from the Decision rendered in favor of respondents, dated November 30, 2006.

At the outset, a brief narration of the factual and procedural antecedents that transpired and led to the filing of the motions is in order.

The present controversy arose when petitioner filed with Branch 24 of the Regional Trial Court (RTC) of Manila an application for the issuance of search warrants against an outlet and warehouse operated by respondents for infringement of trademark under Section 155, in relation to Section 170 of Republic Act No. 8293, otherwise known as the Intellectual Property Code of the Philippines.2 In the course of its business, petitioner has registered the trademark "SKECHERS"3 and the trademark "S" (within an oval design)4 with the Intellectual Property Office (IPO).

Two search warrants5 were issued by the RTC and were served on the premises of respondents. As a result of the raid, more than 6,000 pairs of shoes bearing the "S" logo were seized.

Later, respondents moved to quash the search warrants, arguing that there was no confusing similarity between petitioner’s "Skechers" rubber shoes and its "Strong" rubber shoes.

On November 7, 2002, the RTC issued an Order6 quashing the search warrants and directing the NBI to return the seized goods. The RTC agreed with respondent’s view that Skechers rubber shoes and Strong rubber shoes have glaring differences such that an ordinary prudent purchaser would not likely be misled or confused in purchasing the wrong article.

Aggrieved, petitioner filed a petition for certiorari7 with the Court of Appeals (CA) assailing the RTC Order. On November 17, 2003, the CA issued a Decision8 affirming the ruling of the RTC.

Subsequently, petitioner filed the present petition9 before this Court which puts forth the following assignment of errors:

A. WHETHER THE COURT OF APPEALS COMMITTED GRAVE ABUSE OF DISCRETION IN CONSIDERING MATTERS OF DEFENSE IN A CRIMINAL TRIAL FOR TRADEMARK INFRINGEMENT IN PASSING UPON THE VALIDITY OF THE SEARCH WARRANT WHEN IT SHOULD HAVE LIMITED ITSELF TO A DETERMINATION OF WHETHER THE TRIAL COURT COMMITTED GRAVE ABUSE OF DISCRETION IN QUASHING THE SEARCH WARRANTS.

B. WHETHER THE COURT OF APPEALS COMMITTED GRAVE ABUSE OF DISCRETION IN FINDING THAT RESPONDENTS ARE NOT GUILTY OF

TRADEMARK INFRINGEMENT IN THE CASE WHERE THE SOLE TRIABLE ISSUE IS THE EXISTENCE OF PROBABLE CAUSE TO ISSUE A SEARCH WARRANT.10

In the meantime, petitioner-intervenor filed a Petition-in-Intervention11

with this Court claiming to be the sole licensed distributor of Skechers products here in the Philippines.

On November 30, 2006, this Court rendered a Decision12 dismissing the petition.

Both petitioner and petitioner-intervenor filed separate motions for reconsideration.

In petitioner’s motion for reconsideration, petitioner moved for a reconsideration of the earlier decision on the following grounds:

(a) THIS HONORABLE COURT MUST RE-EXAMINE THE FACTS OF THIS CASE DUE TO THE SIGNIFICANCE AND REPERCUSSIONS OF ITS DECISION.

(b) COMMERCIAL QUANTITIES OF THE SEIZED ITEMS WITH THE UNAUTHORIZED REPRODUCTIONS OF THE "S" TRADEMARK OWNED BY PETITIONER WERE INTENDED FOR DISTRIBUTION IN THE PHILIPPINE MARKET TO THE DETRIMENT OF PETITIONER – RETURNING THE GOODS TO RESPONDENTS WILL ADVERSELY AFFECT THE GOODWILL AND REPUTATION OF PETITIONER.

(c) THE SEARCH WARRANT COURT AND THE COURT OF APPEALS BOTH ACTED WITH GRAVE ABUSE OF DISCRETION.

(d) THE SEARCH WARRANT COURT DID NOT PROPERLY RE-EVALUATE THE EVIDENCE PRESENTED DURING THE SEARCH WARRANT APPLICATION PROCEEDINGS.

(e) THE SOLID TRIANGLE CASE IS NOT APPLICABLE IN THIS CASE, AS IT IS BASED ON A DIFFERENT FACTUAL MILIEU. PRELIMINARY FINDING OF GUILT (OR ABSENCE THEREOF) MADE BY THE SEARCH WARRANT COURT AND THE COURT OF APPEALS WAS IMPROPER.

(f) THE SEARCH WARRANT COURT OVERSTEPPED ITS DISCRETION. THE LAW IS CLEAR. THE DOMINANCY TEST SHOULD BE USED.

(g) THE COURT OF APPEALS COMMITTED ERRORS OF JURISDICTION.13

On the other hand, petitioner-intervenor’s motion for reconsideration raises the following errors for this Court’s consideration, to wit:

(a) THE COURT OF APPEALS AND THE SEARCH WARRANT COURT ACTED CONTRARY TO LAW AND JURISPRUDENCE IN ADOPTING THE ALREADY-REJECTED HOLISTIC TEST IN DETERMINING THE ISSUE OF CONFUSING SIMILARITY;

(b) THE COURT OF APPEALS AND THE SEARCH WARRANT COURT ACTED CONTRARY TO LAW IN HOLDING THAT THERE IS NO PROBABLE CAUSE FOR TRADEMARK INFRINGEMENT; AND

(c) THE COURT OF APPEALS SANCTIONED THE TRIAL COURT’S DEPARTURE FROM THE USUAL AND ACCEPTED COURSE OF JUDICIAL PROCEEDINGS WHEN IT UPHELD THE QUASHAL OF THE SEARCH WARRANT ON THE BASIS SOLELY OF A FINDING THAT THERE IS NO CONFUSING SIMILARITY.14

A perusal of the motions submitted by petitioner and petitioner-intervenor would show that the primary issue posed by them dwells on the issue of whether or not respondent is guilty of trademark infringement.

After a thorough review of the arguments raised herein, this Court reconsiders its earlier decision.

The basic law on trademark, infringement, and unfair competition is Republic Act (R.A.) No. 8293. Specifically, Section 155 of R.A. No. 8293 states:

Remedies; Infringement. — Any person who shall, without the consent of the owner of the registered mark:

155.1. Use in commerce any reproduction, counterfeit, copy, or colorable imitation of a registered mark or the same container or a dominant feature thereof in connection with the sale, offering for sale, distribution, advertising of any goods or services including other preparatory steps necessary to carry out the sale of any goods or services on or in connection with which such use is likely to cause confusion, or to cause mistake, or to deceive; or

155.2. Reproduce, counterfeit, copy or colorably imitate a registered mark or a dominant feature thereof and apply such reproduction, counterfeit, copy or colorable imitation to labels, signs, prints, packages, wrappers, receptacles or advertisements intended to be used in commerce upon or in connection with the sale, offering for sale, distribution, or advertising of goods or services on or in connection with which such use is likely to cause confusion, or to cause mistake, or to deceive, shall be liable in a civil action for infringement by the registrant for the remedies hereinafter set forth: Provided, That the infringement takes place at the moment any of the acts stated in Subsection 155.1 or this subsection are committed regardless of whether there is actual sale of goods or services using the infringing material.15

The essential element of infringement under R.A. No. 8293 is that the infringing mark is likely to cause confusion. In determining similarity and likelihood of confusion, jurisprudence has developed tests the Dominancy Test and the Holistic or Totality Test. The Dominancy Test focuses on the similarity of the prevalent or dominant features of the competing trademarks that might cause confusion, mistake, and deception in the mind of the purchasing public. Duplication or imitation is not necessary; neither is it required that the mark sought to be registered suggests an effort to imitate. Given more consideration are the aural and visual impressions created by the marks on the buyers of goods, giving little weight to factors like prices, quality, sales outlets, and market segments.16

In contrast, the Holistic or Totality Test necessitates a consideration of the entirety of the marks as applied to the products, including the labels and packaging, in determining confusing similarity. The discerning eye of the observer must focus not only on the predominant words, but also on the other features appearing on both labels so that the observer may draw conclusion on whether one is confusingly similar to the other.17

Relative to the question on confusion of marks and trade names, jurisprudence has noted two (2) types of confusion, viz.: (1) confusion of goods (product confusion), where the ordinarily prudent purchaser would be induced to purchase one product in the belief that he was purchasing the other; and (2) confusion of business (source or origin confusion), where, although the goods of the parties are different, the product, the mark of which registration is applied for by one party, is such as might reasonably be assumed to originate with the registrant of an earlier product, and the public would then be deceived either into that belief or into the belief that there is some connection between the two parties, though inexistent.18

Applying the Dominancy Test to the case at bar, this Court finds that the use of the stylized "S" by respondent in its Strong rubber shoes infringes on the mark already registered by petitioner with the IPO. While it is undisputed that petitioner’s stylized "S" is within an oval

design, to this Court’s mind, the dominant feature of the trademark is the stylized "S," as it is precisely the stylized "S" which catches the eye of the purchaser. Thus, even if respondent did not use an oval design, the mere fact that it used the same stylized "S", the same being the dominant feature of petitioner’s trademark, already constitutes infringement under the Dominancy Test.

This Court cannot agree with the observation of the CA that the use of the letter "S" could hardly be considered as highly identifiable to the products of petitioner alone. The CA even supported its conclusion by stating that the letter "S" has been used in so many existing trademarks, the most popular of which is the trademark "S" enclosed by an inverted triangle, which the CA says is identifiable to Superman. Such reasoning, however, misses the entire point, which is that respondent had used a stylized "S," which is the same stylized "S" which petitioner has a registered trademark for. The letter "S" used in the Superman logo, on the other hand, has a block-like tip on the upper portion and a round elongated tip on the lower portion. Accordingly, the comparison made by the CA of the letter "S" used in the Superman trademark with petitioner’s stylized "S" is not appropriate to the case at bar.

Furthermore, respondent did not simply use the letter "S," but it appears to this Court that based on the font and the size of the lettering, the stylized "S" utilized by respondent is the very same stylized "S" used by petitioner; a stylized "S" which is unique and distinguishes petitioner’s trademark. Indubitably, the likelihood of confusion is present as purchasers will associate the respondent’s use of the stylized "S" as having been authorized by petitioner or that respondent’s product is connected with petitioner’s business.

Both the RTC and the CA applied the Holistic Test in ruling that respondent had not infringed petitioner’s trademark. For its part, the RTC noted the following supposed dissimilarities between the shoes, to wit:

1. The mark "S" found in Strong Shoes is not enclosed in an "oval design."

2. The word "Strong" is conspicuously placed at the backside and insoles.

3. The hang tags and labels attached to the shoes bears the word "Strong" for respondent and "Skechers U.S.A." for private complainant;

4. Strong shoes are modestly priced compared to the costs of Skechers Shoes.19

While there may be dissimilarities between the appearances of the shoes, to this Court’s mind such dissimilarities do not outweigh the stark and blatant similarities in their general features. As can be readily observed by simply comparing petitioner’s Energy20 model and respondent’s Strong21 rubber shoes, respondent also used the color scheme of blue, white and gray utilized by petitioner. Even the design and "wavelike" pattern of the midsole and outer sole of respondent’s shoes are very similar to petitioner’s shoes, if not exact patterns thereof. At the side of the midsole near the heel of both shoes are two elongated designs in practically the same location. Even the outer soles of both shoes have the same number of ridges, five at the back and six in front. On the side of respondent’s shoes, near the upper part, appears the stylized "S," placed in the exact location as that of the stylized "S" on petitioner’s shoes. On top of the "tongue" of both shoes appears the stylized "S" in practically the same location and size. Moreover, at the back of petitioner’s shoes, near the heel counter, appears "Skechers Sport Trail" written in white lettering. However, on respondent’s shoes appears "Strong Sport Trail" noticeably written in the same white

lettering, font size, direction and orientation as that of petitioner’s shoes. On top of the heel collar of petitioner’s shoes are two grayish-white semi-transparent circles. Not surprisingly, respondent’s shoes also have two grayish-white semi-transparent circles in the exact same location.lihpwa1

Based on the foregoing, this Court is at a loss as to how the RTC and the CA, in applying the holistic test, ruled that there was no colorable imitation, when it cannot be any more clear and apparent to this Court that there is colorable imitation. The dissimilarities between the shoes are too trifling and frivolous that it is indubitable that respondent’s products will cause confusion and mistake in the eyes of the public. Respondent’s shoes may not be an exact replica of petitioner’s shoes, but the features and overall design are so similar and alike that confusion is highly likely.1avvphi1

In Converse Rubber Corporation v. Jacinto Rubber & Plastic Co., Inc.,22

this Court, in a case for unfair competition, had opined that even if not all the details are identical, as long as the general appearance of the two products are such that any ordinary purchaser would be deceived, the imitator should be liable, to wit:

From said examination, We find the shoes manufactured by defendants to contain, as found by the trial court, practically all the features of those of the plaintiff Converse Rubber Corporation and manufactured, sold or marketed by plaintiff Edwardson Manufacturing Corporation, except for their respective brands, of course. We fully agree with the trial court that "the respective designs, shapes, the colors of the ankle patches, the bands, the toe patch and the soles of the two products are exactly the same ... (such that) at a distance of a few meters, it is impossible to distinguish "Custombuilt" from "Chuck Taylor." These elements are more than sufficient to serve as basis for a charge of unfair competition. Even if not all the details just mentioned were identical, with the general appearances alone of the two products, any ordinary, or even perhaps even a not too perceptive and discriminating customer could be deceived, and, therefore, Custombuilt could easily be passed off for Chuck Taylor. Jurisprudence supports the view that under such circumstances, the imitator must be held liable. x x x23

Neither can the difference in price be a complete defense in trademark infringement. In McDonald’s Corporation v. L.C. Big Mak Burger. Inc.,24

this Court held:

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). x x x25

Indeed, the registered trademark owner may use its 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.26 The purchasing public might be mistaken in thinking that petitioner had ventured into a lower market segment such that it is not inconceivable for the public to think that Strong or Strong Sport Trail might be associated or connected with petitioner’s brand, which scenario is plausible especially since both petitioner and respondent manufacture rubber shoes.

Withal, the protection of trademarks as intellectual property is intended not only to preserve the goodwill and reputation of the business established on the goods bearing the mark through actual use over a period of time, but also to safeguard the public as consumers against confusion on these goods.27 While respondent’s shoes contain some dissimilarities with petitioner’s shoes, this Court cannot close its eye to the fact that for all intents and purpose, respondent had deliberately attempted to copy petitioner’s mark and overall design and features of the shoes. Let it be remembered, that defendants in cases of infringement do not normally copy but only make colorable changes.28

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.29

WHEREFORE, premises considered, the Motion for Reconsideration is GRANTED. The Decision dated November 30, 2006 is RECONSIDERED and SET ASIDE.

G.R. No. 172775 December 19, 2007 CHICO-NAZARIO, J.:

HON NE CHAN, YUNJI ZENG, AND JOHN DOE, Petitioners, vs.

HONDA MOTOR CO., LTD., AND HONDA PHIL., INC., Respondents.

Before the Court is a Petition for Review on Certiorari of the Decision1

of the Court of Appeals in CA-G.R. SP No. 85353, granting respondents’ Petition for Certiorari and setting aside the Orders dated 20 February

2004 and 18 May 2004, of the Regional Trial Court (RTC) of Manila, Branch 46.

On 14 November 2003, the National Bureau of Investigation (NBI), through Special Investigator (SI) Glenn Lacaran, applied for search warrants with the RTC against petitioners for alleged violation of Section 1682 in relation to Section 1703 of Republic Act No. 8293 or the Intellectual Property Code of the Philippines.4

On the same date, RTC Judge Artemio S. Tipon issued two search warrants. The first warrant, Search Warrant No. 03-4438,5 was directed against petitioner "Hon Ne Chan and John Does, operating under the name and style ‘Dragon Spirit Motorcycle Center,’ located at No. 192 M.H. del Pilar Street corner 10th Avenue, Grace Park, Caloocan City, Metro Manila."

On the other hand, the second search warrant, or Search Warrant No. 03-44396 was issued against petitioner "Yunji Zeng and John Does, operating under the name and style ‘Dragon Spirit Motorcycle Center,’ located at No. 192 E. Delos Santos Avenue, Caloocan City, Metro Manila."

Except for the names of respondents and addresses to be searched, both search warrants stated the following:

SEARCH WARRANT7

TO ANY PEACE OFFICER:

G R E E T I N G S:

It appearing to the satisfaction of the undersigned, after examining under oath the applicant Special Investigator Glenn M. Lacaran of the National Bureau of Investigation, and his witnesses Atty. Elmer NA. Cadano and Mr. Rene C. Baltazar, that there are good and sufficient reasons to believe that a violation of Sec. 168 in relation to Sec. 170 of the R.A. No. 8293 has been committed and that there are good and sufficient reasons to believe that the following :

a) Motorcycles bearing the model names and/or markings "DS-110", "DSM-110", "SUPER WAVE", "DS-125", "DSM-125", "WAVE R", and "WAVE" and the engines, moldings, spare parts, tires and accessories for the manufacture and assembly of such motorcycles;

b) Papers, documents, brochures, documents, receipts, invoices, ledgers, books of accounts, labels, materials, paraphernalia, effects, computer software, computer systems, central processing units, hard disks, floppy disks, diskettes, date storage and retrieval devices, monitors, and vehicles used or intended to be used in importing, producing, manufacturing, assembling, selling, marketing, distributing, dealing with and/or otherwise disposing of motorcycles bearing the model names and/or markings "DS-110", "DSM-110", "SUPER WAVE", DS-125, DSM-125", "WAVE R", and WAVE",

are in the possession and control of Respondents HON NE CHAN8 and JOHN DOES, operating under the name and style "DRAGON SPIRIT MOTORCYCLE CENTER", located at No. 192 M. H. Del Pilar Street corner 10th Avenue, Grace Park, Caloocan City, Metro Manila, and are being kept and concealed at the said address.9

You are hereby commanded to make an immediate search at any time of the day of the premises above-described and to search for, and seize, the above-described personal properties which are the subject of the aforesaid offense and bring to this Court said properties to be dealt with as the law directs.

GIVEN UNDER MY HAND AND SEAL this 14th day of November, 2003 at the City of Manila, Philippines.

ARTEMIO S. TIPON

Judge

On the strength of these search warrants, NBI agents conducted a search of petitioners’ premises and seized the following items:

1. from petitioner Hon Ne Chan’s premises:

a) seven (7) motorcycles bearing the model name "DSM WAVE R;"

b) three (3) motorcycles bearing the model name "DSM SUPER WAVE", and

c) one (1) motorcycle bearing the model name "WAVE CX".

2. from petitioner Yunji Zeng’s premises:

a) twenty-one (21) motorcycles bearing the model name "WAVE CX 110;"

b) eight (8) motorcycles bearing the model name "WAVE 110;"

c) thirty-five (35) motorcycles bearing the model name "WAVE 125";

d) one (1) motorcycle bearing the model name "WAVE R";

e) eight (8) motorcycles bearing the model name "SUPER WAVE 110;" and

f) two (2) plastic bags containing various documents.10

On 1 December 2003, petitioners filed with the RTC a Joint Motion to Quash Search Warrants and to Return Illegally Seized Items,11 averring therein that the search warrants were issued despite the absence of probable cause and that they were in the nature of general search warrants. Respondents filed their Opposition thereto on 7 January 200412 but despite this, the trial court still issued an Order dated 20 February 2004 which quashed both Search Warrants No. 03-4438 and 03-4439 and ordered the NBI to return to petitioners the articles seized. In quashing the search warrants, the trial court held that the return of the twenty-two "WAVE CX 110" motorcycle units was proper for they were never specifically mentioned therein. As regards the rest of the items seized by the NBI agents, the trial court decreed that their return to petitioners was justified due to lack of probable cause in the issuance of the search warrants.

Respondents’ Motion for Reconsideration dated 12 March 200413 was denied by the court a quo through its Order of 18 May 2004. 14 This prompted respondents to seek recourse before the Court of Appeals via a Petition for Certiorari.15

On 31 January 2006, the Court of Appeals rendered the now assailed Decision granting respondents’ petition and setting aside the RTC’s Orders dated 20 February 2004 and 18 May 2004.16 The appellate court likewise denied petitioners’ Motion for Reconsideration due to lack of merit.

Hence, the present petition imputing error to the Court of Appeals because of the following:

i.

THE COURT OF APPEALS SERIOUSLY ERRED AND GRAVELY ABUSED ITS DISCRETION IN RULING THAT THE WARRANTS COMPLIED WITH THE CONSTITUTIONAL AND STATUTORY REQUIREMENTS FOR THE ISSUANCE OF VALID SEARCH WARRANTS NOTWITHSTANDING THE LACK OF PROBABLE CAUSE IN CONNECTION WITH ONE SPECIFIC OFFENSE TO SEARCH AND SEIZE THE MOTORCYCLE UNITS OF THE

PETITIONERS AND THE LACK OF PARTICULARITY IN THE DESCRIPTION OF THE THINGS TO BE SEARCHED.

ii.

THE COURT OF APPEALS COMMITTED GRAVE, SERIOUS AND REVERSIBLE ERROR IN RULING THAT RESPONDENT HAD ESTABLISHED GOODWILL IN HONDA WAVE MOTORCYCLE DESPITE OF THE FACT THAT THERE IS NO EVIDENCE ON RECORD SUPPORTING THE CLAIM.

iii.

THE COURT OF APPEALS COMMITTED A MISAPPREHENSION OF FACTS IN RULING THAT THE PETITIONERS PASSED OFF THEIR GOODS AS THAT OF THE RESPONDENTS BY USING THE MODEL NAME WAVE AND EMBODYING THE PROMINENT FEATURES OF THE DESIGNS, WHICH IS THE VERY ESSENCE OF UNFAIR COMPETITION.17

We are primarily tasked to resolve the questions of: 1) whether probable cause existed in the issuance of the subject search warrants; 2) whether said search warrants were in the nature of general search warrants and therefore null and void; and 3) whether there existed an offense to which the issuance of the search warrants was connected.

We affirm the Decision of the Court of Appeals.

The pertinent provision of the Rules of Court on the issuance of a search warrant provides:

Rule 126

Search and Seizure

x x x x

SEC. 4. Requisites for issuing search warrant. – A search warrant shall not issue but upon probable cause in connection with one specific offense to be determined personally by the judge after examination under oath or affirmation of the complainant and the witnesses he may produce, and particularly describing the place to be searched and the things to be seized which may be anywhere in the Philippines.

Thus, the validity of the issuance of a search warrant rests upon the following factors: (1) it must be issued upon probable cause; (2) the probable cause must be determined by the judge himself and not by the applicant or any other person; (3) in the determination of probable cause, the judge must examine, under oath or affirmation, the complainant and such witnesses as the latter may produce; and (4) the warrant issued must particularly describe the place to be searched and persons or things to be seized.18

In this case, petitioners argue that the requirements enumerated in Rule 126 of the Rules of Court pertaining to the issuance of a search warrant were not fulfilled when Search Warrants No. 03-4438 and 03-4439 were issued by the trial court. First, they contend that no probable cause existed meriting the issuance of the search warrants in that it was stated in the Application for Search Warrant of National Bureau of Investigation Special Investigator (NBI SI) Lacaran that "(h)e has information and verily believes that (petitioners) are in possession or has in their control properties which are being sold, retailed, distributed, imported, dealt with or otherwise disposed of, or intended to be used as a means of committing a violation of Section 168 in relation to Section 170 of Republic Act No. 8293 otherwise known as the Intellectual Property Code of the Philippines"19 Said statement, petitioners insist, failed to meet the condition that probable cause must be shown to be within the personal knowledge of the complainant or the witnesses he may produce and not based on mere hearsay.20

It is settled that in determining probable cause, a judge is duty-bound to personally examine under oath the complainant and the witnesses he may present. Emphasis must be laid on the fact that the oath required must refer to "the truth of the facts within the personal knowledge of the petitioner or his witnesses, because the purpose thereof is to convince the committing magistrate, not the individual making the affidavit and seeking the issuance of the warrant, of the existence of probable cause."21 Search warrants are not issued on loose, vague or doubtful basis of fact, or on mere suspicion or belief.22

In the case at bar, petitioners capitalize on the first paragraph of the Application for Search Warrant executed by NBI SI Lacaran to support their argument that he lacked the personal knowledge required by both the Rules of Court and by jurisprudence. However, the very next paragraph of the application reveals the tremulous nature of their argument for it is clearly stated therein that far from merely relying on mere information and belief, NBI SI Lacaran "personally verified the report and found [it] to be a fact."23 This, to our mind, removed the basis of his application from mere hearsay and supported the earlier finding of probable cause on the part of the examining judge. We cannot, thus, agree in his Order of 20 February 2004 quashing the search warrants he earlier issued on 14 November 2003.

It is likewise well to reiterate here that "probable cause," as far as the issuance of a search warrant is concerned, has been uniformly defined as such facts and circumstances which would lead a reasonable, discreet and prudent man to believe that an offense has been committed, and that the objects sought in connection with the offense are in the place sought to be searched.24 Equally important is our declaration in Microsoft Corporation and Lotus Development Corporation v. Maxicorp, Inc.25 that –

The determination of probable cause does not call for the application of rules and standards of proof that a judgment of conviction requires after trial on the merits. As implied by the words themselves, "probable cause" is concerned with probability, not absolute or even moral certainty. The prosecution need not present at this stage reasonable doubt. The standards of judgment are those of a reasonably prudent man, not the exacting calibrations of a judge after a full-blown trial.26

Applying these standards, we hold that the trial court overstepped its boundaries as far as determination of probable cause is concerned when it ratiocinated in its Order dated 20 February 2004 that –

With respect to the other units seized by the NBI, their immediate release is likewise proper since there is no showing of probable cause that justified the issuance of the search warrant. The (herein respondents) claims (sic) that the (herein petitioners) are guilty of Unfair Competition because of the alleged similarities between its motorcycle units and those of the (petitioners). There maybe similarities as claimed by the (respondents) but the differences far outweigh the similarities that any confusion to the consumer is remote and speculative. These differences are quite evident from the very comparative pictures attached by the (petitioners) in its (sic) application for Search Warrant as well as in the Opposition filed relative to the pending "Joint Motion to Quash Search Warrants and to Return Illegally Seized Items."

Aside from the differences in features, the motorcycle units sold by the (petitioners) prominently bear the distinct trade name "DRAGON SPIRIT." This is not the same trade name of the (respondents), which is Honda. The fact alone would practically eliminate any possible confusion on the part of the public that the motorcycle units they would

be buying from the (petitioners) are those manufactured and/or sold by (respondents).27

Such pronouncement by the RTC is utterly premature for, at that point, all that was presented before it by respondents was evidence, which to their minds, was sufficient to support a finding of probable cause. The trial court’s above-cited declaration unmistakably conveys the message that no unfair competition exists in this case – a conclusion that is not within its competence to make, for its task is merely confined to the preliminary matter of determination of probable cause and nothing more. The evidence it requires to dispense this function is, as stated before, far less stringent than that required in the trial on the merits of the charge involving unfair competition.

Petitioners also argue that the search warrants in question partook the nature of general search warrants in that they included motorcycles bearing the model name "WAVE." They insist that word "WAVE" is generic and that it fails to pass the requirement of particularity of the items to be seized. They also maintain that had the word "WAVE" been enough, there would have been no need for petitioners to state in their application for search warrants the specific motorcycle models, i.e., "DSM WAVE," "DSM SUPERWAVE 110," and "WAVE R 125."28

It is elemental that in order to be valid, a search warrant must particularly describe the place to be searched and the things to be seized. The constitutional requirement of reasonable particularity of description of the things to be seized is primarily meant to enable the law enforcers serving the warrant to: (1) readily identify the properties to be seized and thus prevent them from seizing the wrong items; and (2) leave said peace officers with no discretion regarding the articles to be seized and thus prevent unreasonable searches and seizures.29 It is not, however, required that the things to be seized must be described in precise and minute detail as to leave no room for doubt on the part of the searching authorities.30

In Bache and Co. (Phil.), Inc. v. Judge Ruiz,31 it was pointed out that one of the tests to determine the particularity in the description of objects to be seized under a search warrant is when the things described are limited to those which bear direct relation to the offense for which the warrant is being issued. A reading of the search warrants issued by the trial court in this case reveals that the items to be seized, including motorcycles, are those which are connected with the alleged violation of Section 168 in relation to Section 170 of Republic Act No. 8293, notwithstanding the use of the generic word "WAVE." We, therefore, adopt the following finding of the appellate court:

We may say this of the Wave motorcycles. It is evident that Wave is the model name of the motorcycles produced by the (herein respondents) Honda and, therefore, any imitation unit that is in the possession of the (herein petitioners) and carries the name Wave is the fit object of the warrants – whether some other name or figure is affixed to it or not. The name Wave CX 110 is but a [species] of units under the generic name Wave. The warrant that directs the seizure of Wave logically includes Wave CX 110 and is by no means converted into a roving commission when it allows the officer to seize it.32

Anent petitioners’ contention that the search warrants were issued in relation to no particular offense, they rely on the holding of this Court in Savage v. Judge Taypin,33 where it was held that –

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, for penal statutes cannot be enlarged or extended by intendment, implication or any equitable consideration.34

A reading of said case readily exposes its stark inapplicability to the instant Petition.

To be sure, the search warrant in Savage was issued in the face of possible violation of Republic Act No. 8293.1avvphi1 The acts complained of in said case were the alleged manufacture and fabrication of wrought iron furniture similar to that patented by private respondent therein sans any license or patent for the same, for the purpose of deceiving or defrauding private respondent and the buying public.

In making the above-quoted declaration in said case, this Court recognized that paragraph 3 of Article 189 of the Revised Penal Code stating that –

3. Any person who, by means of false or fraudulent representations or declarations, orally or in writing, or by other fraudulent means shall procure from the patent office or from any other office which may hereafter be established by law for the purposes, the registration of a tradename, trademark, or service mark, or of himself as the owner of such tradename, trademark, or service mark or an entry respecting a tradename, trademark, or servicemark.

was not included in the enactment of Section 168 of Republic Act No. 8293.

On the other hand, in the Application for Search Warrant filed by NBI SI Lacaran, it is clearly stated that what respondents are complaining about was the alleged violation of the goodwill they have established with respect to their motorcycle models "WAVE 110 S" and "WAVE 125 S" and which goodwill is entitled to protection in the same manner as other property rights. It is quite obvious then that their cause of action arose out of the intrusion into their established goodwill involving the two motorcycle models and not patent infringement, as what existed in Savage.

WHEREFORE, premises considered the present petition for review is DENIED, and the 31 January 2006 Decision of the Court of Appeals and its 17 May 2006 Resolution in CA-G.R. SP No. 85353 are AFFIRMED. Costs against petitioners.

G.R. No. 171053 October 15, 2007 YNARES-SANTIAGO, J.:

SEHWANI, INCORPORATED and/or BENITA'S FRITES, INC., Petitioner,

vs.IN-N-OUT BURGER, INC., Respondent.

This petition for review assails the Decision1 of the Court of Appeals in CA-G.R. SP No. 88004 dated October 21, 2005, which affirmed the December 7, 2004 Order2 of Director General Emma C. Francisco of the Intellectual Property Office (IPO), in Appeal No. 14-2004-0004 finding that petitioners’ appeal was filed out of time, as well as the Resolution3

dated January 12, 2006 denying the motion for reconsideration.

Respondent IN-N-OUT Burger, Inc., a foreign corporation organized under the laws of California, U.S.A., and not doing business in the Philippines, filed before the Bureau of Legal Affairs of the IPO (BLA-IPO), an administrative complaint against petitioners Sehwani, Inc. and Benita’s Frites, Inc. for violation of intellectual property rights, attorney’s fees and damages with prayer for the issuance of a restraining order or writ of preliminary injunction.4

Respondent alleged that it is the owner of the tradename "IN-N-OUT" and trademarks "IN-N-OUT," "IN-N-OUT Burger & Arrow Design" and "IN-N-OUT Burger Logo," which are used in its business since 1948 up to the present. These tradename and trademarks were registered in the United States as well as in other parts of the world.5

On June 2, 1997, respondent applied with the IPO for the registration of its trademark "IN-N-OUT Burger & Arrow Design" and servicemark "IN-N-OUT." In the course of its application, respondent discovered that petitioner Sehwani, Inc. had obtained Trademark Registration No. 56666 for the mark "IN N OUT" (THE INSIDE OF THE LETTER "O" FORMED LIKE A STAR) on December 17, 1993 without its authority.6

Respondent thus demanded that petitioner Sehwani, Inc. desist from claiming ownership of the mark "IN-N-OUT" and to voluntarily cancel its Trademark Registration No. 56666. Petitioner Sehwani, Inc. however refused to accede to the demand and even entered into a Licensing Agreement granting its co-petitioner Benita’s Frites, Inc. license to use for a period of five years the trademark "IN-N-OUT BURGER" in its restaurant in Pasig City.7 Hence, respondent filed a complaint for violation of intellectual property rights.

In their answer with counterclaim, petitioners alleged that respondent lack the legal capacity to sue because it was not doing business in the Philippines and that it has no cause of action because its mark is not registered or used in the Philippines. Petitioner Sehwani, Inc. also claimed that as the registered owner of the "IN-N-OUT" mark, it enjoys the presumption that the same was validly acquired and that it has the exclusive right to use the mark. Moreover, petitioners argued that other than the bare allegation of fraud in the registration of the mark, respondent failed to show the existence of any of the grounds for cancellation thereof under Section 151 of Republic Act (R.A.) No. 8293, otherwise known as The Intellectual Property Code of the Philippines.8

On December 22, 2003, Bureau Director Estrellita Beltran-Abelardo rendered Decision No. 2003-02 finding that respondent has the legal capacity to sue and that it is the owner of the internationally well-known trademarks; however, she held that petitioners are not guilty of unfair competition, thus:

With the foregoing disquisition, Certificate of Registration No. 56666 dated 17 December 1993 for the mark "IN-N-OUT (the inside of the letter "O" formed like a star) issued in favor of Sehwani, Incorporated is hereby CANCELLED. Consequently, Respondents Sehwani, Inc. and Benita’s Frites are hereby ordered to permanently cease and desist from using the mark "IN-N-OUT" and "IN-N-OUT BURGER LOGO" on its goods and in its business. With regard to mark "Double-Double", considering that as earlier discussed, the mark has been approved by

this Office for publication and that as shown by the evidence, Complainant is the owner of the said mark, Respondents are also ordered to permanently cease and desist from using the mark Double-Double. NO COSTS.

SO ORDERED.9

Petitioners filed a motion for reconsideration10 insisting that respondent has no legal capacity to sue, that no ground for cancellation was duly proven, and that the action is barred by laches; while respondent moved for partial reconsideration11 assailing the finding that petitioners are not guilty of unfair competition. Both, however, were denied in Resolution No. 2004-18 dated October 28, 200412 and Resolution No. 2005-05 dated April 25, 2005,13 respectively.

On separate dates, the parties appealed to the Office of the Director General which rendered an Order dated December 7, 2004,14 in Appeal No. 14-2004-0004, dismissing petitioners’ appeal for being filed out of time, thus:

WHEREFORE, premises considered, the MOTION TO ADMIT COPY OF DECISION NO. 2003-02 is hereby granted. The instant appeal, however, is hereby DISMISSED for having been filed out of time.15

Aggrieved, petitioners filed a petition before the Court of Appeals which was dismissed for lack of merit. It held that the right to appeal is not a natural right or a part of due process, but a procedural remedy of statutory origin, hence, its requirements must be strictly complied with. The appeal being filed out of time, the December 22, 2003 Decision and the October 28, 2004 Orders of Bureau Director Beltran-Abelardo are now final and executory.16

Meanwhile, respondent filed a Manifestation with the Court of Appeals that on December 23, 2005, Director General Adrian S. Cristobal, Jr. had rendered a Decision in Appeal 10-05-01 finding petitioners guilty of unfair competition.17

Petitioners’ motion for reconsideration was denied; hence, the instant petition raising the following issues:

THE COURT OF APPEALS COMMITTED GRAVE ERROR IN UPHOLDING THE IPO DIRECTOR GENERAL’S DISMISSAL OF APPEAL NO. 14-2004-0004 ON A MERE TECHNICALITY.

SUBSTANTIAL JUSTICE WOULD BE BETTER SERVED IF THE COURT OF APPEALS AND THE IPO DIRECTOR GENERAL ENTERTAINED PETITIONERS APPEAL AS THE BUREAU OF LEGAL AFFAIR’S DECISION AND RESOLUTION (1) CANCELING PETITIONER SEHWANI’S CERTIFICATE OF REGISTRATION FOR THE MARK "IN-N-OUT," AND (2) ORDERING PETITIONERS TO PERMANENTLY CEASE AND DESIST FROM USING THE SUBJECT MARK ON ITS GOODS AND BUSINESS ARE CONTRARY TO LAW AND/OR NOT SUPPORTED BY EVIDENCE.18

Petitioners contend that the Court of Appeals erred when it dismissed the petition on mere technicality which resulted in a miscarriage of justice and deprivation of intellectual property rights. They claim that their counsel believed in good faith that Resolution No. 2004-18 dated October 28, 2004, denying the motion for reconsideration, was received only on November 3, 2004, thus, they have until November 18, 2004 within which to file an appeal memorandum with the Office of the Director General. They claim that they should not be prejudiced by their counsel’s mistake in computing the period to appeal; besides, the same is understandable and excusable as their counsel is a solo practitioner with only a handful of non-legal staff assisting him. They also reiterate their position that respondent has no legal capacity to

sue, that no ground for cancellation was duly proven, and that the complaint is barred by laches, if not, by prescription.19

The petition has no merit.

The Court has invariably ruled that perfection of an appeal within the statutory or reglementary period is not only mandatory but also jurisdictional; failure to do so renders the questioned decision/final order final and executory, and deprives the appellate court of jurisdiction to alter the judgment or final order, much less to entertain the appeal.20 True, this rule had been relaxed but only in highly meritorious cases to prevent a grave injustice from being done.21 Such does not obtain in this case.

Director General Francisco, as affirmed by the Court of Appeals, correctly held:

[T]hat the appeal must be dismissed outright. Section 2 of the Uniform Rules on Appeal (Office Order no. 12, s. 2002) states that:

Section 2. Appeal to the Director General. – The decisions or final orders of the Bureau Director shall become final and executory thirty (30) days after receipt of a copy thereof by the appellant or appellants unless, within the same period, a motion for reconsideration is filed with the Bureau Director or an appeal to the Director General has been perfected; Provided, that only one (1) motion for reconsideration of the decision or order of the Bureau Director shall be allowed, and, in case the motion for reconsideration is denied, the appellant or appellants has/have the balance of the period prescribed above within which to file the appeal.

Considering that the Respondent-Appellants received a copy of the appealed Decision on 15 January 2004 and filed their MOTION FOR RECONSIDERATION on 30 January 2004, said parties had a balance of 15 days from their receipt of the Resolution denying said motion within which to file the APPEAL MEMORANDUM. Per records of the Bureau of Legal Affairs, the Respondents-Appellants received a copy of the Resolution on 29 October 2004. Hence the deadline for the filing of the APPEAL MEMORANDUM was on 13 November 2004. Since said date fell on a Saturday, the appeal should have been filed on the ensuing working day, that is, 15 November 2004.

On this score, Section 5(c) of the Uniform Rules on Appeal provides:

Section 5. Action on the Appeal Memorandum – The Director General shall:

x x x x

c) Dismiss the appeal for being patently without merit, provided that the dismissal shall be outright if the appeal is not filed within the prescribed period or for failure of the appellant to pay the required fee within the period of appeal.22 (Underscoring supplied)

Petitioners’ allegation that they honestly believed that they received Resolution No. 2004-18 dated October 28, 2004 on November 3, 2004 and not on October 29, 2004, as what appears on the records of the BLA-IPO, is self-serving and unbelievable. The inadvertent computation of the period for one to file a pleading is inexcusable, and has become an all too familiar and ready excuse on the part of lawyers remiss in their bounden duty to comply with the mandatory periods.23

This Court has always reminded the members of the legal profession that every case they handle deserves full and undivided attention, diligence, skill and competence, regardless of its importance.24 A lawyer has the responsibility of monitoring and keeping track of the period of time left to file pleadings and to see to it that said pleadings are filed

before the lapse of the period. If he fails to do so, his client is bound by his conduct, negligence and mistakes.25 This responsibility is imposed on all lawyers notwithstanding the presence or absence of staff assisting them in the discharge thereof.

Thus, as correctly held by the Court of Appeals, petitioners’ belated filing of an appeal memorandum rendered the December 22, 2003 Decision and the October 28, 2004 Order of Bureau Director Beltran-Abelardo final and executory.

At this point, the Court could very well write finis to this petition. However, in disposing of the instant case, we shall resolve the principal issues raised by petitioners.

Contrary to petitioners’ argument, respondent has the legal capacity to sue for the protection of its trademarks, albeit it is not doing business in the Philippines. Section 160 in relation to Section 3 of R.A. No. 8293, provides:

SECTION 160. Right of Foreign Corporation to Sue in Trademark or Service Mark Enforcement Action. — Any foreign national or juridical person who meets the requirements of Section 3 of this Act and does not engage in business in the Philippines may bring a civil or administrative action hereunder for opposition, cancellation, infringement, unfair competition, or false designation of origin and false description, whether or not it is licensed to do business in the Philippines under existing laws.

Section 3 thereof provides:

SECTION 3. International Conventions and Reciprocity. — Any person who is a national or who is domiciled or has a real and effective industrial establishment in a country which is a party to any convention, treaty or agreement relating to intellectual property rights or the repression of unfair competition, to which the Philippines is also a party, or extends reciprocal rights to nationals of the Philippines by law, shall be entitled to benefits to the extent necessary to give effect to any provision of such convention, treaty or reciprocal law, in addition to the rights to which any owner of an intellectual property right is otherwise entitled by this Act.

Respondent anchors its causes of action under Articles 6bis and 8 of The Convention of Paris for the Protection of Industrial Property, otherwise known as the Paris Convention, wherein both the United States and the Philippines are signatories.26 The Articles read:

Article 6bis

(1) The countries of the Union undertake, ex officio if their legislation so permits, or at the request of an interested party, to refuse or to cancel the registration, and to prohibit the use, of a trademark which constitutes a reproduction, an imitation, or a translation, liable to create confusion, of a mark considered by the competent authority of the country of registration or use to be well known in that country as being already the mark of a person entitled to the benefits of this Convention and used for identical or similar goods. These provisions shall also apply when the essential part of the mark constitutes a reproduction of any such well-known mark or an imitation liable to create confusion therewith.

x x x x.

Article 8

A tradename shall be protected in all countries of the Union without the obligation of filing or registration whether or not it forms part of a trademark.

Article 6bis which governs the protection of well-known trademarks, is a self-executing provision and does not require legislative enactment to give it effect in the member country. It may be applied directly by the tribunals and officials of each member country by the mere publication or proclamation of the Convention, after its ratification according to the public law of each state and the order for its execution. The essential requirement under this Article is that the trademark to be protected must be "well-known" in the country where protection is sought. The power to determine whether a trademark is well-known lies in the "competent authority of the country of registration or use." This competent authority would be either the registering authority if it has the power to decide this, or the courts of the country in question if the issue comes before a court.27

The question of whether or not respondent’s trademarks are considered "well-known" is factual in nature, involving as it does the appreciation of evidence adduced before the BLA-IPO. The settled rule is that the factual findings of quasi-judicial agencies, like the IPO, which have acquired expertise because their jurisdiction is confined to specific matters, are generally accorded not only respect, but, at times, even finality if such findings are supported by substantial evidence.28

Director Beltran-Abelardo found that:

Arguing mainly that it is the owner of an internationally well-known mark, complainant presented its United States trademark registrations, namely: United States Trademark Registration No. 1,514,689 for the mark "IN-N-OUT Burger and Arrow Design" under class 25 dated November 29, 1988 for the shirts (Exhibit "L"); United States Trademark Registration No. 1,528,456 for the mark "IN-N-OUT Burger and Arrow Design" under Class 29, 30, 32 and 42 dated March 7, 1989 for milk and french-fried potatoes for consumption on or off the premises, for hamburger sandwiches, cheeseburger sandwiches, hot coffee and milkshakes for consumption on or off the premises, lemonade and softdrinks for consumption on and off the premises, restaurant services respectively (Exhibit "M"); US Trademark Registration No. 1,101,638 for the mark "IN-N-OUT" under Class No. 30 dated September 5, 1978 for cheeseburgers, hamburgers, hot coffee and milkshake for consumption on or off premises (Exhibit "N"); US Trademark Registration No. 1,085,163 "IN-N-OUT" under Class 42 dated February 7, 1978 for Restaurant Services and carry-out restaurant services (Exhibit "Q"). For its mark "Double-Double" it submitted Certificates of Registration of said mark in several countries (Exhibits "MM" and submarkings).

x x x x

Moreover, complainant also cites our decision in Inter Pares Case No. 14-1998-00045 dated 12 September 2000, an opposition case involving the mark "IN-N-OUT" between IN-N-OUT Burger (herein complainant) and Nestor SJ Bonjales where we ruled:

"And last but not the lease, the herein Opposer was able to prove substantially that its mark "IN-N-OUT Burger and Arrow Design" is an internationally well known mark as evidenced by its trademark registrations around the world and its comprehensive advertisements therein."

The nub of complainant’s reasoning is that the Intellectual Property Office as a competent authority had declared in previous inter partes case that "IN-N-OUT Burger and Arrow Design" is an internationally well known mark.

In the aforementioned case, we are inclined to favor the declaration of the mark "IN-N-OUT" as an internationally well-known mark on the

basis of "registrations in various countries around the world and its comprehensive advertisements therein."

The Ongpin Memorandum dated 25 October 1983 which was the basis for the decision in the previous inter partes case and which set the criteria for determining whether a mark is well known, takes into consideration the extent of registration of a mark. Similarly, the implementing rules of Republic Act 8293, specifically Section (e) Rule 102 Criteria for determining whether a mark is well known, also takes into account the extent to which the mark has been registered in the world in determining whether a mark is well known.

Likewise, as shown by the records of the instant case, Complainant submitted evidence consisting of articles about "IN-N-OUT Burger" appearing in magazines, newspapers and print-out of what appears to be printed representations of its internet website (www.innout.com) (Exhibits "CCC" to "QQQ"), as well as object evidence consisting of videotapes of famous celebrities mentioning IN-N-OUT burgers in the course of their interviews (Exhibits "EEEE" and "FFFF") showing a tremendous following among celebrities.

The quality image and reputation acquired by the complainant’s IN-N-OUT mark is unmistakable. With this, complainant’s mark have met other criteria set in the Implementing Rules of Republic Act 8293, namely, ‘a’ and ‘d’ of Rule 102, to wit:

"Rule 102:

(a) the duration, extent and geographical area of any use of the mark, in particular, the duration, extent and geographical area of any promotion of the mark, including publicity and the presentation at fairs or exhibitions, of the goods and/or services to which the mark applies;

x x x x

(d) the quality image or reputation acquired by the mark"

Hence, on the basis of evidence presented consisting of worldwide registration of mark "IN-N-OUT" almost all of which were issued earlier than the respondent’s date of filing of its application and the subsequent registration of the mark "IN-N-OUT" in this Office, as well as the advertisements therein by the complainant, this Office hereby affirms its earlier declaration that indeed, the mark "IN-N-OUT BURGER LOGO" is an internally well-known mark.29

We find the foregoing findings and conclusions of Director Beltran-Abelardo fully substantiated by the evidence on record and in accord with law.

The fact that respondent’s marks are neither registered nor used in the Philippines is of no moment. The scope of protection initially afforded by Article 6bis of the Paris Convention has been expanded in the 1999 Joint Recommendation Concerning Provisions on the Protection of Well-Known Marks, wherein the World Intellectual Property Organization (WIPO) General Assembly and the Paris Union agreed to a nonbinding recommendation that a well-known mark should be protected in a country even if the mark is neither registered nor used in that country. Part I, Article 2(3) thereof provides:

(3) [Factors Which Shall Not Be Required] (a) A Member State shall not require, as a condition for determining whether a mark is a well-known mark:

(i) that the mark has been used in, or that the mark has been registered or that an application for registration of the mark has been filed in or in respect of, the Member State;

(ii) that the mark is well known in, or that the mark has been registered or that an application for registration of the mark has been filed in or in respect of, any jurisdiction other than the Member State; or

(iii) that the mark is well known by the public at large in the Member State. (Underscoring supplied)

Moreover, petitioners’ claim that no ground exists for the cancellation of their registration lacks merit. Section 151(b) of RA 8293 provides:

SECTION 151. Cancellation. — 151.1. A petition to cancel a registration of a mark under this Act may be filed with the Bureau of Legal Affairs by any person who believes that he is or will be damaged by the registration of a mark under this Act as follows:

x x x x

(b) At any time, if the registered mark becomes the generic name for the goods or services, or a portion thereof, for which it is registered, or has been abandoned, or its registration was obtained fraudulently or contrary to the provisions of this Act, or if the registered mark is being used by, or with the permission of, the registrant so as to misrepresent the source of the goods or services on or in connection with which the mark is used. x x x.1âwphi1

The evidence on record shows that not only did the petitioners use the IN-N-OUT Burger trademark for the name of their restaurant, but they also used identical or confusingly similar mark for their hamburger wrappers and french-fries receptacles, thereby effectively misrepresenting the source of the goods and services.30

Finally, petitioner’s contention that respondent is precluded from asserting its claim by laches, if not by prescription, lacks basis. Section 151(b) of R.A. No. 8293 specifically provides that a petition to cancel the registration of a mark which is registered contrary to the provisions thereof, or which is used to misrepresent the source of the goods or services, may be filed at any time. Moreover, laches may not prevail against a specific provision of law, since equity, which has been defined as ‘justice outside legality’ is applied in the absence of and not against statutory law or rules of procedure.31 Aside from the specific provisions of R.A. No. 8293, the Paris Convention and the WIPO Joint Recommendation have the force and effect of law, for under Section 2, Article II of the Constitution, the Philippines adopts the generally accepted principles of international law as part of the law of the land. To rule otherwise would be to defeat the equitable consideration that no one other than the owner of the well-known mark shall reap the fruits of an honestly established goodwill.

WHEREFORE, the petition is DENIED. The Decision and Resolution of the Court of Appeals in CA-G.R. SP No. 88004, dated October 21, 2005 and January 16, 2006, affirming the December 7, 2004 Order of Director General Emma C. Francisco, in Appeal No. 14-2004-0004, and denying the motion for reconsideration, respectively, are AFFIRMED.

G.R. No. 166886 July 30, 2008 AUSTRIA-MARTINEZ, J.:

MATTEL, INC. Petitioner, vs.

EMMA FRANCISCO, Director-General >of the Intellectual Property Office, HON. ESTRELLITA B. ABELARDO, Director of the Bureau of

Legal Affairs (IPO), and JIMMY UY, Respondents.**

Before the Court is a Petition for Review on Certiorari under Rule 45 of the Rules of Court assailing the Decision1 dated June 11, 2004 of the Court of Appeals (CA) in CA-G.R. SP No. 80480 and the CA Resolution 2

dated January 19, 2005 which denied petitioner's Motion for Reconsideration.

The factual background of the case is as follows:

On November 14, 1991, Jimmy A. Uy (Uy) filed a trademark application Serial No. 785433 with the Bureau of Patents, Trademarks and Technology Transfer (BPTTT) for registration of the trademark "BARBIE" for use on confectionary products, such as milk, chocolate, candies, milkbar and chocolate candies in Class 30 of the International Classification of Goods. The trademark application was published in the March-April 1993 issue of the BPTTT Official Gazette, Vol. VI, No. 2, which was released for circulation on May 31, 1993.

On July 19, 1993, Mattel, Inc. (Mattel), a corporation organized under the laws of the State of Delaware, United States of America, filed a Notice of Opposition4 against Uy's "Barbie" trademark as the latter was confusingly similar to its trademark on dolls, doll clothes and doll accessories, toys and other similar commercial products. It was docketed as Inter Partes Case No. 3898.

On August 26, 1993, Uy filed his Answer5 to the Notice of Opposition, denying the allegations therein and claiming that there is no similarity between the two goods.

While the case was pending, Republic Act (R.A.) No. 8293, otherwise known as the Intellectual Property Code of the Philippines was enacted and took effect on January 1, 1998. The BPTTT was abolished and its functions transferred to the newly created Intellectual Property Office (IPO).

On May 18, 2000, public respondent Estrellita B. Abelardo, the Director of the Bureau of Legal Affairs, IPO, rendered a Decision6 dismissing Mattel's opposition and giving due course to Uy’s application for the registration of the trademark "Barbie" used on confectionary products. The Director held that there was no confusing similarity between the two competing marks because the goods were non-competing or unrelated.

On June 5, 2000, Mattel filed a Motion for Reconsideration.7 On May 27, 2002, the Director of the Bureau of Legal Affairs, IPO issued a Resolution8 denying Mattel's Motion for Reconsideration.

On June 24, 2002, Mattel filed an Appeal Memorandum9 with the Office of the Director General, IPO. Despite due notice, no comment was submitted by Uy. Thus, in an Order10 dated October 7, 2002, Uy was deemed to have waived his right to file a comment on the appeal.

On September 3, 2003, public respondent Emma C. Francisco, the Director General, rendered a Decision11 denying the appeal on the ground that there was no proof on record that Mattel had ventured into the production of chocolates and confectionary products under the trademark "Barbie" to enable it to prevent Uy from using an identical "Barbie" trademark on said goods; that the records were bereft of the fact that the Director of the Bureau of Trademarks (BOT) had already declared the subject trademark application abandoned due to the non-filing of the Declaration of Actual Use (DAU) by Uy.

On September 12, 2003, Mattel filed a Motion for New Trial12 on the ground of newly discovered evidence -- i.e., Mattel's Trademark

Application Serial No. 4-1997-124327 for registration of the trademark "Barbie" for use on "confectionaries, sweets and chewing gum, none being medicated, sweetmeats included in Class 30, chocolate, popcorn, chocolate biscuits (other than biscuits for animals), pastries, preparations for cereals for food for human consumption, ices, ice creams" under Class 30 of the International Classification of Goods -- was unopposed after publication in Vol. VI No. 3 of the IPO Official Gazette which was released on June 20, 2003.

On October 22, 2003, the Director General issued an Order13 denying the motion for new trial.

On November 12, 2003, Mattel filed a Petition for Review14 with the CA. Again, despite due notice, no comment on the petition was filed by Uy. Thus, in a Resolution15 dated April 20, 2004, the CA resolved to dispense with the filing of the comment and considered the petition submitted for resolution/decision sans comment.

On June 11, 2004, the CA rendered a Decision16 affirming the decision of the Director General.

On July 15, 2004, Mattel filed a Motion for Reconsideration17 but it was denied by the CA in a Resolution18 dated January 19, 2005.

Hence, the present petition raising the following issues:

I.

WHETHER OR NOT IT IS GRAVE ERROR ON THE PART OF THE HON. COURT OF APPEALS TO RULE THAT "Dolls, Doll Clothes, and Doll Accessories, Costumes, Toys and other similar commercial products" VIS-À-VIS "Confectionery products, namely, milk chocolate, candies, milkbar, and chocolate candies" ARE UNRELATED SUCH THAT USE OF IDENTICAL TRADEMARKS IS UNLIKELY TO CAUSE CONFUSION IN THE MINDS OF THE PURCHASING PUBLIC.

II.

WHETHER OR NOT IT IS GRAVE ERROR ON THE PART OF THE HON. COURT OF APPEALS TO SUSTAIN THE FINDINGS OF THE DIRECTOR GENERAL OF THE INTELLECTUAL PROPERTY OFFICE (IPO) THAT IT IS PREMATURE TO CONCLUDE THAT APPLICATION SERIAL NO. 78543 BE DEEMED WITHDRAWN FOR FAILURE TO FILE THE DECLARATION OF ACTUAL USE (DAU), CONSIDERING THAT SUCH DECLARATION IS THE PREROGATIVE OF THE DIRECTOR OF TRADEMARKS.

III.

WHETHER OR NOT PRIVATE-RESPONDENT SHOULD BE PRESUMED TO HAVE INTENDED TO CASH-IN AND RIDE ON THE GOODWILL AND WIDESPREAD RECOGNITION OF THE PETITIONER'S MARK CONSIDERING THAT PRIVATE RESPONDENT ADOPTED A MARK THAT IS EXACTLY IDENTICAL TO PETITIONER'S MARK IN SPELLING AND STYLE.

IV.

WHETHER OR NOT TRADEMARK APPLICATION NO. 4-1997-124327 SHOULD BE CONSIDERED "NEWLY-DISCOVERED EVIDENCE."19

Mattel argues that its products are items related to Uy's products; hence, identical trademarks should not be used where the possibility of confusion as to source or origin of the product is certain; that the Director General of the IPO has the power to act on a pending trademark application considered as "withdrawn" for failure to file the DAU; that by adopting an exactly identical mark, in spelling and style, Uy should be presumed to have intended to cash in or ride on the goodwill and widespread recognition enjoyed by Mattel's mark; that

Mattel should be allowed to introduce Trademark Application Serial No. 4-1997-124327 as "newly discovered evidence."

On the other hand, Uy submits that the case has become moot and academic since the records of the IPO will show that no DAU was filed on or before December 1, 2001; thus, he is deemed to have abandoned his trademark application for failure to comply with the mandatory filing of the DAU.

For its part, the OSG contends that the petition primarily raised factual issues which are not proper subject of a petition for review under Rule 45 of the Rules of Court and that, at any rate, Mattel failed to establish any grave error on the part of respondent public officials which will warrant the grant of the present petition. It submits that confectionary products, namely: milk chocolate, candies, milkbar and chocolate candies, on the one hand; and dolls, doll clothes and doll accessories, costumes, toys and other similar commercial products, on the other hand, are products which are completely unrelated to one another; that withdrawal of pending application for failure to file a DAU must first be the subject of an administrative proceeding before the Director of Trademarks; that Mattel's Trademark Application Serial No. 4-1997-124327 cannot be considered as newly discovered evidence since said trademark application was filed only on September 3, 1997, or more than two years after the case had been deemed submitted for decision.

The instant case has been rendered moot and academic.

Uy's declaration in his Comment and Memorandum before this Court that he has not filed the DAU as mandated by pertinent provisions of R.A. No. 8293 is a judicial admission that he has effectively abandoned or withdrawn any right or interest in his trademark.

Section 124.2 of R.A. No. 8293 provides:

The applicant or the registrant shall file a declaration of actual use of the mark with evidence to that effect, as prescribed by the Regulations within three (3) years from the filing date of the application. Otherwise, the applicant shall be refused or the marks shall be removed from the Register by the Director. (Emphasis supplied)

Moreover, Rule 204 of the Rules and Regulations on Trademarks provides:

Declaration of Actual Use. The Office will not require any proof of use in commerce in the processing of trademark applications.1avvphi1 However, without need of any notice from the Office, all applicants or registrants, shall file a declaration of actual use of the mark with evidence to that effect within three years, without possibility of extension, from the filing date of the application. Otherwise, the application shall be refused or the mark shall be removed from the register by the Director motu propio. (Emphasis supplied)

Meanwhile, Memorandum Circular No. BT 2K1-3-04 dated March 29, 200120 of the IPO provides:

2. For pending applications prosecuted under R.A. 166 we distinguish as follows:

2.1. Based on use – must submit DAU and evidence of use on or before December 1, 2001, subject to a single six (6) month extension. (Sec. 3.2, Final Provisions of the Trademark Regulations, R.A. 8293, IPO Fee Structure and MC. No. BT Y2K-8-02)

x x x x21

Uy's admission in his Comment and Memorandum of non-compliance with the foregoing requirements is a judicial admission and an admission against interest22 combined. A judicial admission binds the

person who makes the same.23 In the same vein, an admission against interest is the best evidence which affords the greatest certainty of the facts in dispute.24 The rationale for the rule is based on the presumption that no man would declare anything against himself unless such declaration is true.25 Thus, it is fair to presume that the declaration corresponds with the truth, and it is his fault if it does not.26

In the present case, Mattel is seeking a ruling on whether Uy's "Barbie" trademark is confusingly similar to it's (Mattel's) "Barbie" trademark. Given Uy's admission that he has effectively abandoned or withdrawn any rights or interest in his trademark by his non-filing of the required DAU, there is no more actual controversy, or no useful purpose will be served in passing upon the merits of the case. It would be unnecessary to rule on the trademark conflict between the parties. A ruling on the matter would practically partake of a mere advisory opinion, which falls beyond the realm of judicial review. The exercise of the power of judicial review is limited to actual cases and controversies. Courts have no authority to pass upon issues through advisory opinions or to resolve hypothetical or feigned problems.27lawphi1

It cannot be gainsaid that for a court to exercise its power of adjudication, there must be an actual case or controversy — one which involves a conflict of legal rights, an assertion of opposite legal claims susceptible of judicial resolution; the case must not be moot or academic or based on extra-legal or other similar considerations not cognizable by a court of justice.28 Where the issue has become moot and academic, there is no justiciable controversy, and an adjudication thereof would be of no practical use or value as courts do not sit to adjudicate mere academic questions to satisfy scholarly interest, however intellectually challenging.29

Admittedly, there were occasions in the past when the Court passed upon issues although supervening events had rendered those petitions moot and academic. After all, the "moot and academic" principle is not a magical formula that can automatically dissuade the courts from resolving a case. Courts will decide cases, otherwise moot and academic, if: first, there is a grave violation of the Constitution; second, the exceptional character of the situation and the paramount public interest is involved; third, when the constitutional issue raised requires formulation of controlling principles to guide the bench, the bar, and the public; and fourth, the case is capable of repetition yet evading review.30

Thus, in Constantino v. Sandiganbayan (First Division),31 Constantino, a public officer, and his co-accused, Lindong, a private citizen, filed separate appeals from their conviction by the Sandiganbayan for violation of Section 3(e) of Republic Act No. 3019 or the Anti-Graft and Corrupt Practices Act. While Constantino died during the pendency of his appeal, the Court still ruled on the merits thereof, considering the exceptional character of the appeals of Constantino and Lindong in relation to each other; that is, the two petitions were so intertwined that the absolution of the deceased Constantino was determinative of the absolution of his co-accused Lindong.

In Public Interest Center, Inc. v. Elma,32 the petition sought to declare as null and void the concurrent appointments of Magdangal B. Elma as Chairman of the Presidential Commission on Good Government (PCGG) and as Chief Presidential Legal Counsel (CPLC) for being contrary to Section 13, Article VII and Section 7, par. 2, Article IX-B of the 1987 Constitution. While Elma ceased to hold the two offices during the pendency of the case, the Court still ruled on the merits thereof, considering that the question of whether the PCGG Chairman could concurrently hold the position of CPLC was one capable of repetition.

In David v. Arroyo,33 seven petitions for certiorari and prohibition were filed assailing the constitutionality of the declaration of a state of national emergency by President Gloria Macapagal-Arroyo. While the declaration of a state of national emergency was already lifted during the pendency of the suits, this Court still resolved the merits of the petitions, considering that the issues involved a grave violation of the Constitution and affected the public interest. The Court also affirmed its duty to formulate guiding and controlling constitutional precepts, doctrines or rules, and recognized that the contested actions were capable of repetition.

In Pimentel, Jr. v. Ermita,34 the petition questioned the constitutionality of President Gloria Macapagal-Arroyo’s appointment of acting secretaries without the consent of the Commission on Appointments while Congress was in session. While the President extended ad interim appointments to her appointees immediately after the recess of Congress, the Court still resolved the petition, noting that the question of the constitutionality of the President’s appointment of department secretaries in acting capacities while Congress was in session was one capable of repetition.

In Atienza v. Villarosa,35 the petitioners, as Governor and Vice-Governor, sought for clarification of the scope of the powers of the Governor and Vice-Governor under the pertinent provisions of the Local Government Code of 1991. While the terms of office of the petitioners expired during the pendency of the petition, the Court still resolved the issues presented to formulate controlling principles to guide the bench, bar and the public.

In Gayo v. Verceles,36 the petition assailing the dismissal of the petition for quo warranto filed by Gayo to declare void the proclamation of Verceles as Mayor of the Municipality of Tubao, La Union during the May 14, 2001 elections, became moot upon the expiration on June 30, 2004 of the contested term of office of Verceles. Nonetheless, the Court resolved the petition since the question involving the one-year residency requirement for those running for public office was one capable of repetition.

In Albaña v. Commission on Elections,37 the petitioners therein assailed the annulment by the Commission on Elections of their proclamation as municipal officers in the May 14, 2001 elections. When a new set of municipal officers was elected and proclaimed after the May 10, 2004 elections, the petition was mooted but the Court resolved the issues raised in the petition in order to prevent a repetition thereof and to enhance free, orderly, and peaceful elections.

The instant case does not fall within the category of any of these exceptional cases in which the Court was persuaded to resolve moot and academic issues to formulate guiding and controlling constitutional principles, precepts, doctrines or rules for future guidance of both bench and bar. The issues in the present case call for an appraisal of factual considerations which are peculiar only to the transactions and parties involved in this controversy. The issues raised in this petition do not call for a clarification of any constitutional principle. Perforce, the Court dispenses with the need to adjudicate the instant case.

WHEREFORE, the petition is DISMISSED for being moot and academic.