[G.R. No. 154342.

July 14, 2004]

MIGHTY CORPORATION and LA CAMPANA FABRICA DE TABACO, INC. petitioners, vs. E. & J. GALLO WINERY and THE ANDRESONS GROUP, INC. respondents. DECISION CORONA, J.: In this petition for review on certiorari under Rule 45, petitioners Mighty Corporation and La Campana Fabrica de Tabaco, Inc. (La Campana) seek to annul, reverse and set aside: (a) the November 15, 2001 decision [1] of the Court of Appeals (CA) in CA-G.R. CV No. 65175 affirming the November 26, 1998 decision,[2] as modified by the June 24, 1999 order,[3] of the Regional Trial Court of Makati City, Branch 57 (Makati RTC) in Civil Case No. 93-850, which held petitioners liable for, and permanently enjoined them from, committing trademark infringement and unfair competition, and which ordered them to pay damages to respondents E. & J. Gallo Winery (Gallo Winery) and The Andresons Group, Inc. (Andresons); (b) the July 11, 2002 CA resolution denying their motion for reconsideration[4] and (c) the aforesaid Makati RTC decision itself. I.

The Factual Background

Respondent Gallo Winery is a foreign corporation not doing business in the Philippines but organized and existing under the laws of the State of California, United States of America (U.S.), where all its wineries are located. Gallo Winery produces different kinds of wines and brandy products and sells them in many countries under different registered trademarks, including the GALLO and ERNEST & JULIO GALLO wine trademarks. Respondent domestic corporation, Andresons, has been Gallo Winerys exclusive wine importer and distributor in the Philippine s since 1991, selling these products in its own name and for its own account. [5] Gallo Winerys GALLO wine trademark was registered in the principal register of the Philippine Patent Office (now Intellectual Property Office) on November 16, 1971 under Certificate of Registration No. 17021 which was renewed on November 16, 1991 for another 20 years.[6] Gallo Winery also applied for registration of its ERNEST & JULIO GALLO wine trademark on October 11, 1990 under Application Serial No. 90101100073599-PN but the records do not disclose if it was ever approved by the Director of Patents.[7] On the other hand, petitioners Mighty Corporation and La Campana and their sister company, Tobacco Industries of the Philippines (Tobacco Industries), are engaged in the cultivation, manufacture, distribution and sale of tobacco products for which they have been using the GALLO cigarette trademark since 1973. [8] The Bureau of Internal Revenue (BIR) approved Tobacco Industries use of GALLO 100s cigarette mark on September 14, 1973 and GALLO filter cigarette mark on March 26, 1976, both for the manufacture and sale of its cigarette products. In 1976, Tobacco Industries filed its manufacturers sworn statement as basis for BIRs collection of specific tax on GALLO cigarettes. [9] On February 5, 1974, Tobacco Industries applied for, but eventually did not pursue, the registration of the GALLO cigarette trademark in the principal register of the then Philippine Patent Office.[10] In May 1984, Tobacco Industries assigned the GALLO cigarette trademark to La Campana which, on July 16, 1985, applied for trademark registration in the Philippine Patent Office.[11] On July 17, 1985, the National Library issued Certificate of Copyright Registration No. 5834 for La Campanas lifetime copyright claim over GALLO cigarette labels.[12] Subsequently, La Campana authorized Mighty Corporation to manufacture and sell cigarettes bearing the GALLO trademark. [13] BIR approved Mighty Corporations use of GALLO 100s cigarette brand, under licensing agreement with Tobacco Industries, on May 18, 1988, and GALLO SPECIAL MENTHOL 100s cigarette brand on April 3, 1989. [14] Petitioners claim that GALLO cigarettes have been sold in the Philippines since 1973, initially by Tobacco Industries, then by La Campana and finally by Mighty Corporation.[15] On the other hand, although the GALLO wine trademark was registered in the Philippines in 1971, respondents claim that they first introduced and sold the GALLO and ERNEST & JULIO GALLO wines in the Philippines circa 1974 within the then U.S. military facilities only. By 1979, they had expanded their Philippine market through authorized distributors and independent outlets. [16]

Respondents claim that they first learned about the existence of GALLO cigarettes in the latter part of 1992 when an Andresons employee saw such cigarettes on display with GALLO wines in a Davao supermarket wine cellar section.[17] Forthwith, respondents sent a demand letter to petitioners asking them to stop using the GALLO trademark, to no avail. II.

The Legal Dispute

On March 12, 1993, respondents sued petitioners in the Makati RTC for trademark and tradename infringement and unfair competition, with a prayer for damages and preliminary injunction. Respondents charged petitioners with violating Article 6bis of the Paris Convention for the Protection of Industrial Property (Paris Convention)[18] and RA 166 (Trademark Law),[19] specifically, Sections 22 and 23 (for trademark infringement), [20] 29 and 30[21] (for unfair competition and false designation of origin) and 37 (for tradename infringement). [22]They claimed that petitioners adopted the GALLO trademark to ride on Gallo Winerys GALLO and ERNEST & JULIO GALLO trademarks established reputation and popularity, thus causing confusi on, deception and mistake on the part of the purchasing public who had always associated GALLO and ERNEST & JULIO GALLO trademarks with Gallo Winerys wines. Respondents prayed for the issuance of a writ of preliminary injunction and ex parte restraining order, plus P2 million as actual and compensatory damages, at leastP500,000 as exemplary and moral damages, and at least P500,000 as attorneys fees and litigation expenses.[23] In their answer, petitioners alleged, among other affirmative defenses, that: petitioners GALLO cigarettes and Gallo Winery s wines were totally unrelated products; Gallo Winerys GALLO trademark registration certificate covered wines on ly, not cigarettes; GALLO cigarettes and GALLO wines were sold through different channels of trade; GALLO cigarettes, sold at P4.60 for GALLO filters and P3 for GALLO menthols, were low-cost items compared to Gallo Winerys high-priced luxury wines which cost between P98 toP242.50; the target market of Gallo Winerys wines was the middle or high-income bracket with at least P10,000 monthly income while GALLO cigarette buyers were farmers, fishermen, laborers and other low-income workers; the dominant feature of the GALLO cigarette mark was the rooster device with the manufacturers name clearly indicated as MIGHTY CORPORATION while, in the case of Gallo Winerys wines, it was the full names of the founders-owners ERNEST & JULIO GALLO or just their surname GALLO; by their inaction and conduct, respondents were guilty of laches and estoppel; and petitioners acted with honesty, justice and good faith in the exercise of their right to manufacture and sell GALLO cigarettes. In an order dated April 21, 1993,[24] the Makati RTC denied, for lack of merit, respondents prayer for the issuance of a writ of preliminary injunction,[25] holding that respondents GALLO trademark registration certificate covered wines only, that respondents wines and petitioners cigarettes were not related goods and respondents failed to prove material damage or great irreparable injury as required by Section 5, Rule 58 of the Rules of Court.[26] On August 19, 1993, the Makati RTC denied, for lack of merit, respondents motion for reconsideration. The court reiterated that respondents wines and petitioners cigarettes were not related goods since the likelihood of deception and confusion on the part of the consuming public was very remote. The trial court emphasized that it could not rely on foreign rulings cited by respondents because the[se] cases were decided by foreign courts on the basis of unknown facts peculiar to each case or upon factual surroundings which may exist only within their jurisdiction. Moreover, there [was] no showing that [these cases had] been tested or found applicable in our jurisdiction. [27] On February 20, 1995, the CA likewise dismissed respondents petition for review on certiorari, docketed as CA -G.R. No. 32626, thereby affirming the Makati RTCs denial of the application for issuance of a writ of preliminary injunction against petitioners.[28] After trial on the merits, however, the Makati RTC, on November 26, 1998, held petitioners liable for, and permanently enjoined them from, committing trademark infringement and unfair competition with respect to the GALLO trademark: WHEREFORE, judgment is rendered in favor of the plaintiff (sic) and against the defendant (sic), to wit: a. permanently restraining and enjoining defendants, their distributors, trade outlets, and all persons acting for them or under their instructions, from (i) using E & Js registered trademark GALLO or any other reproduction, counterfeit, copy or colorable imitation of said trad emark, either singly or in conjunction with other words, designs or emblems and other acts of similar nature, and (ii) committing other acts of unfair competition against plaintiffs by manufacturing and selling their cigarettes in the domestic or export markets under the GALLO trademark. b. ordering defendants to pay plaintiffs (i) actual and compensatory damages for the injury and prejudice and impairment of plaintiffs business and goodwill as a res ult of the acts and conduct pleaded as basis for this suit, in an amount equal to 10% of FOURTEEN MILLION TWO HUNDRED THIRTY FIVE THOUSAND PESOS (PHP14,235,000.00) from the filing of the complaint until fully paid; (ii) exemplary damages in the amount of PHP100,000.00;

(iii) attorneys fees and expenses of litigation in the amount of PHP1,130,0 68.91; (iv) the cost of suit. SO ORDERED.[29] On June 24, 1999, the Makati RTC granted respondents motion for partial reconsideration and increased the awa rd of actual and compensatory damages to 10% ofP199,290,000 or P19,929,000.[30] On appeal, the CA affirmed the Makati RTC decision and subsequently denied pe titioners motion for reconsideration. III.

The Issues

Petitioners now seek relief from this Court contending that the CA did not follow prevailing laws and jurisprudence when it held that: [a] RA 8293 (Intellectual Property Code of the Philippines [IP Code]) was applicable in this case; [b] GALLO cigarettes and GALLO wines were identical, similar or related goods for the reason alone that they were purportedly forms of vice; [c] both goods passed through the same channels of trade and [d] petitioners were liable for trademark infringement, unfair competition and damages. [31] Respondents, on the other hand, assert that this petition which invokes Rule 45 does not involve pure questions of law, and hence, must be dismissed outright. IV.

Discussion

THE EXCEPTIONAL CIRCUMSTANCES IN THIS CASE OBLIGE THE COURT TO REVIEW THE CAS FACTUAL FINDINGS As a general rule, a petition for review on certiorari under Rule 45 must raise only questions of law[32] (that is, the doubt pertains to the application and interpretation of law to a certain set of facts) and not questions of fact (where the doubt concerns the truth or falsehood of alleged facts),[33] otherwise, the petition will be denied. We are not a trier of facts and the Court of Appeals factual findings are generally conclusive upon us.[34] This case involves questions of fact which are directly related and intertwined with questions of law. The resolution of the factual issues concerning the goods similarity, identity, relation, channels of trade, and acts of trademark infringement and unfair compet ition is greatly dependent on the interpretation of applicable laws. The controversy here is not simply the identity or similarity of both parties trademarks but whether or not infringement or unfair competition was committed, a conclusion based on statutory interpretation. Furthermore, one or more of the following exceptional circumstances oblige us to review the evidence on record:[35] (1) the conclusion is grounded entirely on speculation, surmises, and conjectures; (2) the inference of the Court of Appeals from its findings of fact is manifestly mistaken, absurd and impossible; (3) there is grave abuse of discretion; (4) the judgment is based on a misapprehension of facts; (5) the appellate court, in making its findings, went beyond the issues of the case, and the same are contrary to the admissions of both the appellant and the appellee; (6) the findings are without citation of specific evidence on which they are based; (7) the facts set forth in the petition as well as in the petitioner's main and reply briefs are not disputed by the respondents; and (8) the findings of fact of the Court of Appeals are premised on the absence of evidence and are contradicted [by the evidence] on record.[36]

In this light, after thoroughly examining the evidence on record, weighing, analyzing and balancing all factors to determine whether trademark infringement and/or unfair competition has been committed, we conclude that both the Court of Appeals and the trial court veered away from the law and well-settled jurisprudence. Thus, we give due course to the petition. THE TRADEMARK LAW AND THE PARIS CONVENTION ARE THE APPLICABLE LAWS, NOT THE INTELLECTUAL PROPERTY CODE We note that respondents sued petitioners on March 12, 1993 for trademark infringement and unfair competition committed during the effectivity of the Paris Convention and the Trademark Law. Yet, in the Makati RTC decision of November 26, 1998, petitioners were held liable not only under the aforesaid governing laws but also under the IP Code which took effect only on January 1, 1998,[37] or about five years after the filing of the complaint: Defendants unauthorized use of the GALLO trademark constitutes trademark infringement pursuant to Section 22 of Republic Act No. 166, Section 155 of the IP Code, Article 6bis of the Paris Convention, and Article 16 (1) of the TRIPS Agreement as it causes confusion, deception and mistake on the part of the purchasing public.[38] (Emphasis and underscoring supplied) The CA apparently did not notice the error and affirmed the Makati RTC decision: In the light of its finding that appellants use of the GALLO trademark on its cigarettes is likely to create confusion with the GALLO trademark on wines previously registered and used in the Philippines by appellee E & J Gallo Winery, the trial court thus did not err in holding that appellants acts not only violated the provisions of the our trademark laws (R.A. No. 166 and R.A. Nos. (sic) 8293) but also Article 6bis of the Paris Convention.[39] (Emphasis and underscoring supplied) We therefore hold that the courts a quo erred in retroactively applying the IP Code in this case. It is a fundamental principle that the validity and obligatory force of a law proceed from the fact that it has first been promulgated. A law that is not yet effective cannot be considered as conclusively known by the populace. To make a law binding even before it takes effect may lead to the arbitrary exercise of the legislative power.[40] Nova constitutio futuris formam imponere debet non praeteritis. A new state of the law ought to affect the future, not the past. Any doubt must generally be resolved against the retroactive operation of laws, whether these are original enactments, amendments or repeals.[41] There are only a few instances when laws may be given retroactive effect, [42] none of which is present in this case. The IP Code, repealing the Trademark Law,[43] was approved on June 6, 1997. Section 241 thereof expressly decreed that it was to take effect only on January 1, 1998, without any provision for retroactive application. Thus, the Makati RTC and the CA should have limited the consideration of the present case within the parameters of the Trademark Law and the Paris Convention, the laws in force at the time of the filing of the complaint. DISTINCTIONS BETWEEN TRADEMARK INFRINGEMENT AND UNFAIR COMPETITION Although the laws on trademark infringement and unfair competition have a common conception at their root, that is, a person shall not be permitted to misrepresent his goods or his business as the goods or business of another, the law on unfair competition is broader and more inclusive than the law on trademark infringement. The latter is more limited but it recognizes a more exclusive right derived from the trademark adoption and registration by the person whose goods or business is first associated with it. The law on trademarks is thus a specialized subject distinct from the law on unfair competition, although the two subjects are entwined with each other and are dealt with together in the Trademark Law (now, both are covered by the IP Code). Hence, even if one fails to establish his exclusive property right to a trademark, he may still obtain relief on the ground of his competitors unfairness or fraud. Conduct constitutes unfair competition if the effect is to pass off on the public the goods of one man as the goods of another. It is not necessary that any particular means should be used to this end.[44] In Del Monte Corporation vs. Court of Appeals,[45] we distinguished trademark infringement from unfair competition: (1) (2) (3) Infringement of trademark is the unauthorized use of a trademark, whereas unfair competition is the passing off of one's goods as those of another. In infringement of trademark fraudulent intent is unnecessary, whereas in unfair competition fraudulent intent is essential. In infringement of trademark the prior registration of the trademark is a prerequisite to the action, whereas in unfair competition registration is not necessary.

Pertinent Provisions on Trademark Infringement under the Paris Convention and the Trademark Law

Article 6bis of the Paris Convention,[46] an international agreement binding on the Philippines and the United States (Gallo Winerys country of domicile and origin) prohibits the [registration] or use of a trademark which constitutes a reproduction, imitation or trans lation, liable to create confusion, of a mark considered by the competent authority of the country of registration or use to be well-known in that country as being already the mark of a person entitled to the benefits of the [Paris] Convention and used for identical or similar goods. [This rule also applies] when the essential part of the mark constitutes a reproduction of any such well-known mark or an imitation liable to create confusion therewith. There is no time limit for seeking the prohibition of the use of marks used in bad faith. [47] Thus, under Article 6bis of the Paris Convention, the following are the elements of trademark infringement: (a) (b) (c) registration or use by another person of a trademark which is a reproduction, imitation or translation liable to create confusion, of a mark considered by the competent authority of the country of registration or use[48] to be well-known in that country and is already the mark of a person entitled to the benefits of the Paris Convention, and such trademark is used for identical or similar goods.

On the other hand, Section 22 of the Trademark Law holds a person liable for infringement when, among others, he uses without the consent of the registrant, any reproduction, counterfeit, copy or colorable imitation of any registered mark or tradename in connection with the sale, offering for sale, or advertising of any goods, business or services 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 tradename and apply such reproduction, counterfeit, copy or colorable imitation to labels, signs, prints, packages, wrappers, receptacles or advertisements intended to be used upon or in connection with such goods, business or services.[49] Trademark registration and actual use are material to the complaining partys cause of action. Corollary to this, Section 20 of the Trademark Law[50] considers the trademark registration certificate as prima facie evidence of the validity of the registration, the registrants ownership and exclusive right to use the trademark in connection with the goods, business or services as classified by the Director of Patents[51] and as specified in the certificate, subject to the conditions and limitations stated therein. Sections 2 and 2-A[52] of the Trademark Law emphasize the importance of the trademarks actual use in commerce in the Philippines prior to its registration. In the adjudication of trademark rights between contending parties, equitable principles of laches, estoppel, and acquiescence may be considered and applied.[53] Under Sections 2, 2-A, 9-A, 20 and 22 of the Trademark Law therefore, 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) 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) (d) the trademark is used for identical or similar goods, and such act is done without the consent of the trademark registrant or assignee.

In summary, the Paris Convention protects well-known trademarks only (to be determined by domestic authorities), while the Trademark Law protects all trademarks, whether well-known or not, provided that they have been registered and are in actual commercial use in the Philippines. Following universal acquiescence and comity, in case of domestic legal disputes on any conflicting provisions between the Paris Convention (which is an international agreement) and the Trademark law (which is a municipal law) the latter will prevail. [54] Under both the Paris Convention and the Trademark Law, the protection of a registered trademark is limited only to goods identical or similar to those in respect of which such trademark is registered and only when there is likelihood of confusion. Under both laws, the time element in commencing infringement cases is material in ascertaining the registrants express or implied consent to anothers use of it s trademark or a colorable imitation thereof. This is why acquiescence, estoppel or laches may defeat the registrants otherwise valid cause of action. Hence, proof of all the elements of trademark infringement is a condition precedent to any finding of liability. THE ACTUAL COMMERCIAL USE IN THE PHILIPPINES OF GALLO CIGARETTE TRADEMARK PRECEDED THAT OF GALLO WINE TRADEMARK. By respondents own judicial admission, the GALLO wine trademark was registered in the Philippines in November 1971 but the w ine itself was first marketed and sold in the country only in 1974 and only within the former U.S. military facilities, and outside thereof, only in 1979. To prove commercial use of the GALLO wine trademark in the Philippines, respondents presented sales invoice no. 29991 dated July 9, 1981 addressed to Conrad Company Inc., Makati, Philippines and sales invoice no. 85926 dated March 22, 1996 addressed to Andresons Global, Inc., Quezon City, Philippines. Both invoices were for the sale and shipment of GALLO wines to the Philippines during that period.[55] Nothing at all, however, was presented to evidence the alleged sales of GALLO wines in the Philippines in 1974 or, for that matter, prior to July 9, 1981.

On the other hand, by testimonial evidence supported by the BIR authorization letters, forms and manufacturers sworn stateme nt, it appears that petitioners and its predecessor-in-interest, Tobacco Industries, have indeed been using and selling GALLO cigarettes in the Philippines since 1973 or before July 9, 1981.[56] In Emerald Garment Manufacturing Corporation vs. Court of Appeals,[57] we reiterated our rulings in Pagasa Industrial Corporation vs. Court of Appeals,[58] Converse Rubber Corporation vs. Universal Rubber Products, Inc., [59] Sterling Products International, Inc. vs. Farbenfabriken Bayer Aktiengesellschaft,[60] Kabushi Kaisha Isetan vs. Intermediate Appellate Court,[61] and Philip Morris vs. Court of Appeals,[62] giving utmost importance to the actual commercial use of a trademark in the Philippines prior to its registration, notwithstanding the provisions of the Paris Convention: xxx xxx xxx

In addition to the foregoing, we are constrained to agree with petitioner's contention that private respondent failed to prove prior actual commercial use of its LEE trademark in the Philippines before filing its application for registration with the BPTTT and he nce, has not acquired ownership over said mark. Actual use in commerce in the Philippines is an essential prerequisite for the acquisition of ownership over a trademark pursuant to Sec. 2 and 2-A of the Philippine Trademark Law (R.A. No. 166) x x x xxx xxx xxx

The provisions of the 1965 Paris Convention for the Protection of Industrial Property relied upon by private respondent and Sec. 21-A of the Trademark Law (R.A. No. 166) were sufficiently expounded upon and qualified in the recent case of Philip Morris, Inc. v. Court of Appeals (224 SCRA 576 [1993]): xxx xxx xxx Following universal acquiescence and comity, our municipal law on trademarks regarding the requirement of actual use in the Philippines must subordinate an international agreement inasmuch as the apparent clash is being decided by a municipal tribunal (Mortisen vs. Peters, Great Britain, High Court of Judiciary of Scotland, 1906, 8 Sessions, 93; Paras, International Law and World Organization, 1971 Ed., p. 20). Withal, the fact that international law has been made part of the law of the land does not by any means imply the primacy of international law over national law in the municipal sphere. Under the doctrine of incorporation as applied in most countries, rules of international law are given a standing equal, not superior, to national legislative enactments. xxx xxx xxx In other words, (a foreign corporation) may have the capacity to sue for infringement irrespective of lack of business activity in the Philippines on account of Section 21-A of the Trademark Law but the question of whether they have an exclusive right over their symbol as to justify issuance of the controversial writ will depend on actual use of their trademarks in the Philippines in line with Sections 2 and 2-A of the same law. It is thus incongruous for petitioners to claim that when a foreign corporation not licensed to do business in the Philippines files a complaint for infringement, the entity need not be actually using the trademark in commerce in the Philippines. Such a foreign corporation may have the personality to file a suit for infringement but it may not necessarily be entitled to protection due to absence of actual use of the emblem in the local market. xxx xxx xxx Undisputably, private respondent is the senior registrant, having obtained several registration certificates for its various trademarks LEE, LEE RIDERS, and LEESURES in both the supplemental and principal registers, as early as 1969 to 1973. However, registration alone will not suffice. In Sterling Products International, Inc. v. Farbenfabriken Bayer Aktiengesellschaft (27 SCRA 1214 [1969]; Reiterated in Kabushi Isetan vs. Intermediate Appellate Court (203 SCRA 583 [1991]) we declared: xxx xxx xxx A rule widely accepted and firmly entrenched because it has come down through the years is that actual use in commerce or business is a prerequisite in the acquisition of the right of ownership over a trademark. xxx xxx xxx

The credibility placed on a certificate of registration of one's trademark, or its weight as evidence of validity, ownership and exclusive use, is qualified. A registration certificate serves merely as prima facie evidence. It is not conclusive but can and may be rebutted by controverting evidence. xxx xxx xxx

In the case at bench, however, we reverse the findings of the Director of Patents and the Court of Appeals. After a meticulous study of the records, we observe that the Director of Patents and the Court of Appeals relied mainly on the registration certificates as proof of use by private respondent of the trademark LEE which, as we have previously discussed are not sufficient. We cannot give credence to private respondent's claim that its LEE mark first reached the Philippines in the 1960's through local sales by the Post Exchanges of the U.S. Military Bases in the Philippines (Rollo, p. 177) based as it was solely on the self-serving statements of Mr. Edward Poste, General Manager of Lee (Phils.), Inc., a wholly owned subsidiary of the H.D. Lee, Co., Inc., U.S.A., herein private respondent. (Original Records, p. 52) Similarly, we give little weight to the numerous vouchers r epresenting various advertising expenses in the Philippines for LEE products. It is well to note that these expenses were incurred only in 1981 and 1982 by LEE (Phils.), Inc. after it entered into a licensing agreement with private respondent on 11 May 1981. (Exhibit E) On the other hand, petitioner has sufficiently shown that it has been in the business of selling jeans and other garments adopting its STYLISTIC MR. LEE trademark since 1975 as evidenced by appropriate sales invoices to various stores and retailers. (Exhibit 1-e to 1-o) Our rulings in Pagasa Industrial Corp. v. Court of Appeals (118 SCRA 526 [1982]) and Converse Rubber Corp. v. Universal Rubber Products, Inc., (147 SCRA 154 [1987]), respectively, are instructive: The Trademark Law is very clear. It requires actual commercial use of the mark prior to its registration. There is no dispute that respondent corporation was the first registrant, yet it failed to fully substantiate its claim that it used in trade or business in the Philippines the subject mark; it did not present proof to invest it with exclusive, continuous adoption of the trademark which should consist among others, of considerable sales since its first use. The invoices submitted by respondent which were dated way back in 1957 show that the zippers sent to the Philippines were to be used as samples and of no commercial value. The evidence for respondent must be clear, definite and free from inconsistencies. Samples are not for sale and therefore, the fact of exporting them to the Philippines cannot be considered to be equivalent to the use contemplated by law. Respondent did not expect income from such samples. There were no receipts to establish sale, and no proof were presented to show that they were subsequently sold in the Philippines. xxx xxx xxx For lack of adequate proof of actual use of its trademark in the Philippines prior to petitioner's use of its own mark and for failure to establish confusing similarity between said trademarks, private respondent's action for infringement must necessarily fail. (Emphasis supplied.) In view of the foregoing jurisprudence and respondents judicial admission that the actual commercial use of the GALLO wine trademark was subsequent to its registration in 1971 and to Tobacco Industries commercial use of the GALLO cigarette trademark in 1973, we rule that, on this account, respondents never enjoyed the exclusive right to use the GALLO wine trademark to the prejudice of Tobacco Industries and its successorsin-interest, herein petitioners, either under the Trademark Law or the Paris Convention. Respondents GALLO trademark registration is limited to wines only We also note that the GALLO trademark registration certificates in the Philippines and in other countries expressly state that they cover wines only, without any evidence or indication that registrant Gallo Winery expanded or intended to expand its business to cigarettes. [63] Thus, by strict application of Section 20 of the Trademark Law, Gallo Winerys exclusive right to use the GALLO trademark sho uld be limited to wines, the only product indicated in its registration certificates. This strict statutory limitation on the exclusive right to use trademarks was amply clarified in our ruling in Faberge, Inc. vs. Intermediate Appellate Court:[64] Having thus reviewed the laws applicable to the case before Us, it is not difficult to discern from the foregoing statutory enactments that private respondent may be permitted to register the trademark BRUTE for briefs produced by it notwithstanding petitioner's vehement protestations of unfair dealings in marketing its own set of items which are limited to: after-shave lotion, shaving cream, deodorant, talcum powder and toilet soap. Inasmuch as petitioner has not ventured in the production of briefs, an item which is not listed in its certificate of registration, petitioner cannot and should not be allowed to feign that private respondent had invaded petitioner's exclusive domain. To be sure, it is significant that petitioner failed to annex in its Brief the so-called eloquent proof that petitioner indeed intended to expand its mark BRUT to other goods (Page 27, Brief for the Petitioner; page 202, Rollo). Even then, a mere application by petitioner in this aspect does not suffice and may not vest an exclusive right in its favor that can ordinarily be protected by the Trademark Law. In short, paraphrasing Section 20 of the Trademark

Law as applied to the documentary evidence adduced by petitioner, the certificate of registration issued by the Director of Patents can confer upon petitioner the exclusive right to use its own symbol only to those goods specified in the certificate, subject to any conditions and limitations stated therein. This basic point is perhaps the unwritten rationale of Justice Escolin in Philippine Refining Co., Inc. vs. Ng Sam (115 SCRA 472 [1982]), when he stressed the principle enunciated by the United States Supreme Court in American Foundries vs. Robertson (269 U.S. 372, 381, 70 L ed 317, 46 Sct. 160) that one who has adopted and used a trademark on his goods does not prevent the adoption and use of the same trademark by others for products which are of a different description. Verily, this Court had the occasion to observe in the 1966 case of George W. Luft Co., Inc. vs. Ngo Guan (18 SCRA 944 [1966]) that no serious objection was posed by the petitioner therein since the applicant utilized the emblem Tango for no other product than hair pomade in which petitioner does not deal. This brings Us back to the incidental issue raised by petitioner which private respondent sought to belie as regards petitioner's alleged expansion of its business. It may be recalled that petitioner claimed that it has a pending application for registration of the emblem BRUT 33 for briefs (page 25, Brief for the Petitioner; page 202, Rollo) to impress upon Us the Solomonic wisdom imparted by Justice JBL Reyes in Sta. Ana vs. Maliwat (24 SCRA 1018 [1968]), to the effect that dissimilarity of goods will not preclude relief if the junior user's goods are not remote from any other product which the first user would be likely to make or sell (vide, at page 1025). Commenting on the former provision of the Trademark Law now embodied substantially under Section 4(d) of Republic Act No. 166, as amended, the erudite jurist opined that the law i n point does not require that the articles of manufacture of the previous user and late user of the mark should possess the same descriptive properties or should fall into the same categories as to bar the latter from registering his mark in the principal register. (supra at page 1026). Yet, it is equally true that as aforesaid, the protective mantle of the Trademark Law extends only to the goods used by the first user as specified in the certificate of registration following the clear message conveyed by Section 20. How do We now reconcile the apparent conflict between Section 4(d) which was relied upon by Justice JBL Reyes in the Sta. Ana case and Section 20? It would seem that Section 4(d) does not require that the goods manufactured by the second user be related to the goods produced by the senior user while Section 20 limits the exclusive right of the senior user only to those goods specified in the certificate of registration. But the rule has been laid down that the clause which comes later shall be given paramount significance over an anterior proviso upon the presumption that it expresses the latest and dominant purpose. (Graham Paper Co. vs. National Newspapers Asso. (Mo. App.) 193 S.W. 1003; Barnett vs. Merchant's L. Ins. Co., 87 Okl. 42; State ex nel Atty. Gen. vs. Toledo, 26 N.E., p. 1061; cited by Martin, Statutory Construction Sixth ed., 1980 Reprinted, p. 144). It ineluctably follows that Section 20 is controlling and, therefore, private respondent can appropriate its symbol for the briefs it manufactures because as aptly remarked by Justice Sanchez in Sterling Products International Inc. vs. Farbenfabriken Bayer (27 SCRA 1214 [1969]): Really, if the certificate of registration were to be deemed as including goods not specified therein, then a situation may arise whereby an applicant may be tempted to register a trademark on any and all goods which his mind may conceive even if he had never intended to use the trademark for the said goods. We believe that such omnibus registration is not contemplated by our Trademark Law. (1226). NO LIKELIHOOD OF CONFUSION, MISTAKE OR DECEIT AS TO THE IDENTITY OR SOURCE OF PETITIONERS AND RESPONDENTS GOODS OR BUSINESS A crucial issue in any trademark infringement case is the likelihood of confusion, mistake or deceit as to the identity, source or origin of the goods or identity of the business as a consequence of using a certain mark. Likelihood of confusion is admittedly a relative term, to be determined rigidly according to the particular (and sometimes peculiar) circumstances of each case. Thus, in trademark cases, more than in other kinds of litigation, precedents must be studied in the light of each particular case. [65] There are two types of confusion in trademark infringement. The first is confusion of goods when an otherwise prudent purchaser is induced to purchase one product in the belief that he is purchasing another, in which case defendants goods are then bought as the plaintiffs and its poor quality reflects badly on the plaintiffs reputation. The other is confusion of business wherein the goods of the parties are different but the defendants product can reasonably (though mistakenly) be assumed to originate from the plaintiff, thus deceiving the public into believing that there is some connection between the plaintiff and defendant which, in fact, does not exist. [66] In determining the likelihood of confusion, the Court must consider: [a] the resemblance between the trademarks; [b] the similarity of the goods to which the trademarks are attached; [c] the likely effect on the purchaser and [d] the registrants express or implied consent and other fair and equitable considerations. Petitioners and respondents both use GALLO in the labels of their respective cigarette and wine products. But, as held in t he following cases, the use of an identical mark does not, by itself, lead to a legal conclusion that there is trademark infringement: (a) in Acoje Mining Co., Inc. vs. Director of Patent,[67] we ordered the approval of Acoje Minings application for registration of the trademark LOTUS for its soy sauce even though Philippine Refining Company had prior registration and use of such identical mark for its edible oil which, like soy sauce, also belonged to Class 47;

(b)

in Philippine Refining Co., Inc. vs. Ng Sam and Director of Patents,[68] we upheld the Patent Directors registration of the same trademark CAMIA for Ng Sams ham under Class 47, despite Philippine Refining Companys prior trademark registration and actua l use of such mark on its lard, butter, cooking oil (all of which belonged to Class 47), abrasive detergents, polishing materials and soaps; in Hickok Manufacturing Co., Inc. vs. Court of Appeals and Santos Lim Bun Liong,[69] we dismissed Hickoks petition to cancel private respondents HICKOK trademark registration for its Marikina shoes as against petitioners earlier registration of the same tr ademark for handkerchiefs, briefs, belts and wallets; in Shell Company of the Philippines vs. Court of Appeals,[70] in a minute resolution, we dismissed the petition for review for lack of merit and affirmed the Patent Offices registration of the trademark SHELL used in the cig arettes manufactured by respondent Fortune Tobacco Corporation, notwithstanding Shell Companys opposition as the prior registrant of the same trademark for its gasoline and other petroleum products; in Esso Standard Eastern, Inc. vs. Court of Appeals,[71] we dismissed ESSOs complaint for trademark infringement against United Cigarette Corporation and allowed the latter to use the trademark ESSO for its cigarettes, the same trademark used by ESSO for its petroleum products, and in Canon Kabushiki Kaisha vs. Court of Appeals and NSR Rubber Corporation,[72] we affirmed the rulings of the Patent Office and the CA that NSR Rubber Corporation could use the trademark CANON for its sandals (Class 25) despite Can on Kabushiki Kaishas prior registration and use of the same trademark for its paints, chemical products, toner and dyestuff (Class 2).

(c)

(d)

(e)

(f)

Whether a trademark causes confusion and is likely to deceive the public hinges on colorable imitation [73] which has been defined as such similarity in form, content, words, sound, meaning, special arrangement or general appearance of the trademark or tradename in their overall presentation or in their essential and substantive and distinctive parts as would likely mislead or confuse persons in the ordinary course of purchasing the genuine article.[74] Jurisprudence has developed two tests in determining similarity and likelihood of confusion in trademark resemblance: [75] (a) the Dominancy Test applied in Asia Brewery, Inc. vs. Court of Appeals[76] and other cases,[77] and (b) the Holistic or Totality Test used in Del Monte Corporation vs. Court of Appeals [78] and its preceding cases.[79] The Dominancy Test focuses on the similarity of the prevalent features of the competing trademarks which might cause confusion or deception, and thus infringement. If the competing trademark contains the main, essential or dominant features of another, and confusion or 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. The question is whether the use of the marks involved is likely to cause confusion or mistake in the mind of the public or deceive purchasers.[80] On the other hand, the Holistic Test requires that the entirety of the marks in question be considered in resolving confusing similarity. Comparison of words is not the only determining factor. The trademarks in their entirety as they appear in their respective labels or hang tags must also be considered in relation to the goods to which they are attached. The discerning eye of the observer must focus not only on the predominant words but also on the other features appearing in both labels in order that he may draw his conclusion whether one is confusingly similar to the other.[81] In comparing the resemblance or colorable imitation of marks, various factors have been considered, such as the dominant color, style, size, form, meaning of letters, words, designs and emblems used, the likelihood of deception of the mark or name's tendency to confuse[82] and the commercial impression likely to be conveyed by the trademarks if used in conjunction with the respective goods of the parties.[83] Applying the Dominancy and Holistic Tests, we find that the dominant feature of the GALLO cigarette trademark is the device of a large rooster facing left, outlined in black against a gold background. The roosters color is either green or red green for GALLO menthols and red for GALLO filters. Directly below the large rooster device is the word GALLO. The rooster device is given prominence in the GALLO cigarette packs in terms of size and location on the labels.[84] The GALLO mark appears to be a fanciful and arbitrary mark for the cigarettes as it has no relation at all to the product but was chosen merely as a trademark due to the fondness for fighting cocks of the son of petitioners president. Furthermore, petitioners adopted GALLO, the Spanish word for rooster, as a cigarette trademark to appeal to one of their target markets, the sabungeros (cockfight aficionados).[85] Also, as admitted by respondents themselves,[86] on the side of the GALLO cigarette packs are the words MADE BY MIGHTY CORPORATION, thus clearly informing the public as to the identity of the manufacturer of the cigarettes. On the other hand, GALLO Winerys wine and brandy labels are diverse. In many of them, the labels are embellished with sketches of buildings and trees, vineyards or a bunch of grapes while in a few, one or two small roosters facing right or facing each other (atop the EJG crest, surrounded by leaves or ribbons), with additional designs in green, red and yellow colors, appear as minor features thereof. [87] Directly below or

above these sketches is the entire printed name of the founder-owners, ERNEST & JULIO GALLO or just their surname GALLO,[88] which appears in different fonts, sizes, styles and labels, unlike petitioners uniform casque-font bold-lettered GALLO mark. Moreover, on the labels of Gallo Winerys wines are printed the words VINTED AND BOTTLED BY ERNEST & JULIO GALLO, MODESTO, CALIFORNIA.[89] The many different features like color schemes, art works and other markings of both products drown out the similarity between them the use of the word GALLO a family surname for the Gallo Winerys wines and a Spanish word for rooster for petitioners cigarettes. WINES AND CIGARETTES ARE NOT IDENTICAL, SIMILAR, COMPETING OR RELATED GOODS Confusion of goods is evident where the litigants are actually in competition; but confusion of business may arise between non-competing interests as well.[90] Thus, apart from the strict application of Section 20 of the Trademark Law and Article 6 bis of the Paris Convention which proscribe trademark infringement not only of goods specified in the certificate of registration but also of identical or similar goods, we have also uniformly recognized and applied the modern concept of related goods.[91] Simply stated, when goods are so related that the public may be, or is actually, deceived and misled that they come from the same maker or manufacturer, trademark infringement occurs. [92] 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. [93] They may also be those which, being entirely unrelated, cannot be assumed to have a common source; hence, there is no confusion of business, even though similar marks are used.[94] Thus, there is no trademark infringement if the public does not expect the plaintiff to make or sell the same class of goods as those made or sold by the defendant.[95] In resolving whether goods are related,[96] several factors come into play: (a) (b) (c) (d) (e) (f) (g) (h) (i) (j) the business (and its location) to which the goods belong the class of product to which the goods belong the product's quality, quantity, or size, including the nature of the package, wrapper or container [97] the nature and cost of the articles[98] the descriptive properties, physical attributes or essential characteristics with reference to their form, composition, texture or quality the purpose of the goods[99] whether the article is bought for immediate consumption,[100] that is, day-to-day household items[101] the fields of manufacture[102] the conditions under which the article is usually purchased[103] and the channels of trade through which the goods flow,[104] how they are distributed, marketed, displayed and sold.[105]

The wisdom of this approach is its recognition that each trademark infringement case presents its own unique set of facts. No single factor is preeminent, nor can the presence or absence of one determine, without analysis of the others, the outcome of an infringement suit. Rather, the court is required to sift the evidence relevant to each of the criteria. This requires that the entire panoply of elements constituting the relevant factual landscape be comprehensively examined.[106] It is a weighing and balancing process. With reference to this ultimate question, and from a balancing of the determinations reached on all of the factors, a conclusion is reached whether the parties have a right to the relief sought.[107] A very important circumstance though is whether there exists a likelihood that an appreciable number of ordinarily prudent purchasers will be misled, or simply confused, as to the source of the goods in question. [108] The purchaser is not the completely unwary consumer but is the ordinarily intelligent buyer considering the type of product involved. [109] He is accustomed to buy, and therefore to some extent familiar with, the goods in question. The test of fraudulent simulation is to be found in the likelihood of the deception of some persons in some measure acquainted with an established design and desirous of purchasing the commodity with which that design has been associated. The test is not found in the deception, or the possibility of deception, of the person who knows nothing about the design which has been counterfeited, and who must be indifferent between that and the other. The simulation, in order to be objectionable, must be such as appears likely to mislead the ordinary intelligent buyer who has a need to supply and is familiar with the article that he seeks to purchase.[110]

10

Hence, in the adjudication of trademark infringement, we give due regard to the goods usual purchasers character, attitude, habits, age, training and education. [111] Applying these legal precepts to the present case, petitioners use of the GALLO cigare tte trademark is not likely to cause confusion or mistake, or to deceive the ordinarily intelligent buyer of either wines or cigarettes or both as to the identity of the goo ds, their source and origin, or identity of the business of petitioners and respondents. Obviously, wines and cigarettes are not identical or competing products. Neither do they belong to the same class of goods. R espondents GALLO wines belong to Class 33 under Rule 84[a] Chapter III, Part II of the Rules of Practice in Trademark Case s while petitioners GALLO cigarettes fall under Class 34. We are mindful that product classification alone cannot serve as the decisive factor in the resolution of whether or not wines and cigarettes are related goods. Emphasis should be on the similarity of the products involved and not on the arbitrary classification or general description of their properties or characteristics. But the mere fact that one person has adopted and used a particular trademark for his goods does not prevent the adoption and use of the same trademark by others on articles of a different description. [112] Both the Makati RTC and the CA held that wines and cigarettes are related products because: (1) they are related forms of vice, harmful when taken in excess, and used for pleasure and relaxation and (2) they are grouped or classified in the same section of supermarkets and groceries. We find these premises patently insufficient and too arbitrary to support the legal conclusion that wines and cigarettes are related products within the contemplation of the Trademark Law and the Paris Convention. First, anything - not only wines and cigarettes can be used for pleasure and relaxation and can be harmful when taken in excess. Indeed, it would be a grave abuse of discretion to treat wines and cigarettes as similar or related products likely to cause confusion just because they are pleasure-giving, relaxing or potentially harmful. Such reasoning makes no sense. Second, it is common knowledge that supermarkets sell an infinite variety of wholly unrelated products and the goods here involved, wines and cigarettes, have nothing whatsoever in common with respect to their essential characteristics, quality, quantity, size, including the nature of their packages, wrappers or containers.[113] Accordingly, the U.S. patent office and courts have consistently held that the mere fact that goods are sold in one store under the same roof does not automatically mean that buyers are likely to be confused as to the goods respective sources, connections or sponsor ships. The fact that different products are available in the same store is an insufficient standard, in and of itself, to warrant a finding of likelihood of confusion.[114] In this regard, we adopted the Director of Patents finding in Philippine Refining Co., Inc. vs. Ng Sam and the Director of Patents :[115] In his decision, the Director of Patents enumerated the factors that set respondents products apart from the goods of petitioner. He opined and we quote: I have taken into account such factors as probable purchaser attitude and habits, marketing activities, retail outlets, and commercial impression likely to be conveyed by the trademarks if used in conjunction with the respective goods of the parties, I believe that ham on one hand, and lard, butter, oil, and soap on the other are products that would not move in the same manner through the same channels of trade. They pertain to unrelated fields of manufacture, might be distributed and marketed under dissimilar conditions, and are displayed separately even though they frequently may be sold through the same retail food establishments. Opposers products are ordinary day-to-day household items whereas ham is not necessarily so. Thus, the goods of the parties are not of a character which purchasers would likely attribute to a common origin. The observations and conclusion of the Director of Patents are correct. The particular goods of the parties are so unrelated that consumers, would not, in any probability mistake one as the source of origin of the product of the other. (Emphasis supplied). The same is true in the present case. Wines and cigarettes are non-competing and are totally unrelated products not likely to cause confusion vis--vis the goods or the business of the petitioners and respondents. Wines are bottled and consumed by drinking while cigarettes are packed in cartons or packages and smoked. There is a whale of a difference between their descriptive properties, physical attributes or essential characteristics like form, composition, texture and quality. GALLO cigarettes are inexpensive items while GALLO wines are not. GALLO wines are patronized by middle-to-high-income earners while GALLO cigarettes appeal only to simple folks like farmers, fishermen, laborers and other low-income workers.[116] Indeed, the big price difference of these two products is an important factor in proving that they are in fact unrelated and that they travel in different channels of trade. There is a distinct price segmentation based on vastly different social classes of purchasers.[117] GALLO cigarettes and GALLO wines are not sold through the same channels of trade. GALLO cigarettes are Philippine-made and petitioners neither claim nor pass off their goods as imported or emanating from Gallo Winery. GALLO cigarettes are distributed, marketed and sold through ambulant and sidewalk vendors, small local sari-sari stores and grocery stores in Philippine rural areas, mainly in Misamis Oriental, Pangasinan, Bohol, and Cebu.[118] On the other hand, GALLO wines are imported, distributed and sold in the Philippin es through Gallo Winerys exclusive contracts with a domestic entity, which is currently Andresons. By respondents own testimonial evidence, GALLO wines are sol d in hotels, expensive bars and restaurants, and high-end grocery stores and supermarkets, not through sari-sari stores or ambulant vendors.[119]

11

Furthermore, the Makati RTC and the CA erred in relying on Carling Brewing Company vs. Philip Morris, Inc.[120] to support its finding that GALLO wines and GALLO cigarettes are related goods. The courts a quo should have taken into consideration the subsequent case of IDV North America, Inc. and R & A Bailey Co. Limited vs. S & M Brands, Inc.: [121] IDV correctly acknowledges, however, that there is no per se rule that the use of the same mark on alcohol and tobacco products always will result in a likelihood of confusion. Nonetheless, IDV relies heavily on the decision in John Walker & Sons, Ltd. vs. Tampa Cigar Co., 124 F. Supp. 254, 256 (S.D. Fla. 1954), affd, 222 F. 2d 460 (5th Cir. 1955), wherein the court enjoined the use of the mark JOHNNIE WALKER on cigars because the fame of the plaintiffs mark for scotch whiskey and because the plaintiff advertised its scotch whiskey on, or in connection with tobacco products. The court, in John Walker & Sons, placed great significance on the finding that the infringers use was a deliberate attempt to capitalize on the senior marks fame. Id. At 256. IDV also relies onCarling Brewing Co. v. Philip Morris, Inc., 297 F. Supp. 1330, 1338 (N.D. Ga. 1968), in which the court enjoined the defendants use of the mark BLACK LABEL for cigarettes because it was likely to cause confusion with the plaintiffs well-known mark BLACK LABEL for beer. xxx xxx xxx

Those decisions, however, must be considered in perspective of the principle that tobacco products and alcohol products should be considered related only in cases involving special circumstances. Schenley Distillers, Inc. v. General Cigar Co., 57C.C.P.A. 1213, 427 F. 2d 783, 785 (1970). The presence of special circumstances has been found to exist where there is a finding of unfair competition or where a famous or well-known mark is involved and there is a demonstrated intent to capitalize on that mark. For example, in John Walker & Sons, the court was persuaded to find a relationship between products, and hence a likelihood of confusion, because of the plaintif fs long use and extensive advertising of its mark and placed great emphasis on the fact th at the defendant used the trademark Johnnie Walker with full knowledge of its fame and reputation and with the intention of taking advantage thereof. John Walker & Sons, 124 F. Supp. At 256; see Mckesson & Robbins, Inc. v. P. Lorillard Co., 1959 WL 5894, 120 U.S.P.Q. 306, 307 (1959) (holding that the decision in John Walker & Sons was merely the law on the particular case based upon its own peculiar facts); see also Alfred Dunhill, 350 F. Supp. At 1363 (defendants adoption of Dunhill mark was not innocent). However, in Schenley, the court noted that the relation between tobacco and whiskey products is significant where a widely known arbitrary mark has long been used for diversified products emanating from a single source and a newcomer seeks to use the same mark on unrelated goods. Schenley, 427 F.2d. at 785. Significantly, in Schenley, the court looked at the industry practice and the facts of the case in order to determine the nature and extent of the relationship between the mark on the tobacco product and the mark on the alcohol product. The record here establishes conclusively that IDV has never advertised BAILEYS liqueurs in conjunction with tobacco or tobacco accessory products and that IDV has no intent to do so. And, unlike the defendant in Dunhill, S & M Brands does not market bar accessories, or liqueur related products, with its cigarettes. The advertising and promotional materials presented a trial in this action demonstrate a complete lack of affiliation between the tobacco and liqueur products bearing the marks here at issue. xxx xxx xxx

Of equal significance, it is undisputed that S & M Brands had no intent, by adopting the family name Baileys as the mark for its cigarettes, to capitalize upon the fame of the BAILEYS mark for liqueurs. See Schenley, 427 F. 2d at 785. Moreover, as will be discussed below, and as found in Mckesson & Robbins, the survey evidence refutes the contention that cigarettes and alcoholic beverages are so intimately associated in the public mind that they cannot under any circumstances be sold under the same mark without causing confusion. See Mckesson & Robbins, 120 U.S.P.Q. at 308. Taken as a whole, the evidence here demonstrates the absence of the special circumstances in which courts ha ve found a relationship between tobacco and alcohol products sufficient to tip the similarity of goods analysis in favor of the protected mark and against the allegedly infringing mark. It is true that BAILEYS liqueur, the worlds best selling liqueur and the second best selling in the United States, is a well-known product. That fact alone, however, is insufficient to invoke the special circumstances connection here where so much other evidence and so many other factors disprove a likelihood of confusion. The similarity of products analysis, therefore, augers against finding that there is a likelihood of confusion. (Emphasis supplied). In short, tobacco and alcohol products may be considered related only in cases involving special circumstances which exist only if a famous mark is involved and there is a demonstrated intent to capitalize on it . Both of these are absent in the present case. THE GALLO WINE TRADEMARK IS NOT A WELL-KNOWN MARK IN THE CONTEXT OF THE PARIS CONVENTION IN THIS CASE SINCE WINES AND CIGARETTES ARE NOT IDENTICAL OR SIMILAR GOODS First, the records bear out that most of the trademark registrations took place in the late 1980s and the 1990s, that is, aft er Tobacco Industries use of the GALLO cigarette trademark in 1973 and petitioners use of the same mark in 1984.

12

GALLO wines and GALLO cigarettes are neither the same, identical, similar nor related goods, a requisite element under both the Trademark Law and the Paris Convention. Second, the GALLO trademark cannot be considered a strong and distinct mark in the Philippines. Respondents do not dispute the documentary evidence that aside from Gallo Winerys GALLO trademark registration, the Bureau of Patents, Trademarks and Techn ology Transfer also issued on September 4, 1992 Certificate of Registration No. 53356 under the Principal Register approving Productos Alimenticios Gallo, S.As April 19, 1990 application for GALLO trademark registration and use for its noodles, prepared food or canned noodles, ready or canned sauces for noodles, semolina, wheat flour and bread crumbs, pastry, confectionery, ice cream, honey, molasses syrup, yeast, baking powder, salt, mustard, vinegar, species and ice.[122] Third and most important, pursuant to our ruling in Canon Kabushiki Kaisha vs. Court of Appeals and NSR Rubber Corporation,[123] GALLO cannot be considered a well-known mark within the contemplation and protection of the Paris Convention in this case since wines and cigarettes are not identical or similar goods: We agree with public respondents that the controlling doctrine with respect to the applicability of Article 8 of the Paris Convention is that established in Kabushi Kaisha Isetan vs. Intermediate Appellate Court (203 SCRA 59 [1991]). As pointed out by the BPTTT: Regarding the applicability of Article 8 of the Paris Convention, this Office believes that there is no automatic protection afforded an entity whose tradename is alleged to have been infringed through the use of that name as a trademark by a local entity. In Kabushiki Kaisha Isetan vs. The Intermediate Appellate Court, et. al., G.R. No. 75420, 15 November 1991, the Honorable Supreme Court held that: The Paris Convention for the Protection of Industrial Property does not automatically exclude all countries of the world which have signed it from using a tradename which happens to be used in one country. To illustrate if a taxicab or bus company in a town in the United Kingdom or India happens to use the tradename Rapid Transportation, it does not necessarily follow that Rapid can no longer be registered in Uganda, Fiji, or the Philippines. This office is not unmindful that in (sic) the Treaty of Paris for the Protection of Intellectual Property regarding well-known marks and possible application thereof in this case. Petitioner, as this office sees it, is trying to seek refuge under its protective mantle, claiming that the subject mark is well known in this country at the time the then application of NSR Rubber was filed. However, the then Minister of Trade and Industry, the Hon. Roberto V. Ongpin, issued a memorandum dated 25 October 1983 to the Director of Patents, a set of guidelines in the implementation of Article 6bis of the Treaty of Paris. These conditions are: a) the mark must be internationally known;

b) the subject of the right must be a trademark, not a patent or copyright or anything else; c) the mark must be for use in the same or similar kinds of goods; and d) the person claiming must be the owner of the mark (The Parties Convention Commentary on the Paris Convention. Article by Dr. Bogsch, Director General of the World Intellectual Property Organization, Geneva, Switzerland, 1985) From the set of facts found in the records, it is ruled that the Petitioner failed to comply with the third requirement of the said memorandum that is the mark must be for use in the same or similar kinds of goods. The Petitioner is using the mark CANON for products belonging to class 2 (paints, chemical products) while the Respondent is using the same mark for sandals (class 25). Hence, Petitioner's contention that its mark is well-known at the time the Respondent filed its application for the same mark should fail. (Emphasis supplied.) Consent of the Registrant and Other air, Just and Equitable Considerations Each trademark infringement case presents a unique problem which must be answered by weighing the conflicting interests of the litigants.[124] Respondents claim that GALLO wines and GALLO cigarettes flow through the same channels of trade, that is, retail trade. If respondents assertion is true, then both goods co-existed peacefully for a considerable period of time. It took respondents almost 20 years to know about the existence of GALLO cigarettes and sue petitioners for trademark infringement. Given, on one hand, the long period of time that petitioners were engaged in the manufacture, marketing, distribution and sale of GALLO cigarettes an d, on the other, respondents delay in enforcing their rights (not

13

to mention implied consent, acquiescence or negligence) we hold that equity, justice and fairness require us to rule in favor of petitioners. The scales of conscience and reason tip far more readily in favor of petitioners than respondents. Moreover, there exists no evidence that petitioners employed malice, bad faith or fraud, or that they intended to capitalize on respondents goodwill in adopting the GALLO mark for their cigarettes which are totally unrelated to respondents GALLO wines. Thus, we rule out trademark infringement on the part of petitioners. PETITIONERS ARE ALSO NOT LIABLE FOR UNFAIR COMPETITION Under Section 29 of the Trademark Law, any person who employs deception or any other means contrary to good faith by which he passes off the goods manufactured by him or in which he deals, or his business, or services for those of the one having established such goodwill, or who commits any acts calculated to produce said result, is guilty of unfair competition. It includes the following acts: (a) Any person, who in selling his goods shall give them the general appearance of goods of another manufacturer or dealer, either as to the goods themselves or in the wrapping of the packages in which they are contained, or the devices or words thereon, or in any other feature of their appearance, which would be likely to influence purchasers to believe that the goods offered are those of a manufacturer or dealer other than the actual manufacturer or dealer, or who otherwise clothes the goods with such appearance as shall deceive the public and defraud another of his legitimate trade, or any subsequent vendor of such goods or any agent of any vendor engaged in selling such goods with a like purpose; (b) Any person who by any artifice, or device, or who employs any other means calculated to induce the false belief that such person is offering the services of another who has identified such services in the mind of the public; (c) Any person who shall make any false statement in the course of trade or who shall commit any other act contrary to good faith of a nature calculated to discredit the goods, business or services of another. The universal test question is whether the public is likely to be deceived. Nothing less than conduct tending to pass off one mans goods or business as that of another constitutes unfair competition. Actual or probable deception and confusion on the part of customers by reason of defendants practices must always appear.[125] On this score, we find that petitioners never attempted to pass off their cigarettes as those of respondents. There is no evidence of bad faith or fraud imputable to petitioners in using their GALLO cigarette mark. All told, after applying all the tests provided by the governing laws as well as those recognized by jurisprudence, we conclude that petitioners are not liable for trademark infringement, unfair competition or damages. WHEREFORE, finding the petition for review meritorious, the same is hereby GRANTED. The questioned decision and resolution of the Court of Appeals in CA-G.R. CV No. 65175 and the November 26, 1998 decision and the June 24, 1999 order of the Regional Trial Court of Makati, Branch 57 in Civil Case No. 93-850 are hereby REVERSED and SET ASIDE and the complaint against petitioners DISMISSED. Costs against respondents. SO ORDERED. Vitug, (Chairman), and Sandoval-Gutierrez, JJ., concur. Carpio-Morales, J., no part.

[G.R. No. 148222. August 15, 2003]

PEARL

& DEAN (PHIL.), INCORPORATED, petitioner, vs. SHOEMART, MARKETING,INCORPORATED, respondents. DECISION

INCORPORATED, and

NORTH

EDSA

CORONA, J.: In the instant petition for review on certiorari under Rule 45 of the Rules of Court, petitioner Pearl & Dean (Phil.) Inc. (P & D) assails the May 22, 2001 decision[1] of the Court of Appeals reversing the October 31, 1996 decision [2] of the Regional Trial Court of Makati, Branch 133, in Civil Case No. 92-516 which declared private respondents Shoemart Inc. (SMI) and North Edsa Marketing Inc. (NEMI) liable for infringement of trademark and copyright, and unfair competition.

14

FACTUAL ANTECEDENTS The May 22, 2001 decision of the Court of Appeals[3] contained a summary of this dispute: Plaintiff-appellant Pearl and Dean (Phil.), Inc. is a corporation engaged in the manufacture of advertising display units simply referred to as light boxes. These units utilize specially printed posters sandwiched between plastic sheets and illuminated with back lights. Pearl and Dean was able to secure a Certificate of Copyright Registration dated January 20, 1981 over these illuminated display units. The advertising light boxes were marketed under the trademark Poster Ads. The application for registration of the trademark was filed with the Bureau of Patents, Trademarks and Technology Transfer on June 20, 1983, but was approved only on September 12, 1988, per Registration No. 41165. From 1981 to about 1988, Pearl and Dean employed the services of Metro Industrial Services to manufacture its advertising displays. Sometime in 1985, Pearl and Dean negotiated with defendant-appellant Shoemart, Inc. (SMI) for the lease and installation of the light boxes in SM City North Edsa. Since SM City North Edsa was under construction at that time, SMI offered as an alternative, SM Makati and SM Cubao, to which Pearl and Dean agreed. On September 11, 1985, Pearl and Deans General Manager, Rodolfo Vergara, submitted for signature the contracts covering SM Cubao and SM Makati to SMIs Advertising Promotions and Publicity Division Manager, Ramonlito Abano. Only the contract for SM Makati, however, was returned signed. On October 4, 1985, Vergara wrote Abano inquiring about the other contract and reminding him that their agreement for installation of light boxes was not only for its SM Makati branch, but also for SM Cubao. SMI did not bother to reply. Instead, in a letter dated January 14, 1986, SMIs house counsel informed Pearl and Dean that it was rescinding the contract for SM Makati due to non-performance of the terms thereof. In his reply dated February 17, 1986, Vergara protested the unilateral action of SMI, saying it was without basis. In the same letter, he pushed for the signing of the contract for SM Cubao. Two years later, Metro Industrial Services, the company formerly contracted by Pearl and Dean to fabricate its display units, offered to construct light boxes for Shoemarts chain of stores. SMI approved the proposal and ten (10) light boxes were subsequently fabricated by Metro Industrial for SMI. After its contract with Metro Industrial was terminated, SMI engaged the services of EYD Rainbow Advertising Corporation to make the light boxes. Some 300 units were fabricated in 1991. These were delivered on a staggered basis and installed at SM Megamall and SM City. Sometime in 1989, Pearl and Dean, received reports that exact copies of its light boxes were installed at SM City and in the fastfood section of SM Cubao. Upon investigation, Pearl and Dean found out that aside from the two (2) reported SM branches, light boxes similar to those it manufactures were also installed in two (2) other SM stores. It further discovered that defendant-appellant North Edsa Marketing Inc. (NEMI), through its marketing arm, Prime Spots Marketing Services, was set up primarily to sell advertising space in lighted display units locate d in SMIs different branches. Pearl and Dean noted that NEMI is a sister company of SMI. In the light of its discoveries, Pearl and Dean sent a letter dated December 11, 1991 to both SMI and NEMI enjoining them to cease using the subject light boxes and to remove the same from SMIs establishments. It also demanded the discontinued use of the trademark Poster Ads, and the payment to Pearl and Dean of compensatory damages in the amount of Twenty Million Pesos (P20,000,000.00). Upon receipt of the demand letter, SMI suspended the leasing of two hundred twenty-four (224) light boxes and NEMI took down its advertisements for Poster Ads from the lighted display units in SMIs stores. Claiming that both SMI and NEMI failed to meet all its demands, Pearl and Dean filed this instant case for infringement of trademark and copyright, unfair competition and damages. In denying the charges hurled against it, SMI maintained that it independently developed its poster panels using commonly known techniques and available technology, without notice of or reference to P earl and Deans copyright. SMI noted that the registration of the mark Poster Ads was only for stationeries such as letterheads, envelopes, and the like. Besides, according to SMI, the word Poster Ads is a generic term which cannot be appropriated as a trademark, and, as such, registration of such mark is invalid. It also stressed that Pearl and Dean is not entitled to the reliefs prayed for in its complaint since its advertising display units contained no copyright notice, in violation of Section 27 of P.D. 49. SMI alleged that Pearl and Dean had no cause of action against it and that the suit was purely intended to malign SMIs good name. On this basis, SMI, aside from praying for the dismissal of the case, also counterclaimed for moral, actual an d exemplary damages and for the cancellation of Pearl and Deans Certification of Copyright Registration No. PD-R-2558 dated January 20, 1981 and Certificate of Trademark Registration No. 4165 dated September 12, 1988. NEMI, for its part, denied having manufactured, installed or used any advertising display units, nor having engaged in the business of advertising. It repleaded SMIs averments, admissions and denials and prayed for similar reliefs and counterclaims as SMI. The RTC of Makati City decided in favor of P & D: Wherefore, defendants SMI and NEMI are found jointly and severally liable for infringement of copyright under Section 2 of PD 49, as amended, and infringement of trademark under Section 22 of RA No. 166, as amended, and are hereby penalized under Section 28 of PD 49, as amended, and Sections 23 and 24 of RA 166, as amended. Accordingly, defendants are hereby directed:

15

(1) (a)

to pay plaintiff the following damages: actual damages P16,600,000.00, representing profits derived by defendants as a result of infringement of plaintiffs copyright from 1991 to 1992 - P1,000.000.00

(b) (c) (d)

moral damages

exemplary damages - P1,000,000.00 attorneys fees plus costs of suit; (2) to deliver, under oath, for impounding in the National Library, all light boxes of SMI which were fabricated by Metro Industrial Services and EYD Rainbow Advertising Corporation; to deliver, under oath, to the National Library, all filler-posters using the trademark Poster Ads, for destruction; and to permanently refrain from infringing the copyright on plaintiffs light boxes and its trademark Poster Ads. - P1,000,000.00

(e)

(3) (4)

Defendants counterclaims are hereby ordered dismissed for lack of merit. SO ORDERED.[4] On appeal, however, the Court of Appeals reversed the trial court: Since the light boxes cannot, by any stretch of the imagination, be considered as either prints, pictorial illustrations, advertising copies, labels, tags or box wraps, to be properly classified as a copyrightable class O work, we have to agree with SMI when it posited that what w as copyrighted were the technical drawings only, and not the light boxes themselves, thus: 42. When a drawing is technical and depicts a utilitarian object, a copyright over the drawings like plaintiff-appellants will not extend to the actual object. It has so been held under jurisprudence, of which the leading case is Baker vs. Selden (101 U.S. 841 (1879). In that case, Selden had obtained a copyright protection for a book entitled Seldens Condensed Ledger or Bookkeeping Simplified which purported to explain a new system of bookkeeping. Included as part of the book were blank forms and illustrations consisting of ruled lines and headings, specially designed for use in connection with the system explained in the work. These forms showed the entire operation of a day or a week or a month on a single page, or on two pages following each other. The defendant Baker then produced forms which were similar to the forms illustrated in Sel dens copyrighted books. The Court held that exclusivity to the actual forms is no t extended by a copyright. The reason was that to grant a monopoly in the underlying art when no examination of its novelty has ever been made would be a surprise and a fraud upon the public; that is the province of letters patent, not of copyright. And that is precisely the point. No doubt aware that its alleged original design would never pass the rigorous examination of a patent application, plaintiff-appellant fought to foist a fraudulent monopoly on the public by conveniently resorting to a copyright registration which merely employs a recordal system without the benefit of an in-depth examination of novelty. The principle in Baker vs. Selden was likewise applied in Muller vs. Triborough Bridge Authority [43 F. Supp. 298 (S.D.N.Y. 1942)]. In this case, Muller had obtained a copyright over an unpublished drawing entitled Bridge Approach the drawing showed a novel bridge approach to unsnarl traffic congestion. The defendant constructed a bridge approach which was alleged to be an infringement of the new design illustrated in plaintiffs drawings. In this case it was held that protection of the drawing does not extend to the unauthorized duplication of the object drawn because copyright extends only to the description or expression of the object and not to the object itself. It does not prevent one from using the drawings to construct the object portrayed in the drawing. In two other cases, Imperial Homes Corp. v. Lamont, 458 F. 2d 895 and Scholtz Homes, Inc. v. Maddox, 379 F. 2d 84, it was held that there is no copyright infringement when one who, without being authorized, uses a copyrighted architectural plan to construct a structure. This is because the copyright does not extend to the structures themselves.

16

In fine, we cannot find SMI liable for infringing Pearl and Deans copyright over the technical drawings of the latters advertising display units. xxx xxx xxx

The Supreme Court trenchantly held in Faberge, Incorporated vs. Intermediate Appellate Court that the protective mantle of the Trademark Law extends only to the goods used by the first user as specified in the certificate of registration, following the clear mandate conveyed by Section 20 of Republic Act 166, as amended, otherwise known as the Trademark Law, which reads: SEC. 20. Certification of registration prima facie evidence of validity.- A certificate of registration of a mark or trade-name shall be prima facie evidence of the validity of the registration, the registrants ownership of the mark o r trade-name, and of the registrants exclusive right to use the same in connection with the goods, business or services specified in the certificate, subject to any conditions and limitations stated therein . (underscoring supplied) The records show that on June 20, 1983, Pearl and Dean applied for the registration of the trademark Poster Ads with the Bureau of Patents, Trademarks, and Technology Transfer. Said trademark was recorded in the Principal Register on September 12, 1988 under Registration No. 41165 covering the following products: stationeries such as letterheads, envelopes and calling cards and newsletters. With this as factual backdrop, we see no legal basis to the finding of liability on the part of the defendants-appellants for their use of the words Poster Ads, in the advertising display units in suit. Jurisprudence has interpreted Section 20 of the Trademark Law as an implicit permission to a manufacturer to venture into the production of goods and allow that producer to appropriate the brand name of the senior registrant on goods other than those stated in the certificate of registration. The Supreme Court further emphasized the restrictive meaning of Section 20 when it stated, through Justice Conrado V. Sanchez, that: Really, if the certificate of registration were to be deemed as including goods not specified therein, then a situation may arise whereby an applicant may be tempted to register a trademark on any and all goods which his mind may conceive even if he had never intended to use the trademark for the said goods. We believe that such omnibus registration is not contemplated by our Trademark Law. While we do not discount the striking similarity between Pearl and Deans registered trademark and defendants -appellants Poster Ads design, as well as the parallel use by which said words were used in the parties respective advertising copies, we cannot find defendan ts-appellants liable for infringement of trademark. Poster Ads was registered by Pearl and Dean for specific use i n its stationeries, in contrast to defendants-appellants who used the same words in their advertising display units. Why Pearl and Dean limited the use of its trademark to stationeries is simply beyond us. But, having already done so, it must stand by the consequence of the registration which it had caused. xxx xxx xxx

We are constrained to adopt the view of defendants-appellants that the words Poster Ads are a simple contraction of the generic term poster advertising. In the absence of any convincing proof that Poster Ads has acquired a secondary meaning in this jurisdiction, we find that Pearl and Deans exclusive right to the use of Poster Ads is limited to what is written in its certificate of registration, namel y, stationeries. Defendants-appellants cannot thus be held liable for infringement of the trademark Poster Ads. There being no finding of either copyright or trademark infringement on the part of SMI and NEMI, the monetary award granted by the lower court to Pearl and Dean has no leg to stand on. xxx xxx xxx

WHEREFORE, premises considered, the assailed decision is REVERSED and SET ASIDE, and another is rendered DISMISSING the complaint and counterclaims in the above-entitled case for lack of merit.[5] Dissatisfied with the above decision, petitioner P & D filed the instant petition assigning the following errors for the Cour ts consideration: A. THE HONORABLE COURT OF APPEALS ERRED IN RULING THAT NO COPYRIGHT INFRINGEMENT WAS COMMITTED BY RESPONDENTS SM AND NEMI; THE HONORABLE COURT OF APPEALS ERRED IN RULING THAT NO INFRINGEMENT OF PEARL & DEANS TRADEMARK POSTER ADS WAS COMMITTED BY RESPONDENTS SM AND NEMI;

B.

17

C.

THE HONORABLE COURT OF APPEALS ERRED IN DISMISSING THE AWARD OF THE TRIAL COURT, DESPITE THE LATTERS FINDING, NOT DISPUTED BY THE HONORABLE COURT OF APPEALS, THAT SM WAS GUILTY OF BAD FAITH IN ITS NEGOTIATION OF ADVERTISING CONTRACTS WITH PEARL & DEAN. THE HONORABLE COURT OF APPEALS ERRED IN NOT HOLDING RESPONDENTS SM AND NEMI LIABLE TO PEARL & DEAN FOR ACTUAL, MORAL & EXEMPLARY DAMAGES, ATTORNEYS FEES AND COSTS OF SUIT. [6]

D.

ISSUES

In resolving this very interesting case, we are challenged once again to put into proper perspective four main concerns of intellectual property law patents, copyrights, trademarks and unfair competition arising from infringement of any of the first three. We shall focus then on the following issues: (1) if the engineering or technical drawings of an advertising display unit (light box) are granted copyright protection (copyright certificate of registration) by the National Library, is the light box depicted in such engineering drawings ipso facto also protected by such copyright? (2) or should the light box be registered separately and protected by a patent issued by the Bureau of Patents Trademarks and Technology Transfer (now Intellectual Property Office) in addition to the copyright of the engineering drawings? (3) can the owner of a registered trademark legally prevent others from using such trademark if it is a mere abbreviation of a term descriptive of his goods, services or business?

ON THE ISSUE OF COPYRIGHT INFRINGEMENT Petitioner P & Ds complaint was that SMI infringed on its copyright over the light boxes when SMI had the units manufactured by Metro and EYD Rainbow Advertising for its own account. Obviously, petitioners position was premised on its belief that its copyright over the engineering drawings extended ipso facto to the light boxes depicted or illustrated in said drawings. In ruling that there was no copyright infringement, the Court of Appeals held that the copyright was limited to the drawings alone and not to the light box itself. We agree with the appellate court. First, petitioners application for a copyright certificate as well as Copyright Certificate No. PD-R2588 issued by the National Library on January 20, 1981 clearly stated that it was for a class O work under Section 2 (O) of PD 49 (The Intellectual Property Decree) which was the statute then prevailing. Said Section 2 expressly enumerated the works subject to copyright: SEC. 2. The rights granted by this Decree shall, from the moment of creation, subsist with respect to any of the following works: xxxxxx xxx

(O) Prints, pictorial illustrations, advertising copies, labels, tags, and box wraps; xxxxxx xxx

Although petitioners copyright certificate was entitled Advertising Display Units (which depicted the box -type electrical devices), its claim of copyright infringement cannot be sustained. Copyright, in the strict sense of the term, is purely a statutory right. Being a mere statutory grant, the rights are limited to what the statute confers. It may be obtained and enjoyed only with respect to the subjects and by the persons, and on terms and conditions specified in the statute.[7] Accordingly, it can cover only the works falling within the statutory enumeration or description. [8] P & D secured its copyright under the classification class O work. This being so, petitioners copyright protection extended only to the technical drawings and not to the light box itself because the latter was not at all in the category of prints, pictorial illustrations, advertising copies, labels, tags and box wraps. Stated otherwise, even as we find that P & D indeed owned a valid copyright, the same could have referred only to the technical drawings within the category of pictorial illustrations. It could not have possibly stretched out to include the underlying light box. The strict application[9] of the laws enumeration in Section 2 prevents us from giving petitioner even a little leeway, that is, even if its copyright certificate was entitled Advertising Display Units. What the law does not include, it excludes, and for the good reason: the light box was not a literary or artistic piece which could be copyrighted under the copyright law. And no less clearly, neither could the lack of statutory authority to

18

make the light box copyrightable be remedied by the simplistic act of entitling the copyright certificate issued by the National Library as Advertising Display Units. In fine, if SMI and NEMI reprinted P & Ds technical drawings for sale to the public without license from P & D, then no doub t they would have been guilty of copyright infringement. But this was not the case. SMIs and NEMIs acts complained of by P & D were to have units similar or identical to the light box illustrated in the technical drawings manufactured by Metro and EYD Rainbow Advertising, for leasing out to different advertisers. Was this an infringement of petitioners copyright over the technical drawings? We do not think so. During the trial, the president of P & D himself admitted that the light box was neither a literary not an artistic work but an engineering or marketing invention.[10] Obviously, there appeared to be some confusion regarding what ought or ought not to be the proper subjects of copyrights, patents and trademarks. In the leading case of Kho vs. Court of Appeals,[11] we ruled that these three legal rights are completely distinct and separate from one another, and the protection afforded by one cannot be used interchangeably to cover items or works that exclusively pertain to the others: Trademark, copyright and patents are different intellectual property rights that cannot be interchanged with one another. A trademark is any visible sign capable of distinguishing the goods (trademark) or services (service mark) of an enterprise and shall include a stamped or marked container of goods. In relation thereto, a trade name means the name or designation identifying or distinguishing an enterprise. Meanwhile, the scope of a copyright is confined to literary and artistic works which are original intellectual creations in the literary and artistic domain protected from the moment of their creation. Patentable inventions, on the other hand, refer to any technical solution of a problem in any field of human activity which is new, involves an inventive step and is industrially applicable.

ON THE ISSUE OF PATENT INFRINGEMENT

This brings us to the next point: if, despite its manufacture and commercial use of the light boxes without license from petitioner, private respondents cannot be held legally liable for infringement of P & Ds copyright o ver its technical drawings of the said light boxes, should they be liable instead for infringement of patent? We do not think so either. For some reason or another, petitioner never secured a patent for the light boxes. It therefore acquired no patent rights which could have protected its invention, if in fact it really was. And because it had no patent, petitioner could not legally prevent anyone from manufacturing or commercially using the contraption. In Creser Precision Systems, Inc. vs. Court of Appeals,[12] we held that there can be no infringement of a patent until a patent has been issued, since whatever right one has to the invention covered by the patent arises alone from the grant of patent. x x x (A)n inventor has no common law right to a monopoly of his invention. He has the right to make use of and vend his invention, but if he voluntarily discloses it, such as by offering it for sale, the world is free to copy and use it with impunity. A patent, however, gives the inventor the right to exclude all others. As a patentee, he has the exclusive right of making, selling or using the invention.[13] On the assumption that petitioners advertising units were patentable inventions, petitioner revealed them fully to the public by submitting the engineering drawings thereof to the National Library. To be able to effectively and legally preclude others from copying and profiting from the invention, a patent is a primordial requirement. No patent, no protection. The ultimate goal of a patent system is to bring new designs and technologies into the public domain through disclosure.[14] Ideas, once disclosed to the public without the protection of a valid patent, are subject to appropriation without significant restraint. [15] On one side of the coin is the public which will benefit from new ideas; on the other are the inventors who must be protected. As held in Bauer & Cie vs. ODonnel,[16] The act secured to the inventor the exclusive right to make use, and vend the thing patented, and consequently to prevent others from exercising like privileges without the consent of the patentee. It was passed for the purpose of encouraging useful invention and promoting new and useful inventions by the protection and stimulation given to inventive genius, and was intended to secure to the public, after the lapse of the exclusive privileges granted the benefit of such inventions and improvements. The law attempts to strike an ideal balance between the two interests: (The p)atent system thus embodies a carefully crafted bargain for encouraging the creation and disclosure of new useful and non-obvious advances in technology and design, in return for the exclusive right to practice the invention for a number of years. The inventor may keep his invention secret and reap its fruits indefinitely. In consideration of its disclosure and the consequent benefit to the community, the patent is granted. An exclusive enjoyment is guaranteed him for 17 years, but upon the expiration of that period, the knowledge of the invention inures to the people, who are thus enabled to practice it and profit by its use.[17] The patent law has a three-fold purpose: first, patent law seeks to foster and reward invention; second, it promotes disclosures of inventions to stimulate further innovation and to permit the public to practice the invention once the patent expires; third, the stringent requirements for patent protection seek to ensure that ideas in the public domain remain there for the free use of the public. [18] It is only after an exhaustive examination by the patent office that a patent is issued. Such an in-depth investigation is required because in rewarding a useful invention, the rights and welfare of the community must be fairly dealt with and effectively guarded. To that end, the prerequisites to obtaining a patent are strictly observed and when a patent is issued, the limitations on its exercise are equally strictly enforced. To

19

begin with, a genuine invention or discovery must be demonstrated lest in the constant demand for new appliances, the heavy hand of tribute be laid on each slight technological advance in art.[19] There is no such scrutiny in the case of copyrights nor any notice published before its grant to the effect that a person is claiming the creation of a work. The law confers the copyright from the moment of creation[20] and the copyright certificate is issued upon registration with the National Library of a sworn ex-parte claim of creation. Therefore, not having gone through the arduous examination for patents, the petitioner cannot exclude others from the manufacture, sale or commercial use of the light boxes on the sole basis of its copyright certificate over the technical drawings. Stated otherwise, what petitioner seeks is exclusivity without any opportunity for the patent office (IPO) to scrutinize the light boxs eligibility as a patentable invention. The irony here is that, had petitioner secured a patent instead, its exclusivity would have been for 17 years only. But through the simplified procedure of copyright-registration with the National Library without undergoing the rigor of defending the patentability of its invention before the IPO and the public the petitioner would be protected for 50 years. This situation could not have been the intention of the law. In the oft-cited case of Baker vs. Selden[21], the United States Supreme Court held that only the expression of an idea is protected by copyright, not the idea itself. In that case, the plaintiff held the copyright of a book which expounded on a new accounting system he had developed. The publication illustrated blank forms of ledgers utilized in such a system. The defendant reproduced forms similar to those illustrated in the plaintiffs copyrighted book. The US Supreme Court ruled that: There is no doubt that a work on the subject of book-keeping, though only explanatory of well known systems, may be the subject of a copyright; but, then, it is claimed only as a book. x x x. But there is a clear distinction between the books, as such, and the art, which it is, intended to illustrate. The mere statement of the proposition is so evident that it requires hardly any argument to support it. The same distinction may be predicated of every other art as well as that of bookkeeping. A treatise on the composition and use of medicines, be they old or new; on the construction and use of ploughs or watches or churns; or on the mixture and application of colors for painting or dyeing; or on the mode of drawing lines to produce the effect of perspective, would be the subject of copyright; but no one would contend that the copyright of the treatise would give the exclusive right to the art or manufacture described therein. The copyright of the book, if not pirated from other works, would be valid without regard to the novelty or want of novelty of its subject matter. The novelty of the art or thing described or explained has nothing to do with the validity of the copyright. To give to the author of the book an exclusive property in the art described therein, when no examination of its novelty has ever been officially made, would be a surprise and a fraud upon the public. That is the province of letters patent, not of copyright. The claim to an invention of discovery of an art or manufacture must be subjected to the examination of the Patent Office before an exclusive right therein can be obtained; and a patent from the government can only secure it. The difference between the two things, letters patent and copyright, may be illustrated by reference to the subjects just enumerated. Take the case of medicines. Certain mixtures are found to be of great value in the healing art. If the discoverer writes and publishes a book on the subject (as regular physicians generally do), he gains no exclusive right to the manufacture and sale of the medicine; he gives that to the public. If he desires to acquire such exclusive right, he must obtain a patent for the mixture as a new art, manufacture or composition of matter. He may copyright his book, if he pleases; but that only secures to him the exclusive right of printing and publishing his book. So of all other inventions or discoveries. The copyright of a book on perspective, no matter how many drawings and illustrations it may contain, gives no exclusive right to the modes of drawing described, though they may never have been known or used before. By publishing the book without getting a patent for the art, the latter is given to the public. x x x Now, whilst no one has a right to print or publish his book, or any material part thereof, as a book intended to convey instruction in the art, any person may practice and use the art itself which he has described and illustrated therein. The use of the art is a totally different thing from a publication of the book explaining it. The copyright of a book on bookkeeping cannot secure the exclusive right to make, sell and use account books prepared upon the plan set forth in such book. Whether the art might or might not have been patented, is a question, which is not before us. It was not patented, and is open and free to the use of the public. And, of course, in using the art, the ruled lines and headings of accounts must necessarily be used as incident to it. The plausibility of the claim put forward by the complainant in this case arises from a confusion of ideas produced by the peculiar nature of the art described in the books, which have been made the subject of copyright. In describing the art, the illustrations and diagrams employed happened to correspond more closely than usual with the actual work performed by the operator who uses the art. x x x The description of the art in a book, though entitled to the benefit of copyright, lays no foundation for an exclusive claim to the art itself. The object of the one is explanation; the object of the other is use. The former may be secured by copyright. The latter can only be secured, if it can be secured at all, by letters patent. (underscoring supplied)

20

ON THE ISSUE OF TRADEMARK INFRINGEMENT This issue concerns the use by respondents of the mark Poster Ads which petitioners president said was a contraction of poster advertising. P & D was able to secure a trademark certificate for it, but one where the goods specified were stationeries s uch as letterheads, envelopes, calling cards and newsletters.[22] Petitioner admitted it did not commercially engage in or market these goods. On the contrary, it dealt in electrically operated backlit advertising units and the sale of advertising spaces thereon, which, however, were not at all specified in the trademark certificate. Under the circumstances, the Court of Appeals correctly cited Faberge Inc. vs. Intermediate Appellate Court,[23] where we, invoking Section 20 of the old Trademark Law, ruled that the certificate of registration issued by the Director of Patents can confer (upon petitioner) the exclusive right to use its own symbol only to those goods specified in the certificate, subject to any conditions and limitations specified in the certificate x x x. One who has adopted and used a trademark on his goods does not prevent the adoption and use of the same trademark by others for products which are of a different description.[24] Faberge, Inc. was correct and was in fact recently reiterated in Canon Kabushiki Kaisha vs. Court of Appeals.[25] Assuming arguendo that Poster Ads could validly qualify as a trademark, the failure of P & D to secure a trademark registration for specific use on the light boxes meant that there could not have been any trademark infringement since registration was an essential element thereof.

ON THE ISSUE OF UNFAIR COMPETITION

If at all, the cause of action should have been for unfair competition, a situation which was possible even if P & D had no registration.[26] However, while the petitioners complaint in the RTC also cited unfair competition, the trial court did not find private resp ondents liable therefor. Petitioner did not appeal this particular point; hence, it cannot now revive its claim of unfair competition. But even disregarding procedural issues, we nevertheless cannot hold respondents guilty of unfair competition. By the nature of things, there can be no unfair competition under the law on copyrights although it is applicable to disputes over the use of trademarks. Even a name or phrase incapable of appropriation as a trademark or tradename may, by long and exclusive use by a business (such that the name or phrase becomes associated with the business or product in the mind of the purchasing public), be entitled to protection against unfair competition.[27] In this case, there was no evidence that P & Ds use of Poster Ads was distinctive or well-known. As noted by the Court of Appeals, petitioners expert witnesses himself had testified that Poster Ads was too generic a name. So it was difficult to identify it with any company, honestly speaking.[28] This crucial admission by its own expert witness that Poster Ads could not be associated with P & D showed that, in the mind of the public, the goods and services carrying the trademark Poster Ads could not be distinguished from the goods and services of other entities. This fact also prevented the application of the doctrine of secondary meaning. Poster Ads was generic and incapable of bein g used as a trademark because it was used in the field of poster advertising, the very business engaged in by petitioner. Secondary meaning means that a word or phrase originally incapable of exclusive appropriation with reference to an article in the market (because it is geographically or otherwise descriptive) might nevertheless have been used for so long and so exclusively by one producer with reference to his article that, in the trade and to that branch of the purchasing public, the word or phrase has come to mean that the article was his property. [29] The admission by petitioners own expert witness that he himself could not associate Poster Ads with petitioner P & D because it was too generic definitely precluded the application of this exception. Having discussed the most important and critical issues, we see no need to belabor the rest. All told, the Court finds no reversible error committed by the Court of Appeals when it reversed the Regional Trial Court of Makati City. WHEREFORE, the petition is hereby DENIED and the decision of the Court of Appeals dated May 22, 2001 is AFFIRMED in toto. SO ORDERED. Puno, (Chairman), Panganiban, Sandoval-Gutierrez, and Carpio-Morales, JJ., concur.

G.R. No. 115758

March 19, 2002

ELIDAD C. KHO, doing business under the name and style of KEC COSMETICS LABORATORY, petitioner, vs. HON. COURT OF APPEALS, SUMMERVILLE GENERAL MERCHANDISING and COMPANY, and ANG TIAM CHAY, respondents. DE LEON, JR., J.:

21

Before us is a petition for review on certiorari of the Decision1 dated May 24, 1993 of the Court of Appeals setting aside and declaring as null and void the Orders2 dated February 10, 1992 and March 19, 1992 of the Regional Trial Court, Branch 90, of Quezon City granting the issuance of a writ of preliminary injunction. The facts of the case are as follows: On December 20, 1991, petitioner Elidad C. Kho filed a complaint for injunction and damages with a prayer for the issuance of a writ of preliminary injunction, docketed as Civil Case No. Q-91-10926, against the respondents Summerville General Merchandising and Company (Summerville, for brevity) and Ang Tiam Chay. The petitioner's complaint alleges that petitioner, doing business under the name and style of KEC Cosmetics Laboratory, is the registered owner of the copyrights Chin Chun Su and Oval Facial Cream Container/Case, as shown by Certificates of Copyright Registration No. 0-1358 and No. 03678; that she also has patent rights onChin Chun Su & Device and Chin Chun Su for medicated cream after purchasing the same from Quintin Cheng, the registered owner thereof in the Supplemental Register of the Philippine Patent Office on February 7, 1980 under Registration Certificate No. 4529; that respondent Summerville advertised and sold petitioner's cream products under the brand name Chin Chun Su, in similar containers that petitioner uses, thereby misleading the public, and resulting in the decline in the petitioner's business sales and income; and, that the respondents should be enjoined from allegedly infringing on the copyrights and patents of the petitioner. The respondents, on the other hand, alleged as their defense that Summerville is the exclusive and authorized importer, re-packer and distributor of Chin Chun Su products manufactured by Shun Yi Factory of Taiwan; that the said Taiwanese manufacturing company authorized Summerville to register its trade name Chin Chun Su Medicated Cream with the Philippine Patent Office and other appropriate governmental agencies; that KEC Cosmetics Laboratory of the petitioner obtained the copyrights through misrepresentation and falsification; and, that the authority of Quintin Cheng, assignee of the patent registration certificate, to distribute and market Chin Chun Su products in the Philippines had already been terminated by the said Taiwanese Manufacturing Company. After due hearing on the application for preliminary injunction, the trial court granted the same in an Order dated February 10, 1992, the dispositive portion of which reads: ACCORDINGLY, the application of plaintiff Elidad C. Kho, doing business under the style of KEC Cosmetic Laboratory, for preliminary injunction, is hereby granted. Consequentially, plaintiff is required to file with the Court a bond executed to defendants in the amount of five hundred thousand pesos (P500,000.00) to the effect that plaintiff will pay to defendants all damages which defendants may sustain by reason of the injunction if the Court should finally decide that plaintiff is not entitled thereto. SO ORDERED.3 The respondents moved for reconsideration but their motion for reconsideration was denied by the trial court in an Order dated March 19, 1992.4 On April 24, 1992, the respondents filed a petition for certiorari with the Court of Appeals, docketed as CA-G.R. SP No. 27803, praying for the nullification of the said writ of preliminary injunction issued by the trial court. After the respondents filed their reply and almost a month after petitioner submitted her comment, or on August 14 1992, the latter moved to dismiss the petition for violation of Supreme Court Circular No. 28-91, a circular prohibiting forum shopping. According to the petitioner, the respondents did not state the docket number of the civil case in the caption of their petition and, more significantly, they did not include therein a certificate of non-forum shopping. The respondents opposed the petition and submitted to the appellate court a certificate of non-forum shopping for their petition. On May 24, 1993, the appellate court rendered a Decision in CA-G.R. SP No. 27803 ruling in favor of the respondents, the dispositive portion of which reads: WHEREFORE, the petition is hereby given due course and the orders of respondent court dated February 10, 1992 and March 19, 1992 granting the writ of preliminary injunction and denying petitioners' motion for reconsideration are hereby set aside and declared null and void. Respondent court is directed to forthwith proceed with the trial of Civil Case No. Q-91-10926 and resolve the issue raised by the parties on the merits. SO ORDERED.5 In granting the petition, the appellate court ruled that: The registration of the trademark or brandname "Chin Chun Su" by KEC with the supplemental register of the Bureau of Patents, Trademarks and Technology Transfer cannot be equated with registration in the principal register, which is duly protected by the Trademark Law.1wphi1.nt

22

xxx

xxx

xxx

As ratiocinated in La Chemise Lacoste, S.S. vs. Fernandez, 129 SCRA 373, 393: "Registration in the Supplemental Register, therefore, serves as notice that the registrant is using or has appropriated the trademark. By the very fact that the trademark cannot as yet be on guard and there are certain defects, some obstacles which the use must still overcome before he can claim legal ownership of the mark or ask the courts to vindicate his claims of an exclusive right to the use of the same. It would be deceptive for a party with nothing more than a registration in the Supplemental Register to posture before courts of justice as if the registration is in the Principal Register. The reliance of the private respondent on the last sentence of the Patent office action on application Serial No. 30954 that 'registrants is presumed to be the owner of the mark until after the registration is declared cancelled' is, therefore, misplaced and grounded on shaky foundation. The supposed presumption not only runs counter to the precept embodied in Rule 124 of the Revised Rules of Practice before the Philippine Patent Office in Trademark Cases but considering all the facts ventilated before us in the four interrelated petitions involving the petitioner and the respondent, it is devoid of factual basis. As even in cases where presumption and precept may factually be reconciled, we have held that the presumption is rebuttable, not conclusive, (People v. Lim Hoa, G.R. No. L-10612, May 30, 1958, Unreported). One may be declared an unfair competitor even if his competing trademark is registered (Parke, Davis & Co. v. Kiu Foo & Co., et al., 60 Phil 928; La Yebana Co. v. chua Seco & Co., 14 Phil 534)."6 The petitioner filed a motion for reconsideration. This she followed with several motions to declare respondents in contempt of court for publishing advertisements notifying the public of the promulgation of the assailed decision of the appellate court and stating that genuine Chin Chun Su products could be obtained only from Summerville General Merchandising and Co. In the meantime, the trial court went on to hear petitioner's complaint for final injunction and damages. On October 22, 1993, the trial court rendered a Decision7 barring the petitioner from using the trademark Chin Chun Su and upholding the right of the respondents to use the same, but recognizing the copyright of the petitioner over the oval shaped container of her beauty cream. The trial court did not award damages and costs to any of the parties but to their respective counsels were awarded Seventy-Five Thousand Pesos (P75,000.00) each as attorney's fees. The petitioner duly appealed the said decision to the Court of Appeals. On June 3, 1994, the Court of Appeals promulgated a Resolution 8 denying the petitioner's motions for reconsideration and for contempt of court in CA-G.R. SP No. 27803. Hence, this petition anchored on the following assignment of errors: I RESPONDENT HONORABLE COURT OF APPEALS COMMITTED GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OF JURISDICTION IN FAILING TO RULE ON PETITIONER'S MOTION TO DISMISS. II RESPONDENT HONORABLE COURT OF APPEALS COMMITTED GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OF JURISDICTION IN REFUSING TO PROMPTLY RESOLVE PETITIONER'S MOTION FOR RECONSIDERATION. III IN DELAYING THE RESOLUTION OF PETITIONER'S MOTION FOR RECONSIDERATION, THE HONORABLE COURT OF APPEALS DENIED PETITIONER'S RIGHT TO SEEK TIMELY APPELLATE RELIEF AND VIOLATED PETITIONER'S RIGHT TO DUE PROCESS. IV RESPONDENT HONORABLE COURT OF APPEALS COMMITTED GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OF JURISDICTION IN FAILING TO CITE THE PRIVATE RESPONDENTS IN CONTEMPT.9 The petitioner faults the appellate court for not dismissing the petition on the ground of violation of Supreme Court Circular No. 28-91. Also, the petitioner contends that the appellate court violated Section 6, Rule 9 of the Revised Internal Rules of the Court of Appeals when it failed to rule on

23

her motion for reconsideration within ninety (90) days from the time it is submitted for resolution. The appellate court ruled only after the lapse of three hundred fifty-four (354) days, or on June 3, 1994. In delaying the resolution thereof, the appellate court denied the petitioner's right to seek the timely appellate relief. Finally, petitioner describes as arbitrary the denial of her motions for contempt of court against the respondents. We rule in favor of the respondents. Pursuant to Section 1, Rule 58 of the Revised Rules of Civil Procedure, one of the grounds for the issuance of a writ of preliminary injunction is a proof that the applicant is entitled to the relief demanded, and the whole or part of such relief consists in restraining the commission or continuance of the act or acts complained of, either for a limited period or perpetually. Thus, a preliminary injunction order may be granted only when the application for the issuance of the same shows facts entitling the applicant to the relief demanded.10 This is the reason why we have ruled that it must be shown that the invasion of the right sought to be protected is material and substantial, that the right of complainant is clear and unmistakable, and, that there is an urgent and paramount necessity for the writ to prevent serious damage. 11 In the case at bar, the petitioner applied for the issuance of a preliminary injunctive order on the ground that she is entitled to the use of the trademark on Chin Chun Su and its container based on her copyright and patent over the same. We first find it appropriate to rule on whether the copyright and patent over the name and container of a beauty cream product would entitle the registrant to the use and ownership over the same to the exclusion of others. Trademark, copyright and patents are different intellectual property rights that cannot be interchanged with one another. A trademark is any visible sign capable of distinguishing the goods (trademark) or services (service mark) of an enterprise and shall include a stamped or marked container of goods.12 In relation thereto, a trade name means the name or designation identifying or distinguishing an enterprise. 13 Meanwhile, the scope of a copyright is confined to literary and artistic works which are original intellectual creations in the literary and artistic domain protected from the moment of their creation.14 Patentable inventions, on the other hand, refer to any technical solution of a problem in any field of human activity which is new, involves an inventive step and is industrially applicable.15 Petitioner has no right to support her claim for the exclusive use of the subject trade name and its container. The name and container of a beauty cream product are proper subjects of a trademark inasmuch as the same falls squarely within its definition. In order to be entitled to exclusively use the same in the sale of the beauty cream product, the user must sufficiently prove that she registered or used it before anybody else did. The petitioner's copyright and patent registration of the name and container would not guarantee her the right to the exclusive use of the same for the reason that they are not appropriate subjects of the said intellectual rights. Consequently, a preliminary injunction order cannot be issued for the reason that the petitioner has not proven that she has a clear right over the said name and container to the exclusion of others, not having proven that she has registered a trademark thereto or used the same before anyone did. We cannot likewise overlook the decision of the trial court in the case for final injunction and damages. The dispositive portion of said decision held that the petitioner does not have trademark rights on the name and container of the beauty cream product. The said decision on the merits of the trial court rendered the issuance of the writ of a preliminary injunction moot and academic notwithstanding the fact that the same has been appealed in the Court of Appeals. This is supported by our ruling in La Vista Association, Inc. v. Court of Appeals16, to wit: Considering that preliminary injunction is a provisional remedy which may be granted at any time after the commencement of the action and before judgment when it is established that the plaintiff is entitled to the relief demanded and only when his complaint shows facts entitling such reliefs xxx and it appearing that the trial court had already granted the issuance of a final injunction in favor of petitioner in its decision rendered after trial on the merits xxx the Court resolved to Dismiss the instant petition having been rendered moot and academic. An injunction issued by the trial court after it has already made a clear pronouncement as to the plaintiff's right thereto, that is, after the same issue has been decided on the merits, the trial court having appreciated the evidence presented, is proper, notwithstanding the fact that the decision rendered is not yet final xxx. Being an ancillary remedy, the proceedings for preliminary injunction cannot stand separately or proceed independently of the decision rendered on the merit of the main case for injunction. The merit of the main case having been already determined in favor of the applicant, the preliminary determination of its non-existence ceases to have any force and effect. (italics supplied) La Vista categorically pronounced that the issuance of a final injunction renders any question on the preliminary injunctive order moot and academic despite the fact that the decision granting a final injunction is pending appeal. Conversely, a decision denying the applicant-plaintiff's right to a final injunction, although appealed, renders moot and academic any objection to the prior dissolution of a writ of preliminary injunction. The petitioner argues that the appellate court erred in not dismissing the petition for certiorari for non-compliance with the rule on forum shopping. We disagree. First, the petitioner improperly raised the technical objection of non-compliance with Supreme Court Circular No. 28-91 by filing a motion to dismiss the petition for certiorari filed in the appellate court. This is prohibited by Section 6, Rule 66 of the Revised Rules of Civil Procedure which provides that "(I)n petitions for certiorari before the Supreme Court and the Court of Appeals, the provisions of Section 2, Rule 56, shall be observed. Before giving due course thereto, the court may require the respondents to file their comment to, and not a motion to dismiss, the petition xxx (italics supplied)". Secondly, the issue was raised one month after petitioner had filed her answer/comment and after private respondent had replied thereto. Under Section 1, Rule 16 of the Revised Rules of Civil Procedure, a motion to dismiss shall be filed within the time for but before filing the answer to the complaint or pleading asserting a claim. She therefore could no longer submit a motion to dismiss nor raise defenses

24

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

IN-N-OUT BURGER, INC, Petitioner,

G . R . N o. 1 7 9 1 2 7 Present: YNARES-SANTIAGO, J., Chairperson, AUSTRIA-MARTINEZ, CHICO-NAZARIO, NACHURA, and REYES, JJ. AND/OR Promulgated:

- versus -

SEHWANI, INCORPORATED BENITAS FRITES, INC., Respondents.

December 24, 2008 x---------------------------- ---------------------x

DECISION

CHICO-NAZARIO, J.:

This is a Petition for Review on Certiorari under Rule 45 of the Rules of Court, seeking to reverse the Decision [1] dated 18 July 2006 rendered by the Court of Appeals in CA-G.R. SP No. 92785, which reversed the Decision[2] dated 23 December 2005 of the Director General of the Intellectual Property Office (IPO) in Appeal No. 10-05-01. The Court of Appeals, in its assailed Decision, decreed that the IPO Director of Legal Affairs and the IPO Director General do not have jurisdiction over cases involving unfair competition.

Petitioner IN-N-OUT BURGER, INC., a business entity incorporated under the laws of California, United States (US) of America, which is a signatory to the Convention of Paris on Protection of Industrial Property and the Agreement on Trade Related Aspects of Intellectual Property Rights (TRIPS). Petitioner is engaged mainly in the restaurant business, but it has never engaged in business in the Philippines. [3]

25

Respondents Sehwani, Incorporated and Benita Frites, Inc. are corporations organized in the Philippines.[4]

On 2 June 1997, petitioner filed trademark and service mark applications with the Bureau of Trademarks (BOT) of the IPO for IN -NOUT and IN-N-OUT Burger & Arrow Design. Petitioner later found out, through the Official Action Papers issued by the IPO on 31 May 2000, that respondent Sehwani, Incorporated had already obtained Trademark Registration for the mark IN N OUT (the inside of the letter O formed like a star).[5] By virtue of a licensing agreement, BenitaFrites, Inc. was able to use the registered mark of respondent Sehwani, Incorporated.

Petitioner eventually filed on 4 June 2001 before the Bureau of Legal Affairs (BLA) of the IPO an administrative complaint against respondents for unfair competition and cancellation of trademark registration. Petitioner averred in its complaint that it is the owner of the trade name IN-N-OUT and the following trademarks: (1) IN-N-OUT; (2) IN-N-OUT Burger & Arrow Design; and (3) IN-N-OUT Burger Logo. These trademarks are registered with the Trademark Office of the US and in various parts of the world, are internationally well-known, and have become distinctive of its business and goods through its long and exclusive commercial use. [6] Petitioner pointed out that its internationally well-known trademarks and the mark of the respondents are all registered for the restaurant business and are clearly identical and confusingly similar. Petitioner claimed that respondents are making it appear that their goods and services are those of the petitioner, thus, misleading ordinary and unsuspecting consumers that they are purchasing petitioners products. [7]

Following the filing of its complaint, petitioner sent on 18 October 2000 a demand letter directing respondent Sehwani, Incorporated to cease and desist from claiming ownership of the mark IN-N-OUT and to voluntarily cancel its trademark registration. In a letter-reply dated 23 October 2000, respondents refused to accede to petitioner demand, but expressed willingness to surrender the registration of respondent Sehwani, Incorporated of the IN N OUT trademark for a fair and reasonable consideration. [8]

Petitioner was able to register the mark Double Double on 4 July 2002, based on their application filed on 2 June 1997.[9] It alleged that respondents also used this mark, as well as the menu color scheme. Petitioners also averred that respondent Benitas receipts bore the phrase, representing IN-N-OUT Burger.[10] It should be noted that that although respondent Sehwahi, Incorporated registered a mark which appeared as IN N OUT (the inside of the letter O formed like a star), respondents used the mark IN-N-OUT.[11]

To counter petitioners complaint, respondents filed before the BLA-IPO an Answer with Counterclaim. Respondents asserted therein that they had been using the mark IN N OUT in the Philippines since 15 October 1982. On 15 November 1991, respondent Sehwani, Incorporated filed with the then Bureau of Patents, Trademarks and Technology Transfer (BPTTT) an application for the registration of the mark IN N OUT (the inside of the letter O formed like a star). Upon approval of its application, a certificate of registration of the said mark was issued in the name of respondent Sehwani, Incorporated on 17 December 1993. On 30 August 2000, respondents Sehwani, Incorporated and Benita Frites, Inc. entered into a Licensing Agreement, wherein the former entitled the latter to use its registered mark, IN N OUT. Respondents asserted that respondent Sehwani, Incorporated, being the registered owner of the mark IN N OUT, should be accorded the presumption of a valid regis tration of its mark with the exclusive right to use the same. Respondents argued that none of the grounds provided under the Intellectual Property Code for

26

the cancellation of a certificate of registration are present in this case. Additionally, respondents maintained that petitioner had no legal capacity to sue as it had never operated in the Philippines.[12]

Subsequently, the IPO Director of Legal Affairs, Estrellita Beltran-Abelardo, rendered a Decision dated 22 December 2003,[13] in favor of petitioner. According to said Decision, petitioner had the legal capacity to sue in the Philippines, since its country of origin or domicile was a member of and a signatory to the Convention of Paris on Protection of Industrial Property. And although petitioner had never done business in the Philippines, it was widely known in this country through the use herein of products bearing its corporate and trade name. Petitioners marks are internationally well-known, given the world-wide registration of the mark IN-N-OUT, and its numerous advertisements in various publications and in the Internet. Moreover, the IPO had already declared in a previous inter partes case that In-N-Out Burger and Arrow Design was an internationally well-known mark. Given these circumstances, the IPO Director for Legal Affairs pronounced in her Decision that petitioner had the right to use its tradename and mark IN-N-OUT in the Philippines to the exclusion of others, including the respondents. However, respondents used the mark IN N OUT in good faith and were not guilty of unfair competition, since respondent Sehwani, Incorporated did not evince any intent to ride upon petitioners goodwill by copying the mark IN-N-OUT Burger exactly. The inside of the letter O in the mark used by respondents formed a star. In addition, the simple act of respondent Sehwani, Incorporated of inquiring into the existence of a pending application for registration of the IN-N-OUT mark was not deemed fraudulent. The dispositive part of the Decision of the IPO Director for Legal Affairs reads:

With the foregoing disquisition, Certificate of Registration No. 56666 dated 17 December 1993 for the mark IN-NOUT (the inside of the letter O formed like a star) issued in favor of Sehwani, Incorporated is hereby CANCELLED. Consequently, respondents Sehwani, Inc. and Benitas 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 regards the mark Double-Double, considering that as earlier discussed, the mark has been approved by this Office for publication and that as shown by evidence, Complainant is the owner of the said mark, Respondents are so hereby ordered to permanently cease and desist from using the mark Double-Double. NO COSTS. [14]

Both parties filed their respective Motions for Reconsideration of the aforementioned Decision. Respondents Motion for Reconsideration[15] and petitioners Motion for Partial Reconsideration[16] were denied by the IPO Director for Legal Affairs in Resolution No. 200418[17] dated 28 October 2004 and Resolution No. 2005-05 dated 25 April 2005,[18] respectively.

Subsequent events would give rise to two cases before this Court, G.R. No. 171053 and G.R. No. 179127, the case at bar.

G.R. No. 171053

On 29 October 2004, respondents received a copy of Resolution No. 2004-18 dated 28 October 2004 denying their Motion for Reconsideration. Thus, on 18 November 2004, respondents filed an Appeal Memorandum with IPO Director General Emma Francisco (Director General Francisco). However, in an Order dated 7 December 2004, the appeal was dismissed by the IPO Director General for being filed beyond the 15-day reglementary period to appeal.

Respondents appealed to the Court of Appeals via a Petition for Review under Rule 43 of the Rules of Court, filed on 20 December 2004 and docketed as CA-G.R. SP No. 88004, challenging the dismissal of their appeal by the IPO Director General, which effectively affirmed the

27

Decision dated 22 December 2003 of the IPO Director for Legal Affairs ordering the cancellation of the registration of the disputed trademark in the name of respondent Sehwani, Incorporated and enjoining respondents from using the same. In particular, respondents based their Petition on the following grounds: THE IPO DIRECTOR GENERAL COMMITTED GRAVE ERROR IN DISMISSING APPEAL NO. 14-2004-00004 ON A MERE TECHNICALITY THE BUREAU OF LEGAL AFFAIRS (SIC) DECISION AND RESOLUTION (1) CANCELLING RESPONDENTS 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 IS NOT SUPPORTED BY EVIDENCE.

Respondents thus prayed: WHEREFORE, petitioners respectfully pray that this Honorable Court give due course to this petition, and thereafter order the Office of the Director General of the Intellectual Property Office to rei nstate and give due course to [respondent]s Appeal No. 14-2004-00004. Other reliefs, just and equitable under the premises, are likewise prayed for.

On 21 October 2005, the Court of Appeals rendered a Decision denying respondents Petiti on in CA-G.R SP No. 88004 and affirming the Order dated 7 December 2004 of the IPO Director General. The appellate court confirmed that respondents appeal before the IPO Director General was filed out of time and that it was only proper to cancel the registration of the disputed trademark in the name of respondent Sehwani, Incorporated and to permanently enjoin respondents from using the same. Effectively, the 22 December 2003 Decision of IPO Director of Legal Affairs was likewise affirmed. On 10 November 2005, respondents moved for the reconsideration of the said Decision. On 16 January 2006, the Court of Appeals denied their motion for reconsideration.

Dismayed with the outcome of their petition before the Court of Appeals, respondents raised the matter to the Supreme Court in a Petition for Review under Rule 45 of the Rules of Court, filed on 30 January 2006, bearing the title Sehwani, Incorporated v. In-N-Out Burger and docketed as G.R. No. 171053.[19]

This Court promulgated a Decision in G.R. No. 171053 on 15 October 2007,[20] finding that herein respondents failed to file their Appeal Memorandum before the IPO Director General within the period prescribed by law and, consequently, they lost their right to appeal. The Court further affirmed the Decision dated 22 December 2003 of the IPO Director of Legal Affairs holding that herein petitioner had the legal capacity to sue for the protection of its trademarks, even though it was not doing business in the Philippines, and ordering the cancellation of the registration obtained by herein respondent Sehwani, Incorporated of the internationally well-known marks of petitioner, and directing respondents to stop using the said marks. Respondents filed a Motion for Reconsideration of the Decision of this Court in G.R. No. 171053, but it was denied with finality in a Resolution dated 21 January 2008.

G.R. No. 179127

28

Upon the denial of its Partial Motion for Reconsideration of the Decision dated 22 December 2003 of the IPO Director for Legal Affairs, petitioner was able to file a timely appeal before the IPO Director General on 27 May 2005.

During the pendency of petitioners appeal before the IPO Director General, the Court of Appeals already rendered on 21 October 2005 its Decision dismissing respondents Petition in CA-G.R. SP No. 88004.

In a Decision dated 23 December 2005, IPO Director General Adrian Cristobal, Jr. found petitioners appeal meritorious and modified the Decision dated 22 December 2003 of the IPO Director of Legal Affairs. The IPO Director General declared that respondents were guilty of unfair competition. Despite respondents claims that they had been using the mark since 1982, they only started constructing their restaurant som etime in 2000, after petitioner had already demanded that they desist from claiming ownership of the mark IN -N-OUT. Moreover, the sole distinction of the mark registered in the name of respondent Sehwani, Incorporated, from those of the petitioner was the star inside the letter O, a minor difference which still deceived purchasers. Respondents were not even actually using the star in their mark because it was allegedly difficult to print. The IPO Director General expressed his disbelief over the respondents reasoning for the non -use of the star symbol. The IPO Director General also considered respondents use of petitioners registered mark Double-Double as a sign of bad faith and an intent to mislead the public. Thus, the IPO Director General ruled that petitioner was entitled to an award for the actual damages it suffered by reason of respondents acts of unfair competition, exemplary damages, and attorneys fees.[21] The fallo of the Decision reads: WHEREFORE, premises considered, the [herein respondents] are held guilty of unfair competition. Accordingly, Decision No. 2003-02 dated 22 December 2003 is hereby MODIFIED as follows: [Herein Respondents] are hereby ordered to jointly and severally pay [herein petitioner]: 1. Damages in the amount of TWO HUNDRED TWELVE THOUSAND FIVE HUNDRED SEVENTY FOUR AND 28/100(P212,574.28); 2. Exemplary damages in the amount of FIVE HUNDRED THOUSAND PESOS (P500,000.00); 3. Attorneys fees and expenses of litigation in the amount of FIVE HUNDRED THOUSAND PESOS (P500,000.00). All products of [herein respondents] including the labels, signs, prints, packages, wrappers, receptacles and materials used by them in committing unfair competition should be without compensation of any sort be seized and disposed of outside the channels of commerce. Let a copy of this Decision be furnished the Director of Bureau of Legal Affairs for appropriate action, and the records be returned to her for proper disposition. Further, let a copy of this Decision be furnished the Documentation, Information and Technology Transfer Bureau for their information and records purposes. [22]

Aggrieved, respondents were thus constrained to file on 11 January 2006 before the Court of Appeals another Petition for Review under Rule 43 of the Rules of Court, docketed as CA-G.R. SP No. 92785. Respondents based their second Petition before the appellate court on the following grounds: THE IPO DIRECTOR GENERAL COMMITTED GRAVE ERROR IN HOLDING PETITIONERS LIABLE FOR UNFAIR COMPETITION AND IN ORDERING THEM TO PAY DAMAGES AND ATTORNEYS FEES TO RESPONDENTS THE IPO DIRECTOR GENERAL COMMITTED GRAVE ERROR IN AFFIRMING THE BUREAU OF LEGAL AFFAIRS DECISION (1) CANCELLING PETITIONERS CERTIFICATE OF REGISTRATION FOR THE MARK IN -N-OUT, AND

29

(2) ORDERING PETITIONERS TO PERMANENTLY CEASE AND DESIST FROM USING THE SUBJECT MARK ON ITS GOODS AND BUSINESS

Respondents assailed before the appellate court the foregoing 23 December 2005 Decision of the IPO Director General, alleging that their use of the disputed mark was not tainted with fraudulent intent; hence, they should not be held liable for damages. They argued that petitioner had never entered into any transaction involving its goods and services in the Philippines and, therefore, could not claim that its goods and services had already been identified in the mind of the public. Respondents added that the disputed mark was not well-known. Finally, they maintained that petitioners complaint was already barred by laches.[23]

At the end of their Petition in CA-G.R. SP No. 92785, respondents presented the following prayer: WHEREFORE, [respondents herein] respectfully pray that this Honorable Court: (a) upon the filing of this petition, issue a temporary restraining order enjoining the IPO and [petitioner], their agents, successors and assigns, from executing, enforcing and implementing the IPO Director Generals Decision dated 23 December 2005, which modified the Decision No. 2003-02 dated 22 December 2003 of the BLA, until further orders from this Honorable Court. after notice and hearing, enjoin the IPO and [petitioner], their agents, successors and assigns, from executing, enforcing and implementing the Decision dated 23 December 2005 of the Director General of the IPO in IPV No. 10-2001-00004 and to maintain the status quo ante pending the resolution of the merits of this petition; and after giving due course to this petition: (i) reverse and set aside the Decision dated 23 December 2005 of the Director General of the IPO in IPV No. 10-2001-00004 finding the [respondents] guilty of unfair competition and awarding damages and attorneys fees to the respondent in lieu thereof, affirm Decision No. 2003-02 of the BLA dated 22 December 2003 and Resolution No. 2005-05 of the BLA dated 25 April 2005, insofar as it finds [respondents] not guilty of unfair competition and hence not liable to the [petitioner] for damages and attorneys fees; reverse Decision No. 2003-02 of the BLA dated 22 December 2003, and Resolution No. 2005-05 of the BLA dated 25 April 2005, insofar as it upheld [petitioner]s legal capacity to sue; that [petitioner]s trademarks are well-known; and that respondent has the exclusive right to use the same; and make the injunction permanent.

(b)

(c)

(ii)

(iii)

(iv)

[Respondents] also pray for other reliefs, as may deemed just or equitable.[24]

On 18 July 2006, the Court of Appeals promulgated a Decision[25] in CA-G.R. SP No. 92785 reversing the Decision dated 23 December 2005 of the IPO Director General.

The Court of Appeals, in its Decision, initially addressed petitioners assertion that respondents had committed forum shoppi ng by the institution of CA-G.R. SP No. 88004 and CA-G.R. SP No. 92785. It ruled that respondents were not guilty of forum shopping, distinguishing between the respondents two Petitions. The subject of Respondents Petition in CA-G.R SP No. 88004 was the 7 December 2004 Decision of the IPO Director General dismissing respondents appeal of the 22 December 2003 Decision of the IPO Director of Legal Affairs. Respondents questioned therein the cancellation of the trademark registration of respondent Sehwani, Incorporated and the order permanently enjoining respondents from using the disputed trademark. Respondents Petition in CA-G.R. SP No. 92785 sought the review of the 23 December

30

2005 Decision of the IPO Director General partially modifying the 22 December 2003 Decision of the IPO Director of Legal Affairs. Respondents raised different issues in their second petition before the appellate court, mainly concerning the finding of the IPO Director General that respondents were guilty of unfair competition and the awarding of actual and exemplary damages, as well as attorneys fees, to petitioner .

The Court of Appeals then proceeded to resolve CA-G.R. SP No. 92785 on jurisdictional grounds not raised by the parties. The appellate court declared that Section 163 of the Intellectual Property Code specifically confers upon the regular courts, and not the BLA-IPO, sole jurisdiction to hear and decide cases involving provisions of the Intellectual Property Code, particularly trademarks. Consequently, the IPO Director General had no jurisdiction to rule in its Decision dated 23 December 2005 on supposed violations of these provisions of the Intellectual Property Code.

In the end, the Court of Appeals decreed: WHEREFORE, the Petition is GRANTED. The Decision dated 23 December 2005 rendered by the Director General of the Intellectual Property Office of the Philippines in Appeal No. 10-05-01 is REVERSED and SET ASIDE. Insofar as they pertain to acts governed by Article 168 of R.A. 8293 and other sections enumerated in Section 163 of the same Code, respondents claims in its Complaint docketed as IPV No. 10 -2001-00004 are hereby DISMISSED.[26]

The Court of Appeals, in a Resolution dated 31 July 2007,[27] denied petitioners Motion for Reconsideration of its aforementioned Decision.

Hence, the present Petition, where petitioner raises the following issues: I WHETHER OR NOT THE COURT OF APPEALS ERRED IN ISSUING THE QUESTIONED DECISION DATED 18 JULY 2006 AND RESOLUTION DATED 31 JULY 2007 DECLARING THAT THE IPO HAS NO JURISDICTION OVER ADMINISTRATIVE COMPLAINTS FOR INTELLECTUAL PROPERTY RIGHTS VIOLATIONS; II WHETHER OR NOT THE INSTANT PETITION IS FORMALLY DEFECTIVE; AND

III WHETHER OR NOT THE COURT OF APPEALS ERRED IN ISSUING THE QUESTIONED DECISION DATED 18 JULY 2006 AND RESOLUTION DATED 31 JULY 2007DECLARING THAT SEHWANI AND BENITA ARE NOT GUILTY OF: (A) SUBMITTING A PATENTLY FALSE CERTIFICATION OF NON-FORUM SHOPPING; AND (B) FORUM SHOPPING PROPER.[28]

As previously narrated herein, on 15 October 2007, during the pendency of the present Petition, this Court already promulgated its Decision[29] in G.R. No. 171053 on 15 October 2007, which affirmed the IPO Director Generals dismissal of respondents appeal for being f iled beyond the reglementary period, and left the 22 December 2003 Decision of the IPO Director for Legal Affairs, canceling the trademark registration of respondent Sehwani, Incorporated and enjoining respondents from using the disputed marks.

Before discussing the merits of this case, this Court must first rule on the procedural flaws that each party has attributed to the other.

31

Formal Defects of the Petition

Respondents contend that the Verification/Certification executed by Atty. Edmund Jason Barranda of Villaraza and Angangco, which petitioner attached to the present Petition, is defective and should result in the dismissal of the said Petition.

Respondents point out that the Secretarys Certificate executed by Arnold M. Wensinger on 20 August 2007, stating that petitioner had authorized the lawyers ofVillaraza and Angangco to represent it in the present Petition and to sign the Verification and Certification against Forum Shopping, among other acts, was not properly notarized. The jurat of the aforementioned Secretarys Certificate reads: Subscribed and sworn to me this 20th day of August 2007 in Irving California. Rachel A. Blake (Sgd.) Notary Public[30]

Respondents aver that the said Secretarys Certificate cannot properly authorize Atty. Barranda to sign the Verification/Certification on behalf of petitioner because the notary public Rachel A. Blake failed to state that: (1) petitioners Corporate Secretary, Mr. Wensinger, was known to her; (2) he was the same person who acknowledged the instrument; and (3) he acknowledged the same to be his free act and deed, as required under Section 2 of Act No. 2103 and Landingin v. Republic of the Philippines.[31]

Respondents

likewise

impugn

the

validity

of

the notarial certificate

of

Atty.

Aldrich Fitz B. Uy,

on

Atty. Barandas Verification/Certification attached to the instant Petition, noting the absence of (1) the serial number of the commission of the notary public; (2) the office address of the notary public; (3) the roll of attorneys number and the IBP membership number; and (4) a st atement that the Verification/Certification was notarized within the notary publics territorial jurisdiction, as required under th e 2004 Rules on Notarial Practice. [32]

Section 2 of Act No. 2103 and Landingin v. Republic of the Philippines are not applicable to the present case. The requirements enumerated therein refer to documents which require an acknowledgement, and not a mere jurat.

A jurat is that part of an affidavit in which the notary certifies that before him/her, the document was subscribed and sworn to by the executor. Ordinarily, the language of the jurat should avow that the document was subscribed and sworn to before the notary public. In contrast, an acknowledgment is the act of one who has executed a deed in going before some competent officer or court and declaring it to be his act or deed. It involves an extra step undertaken whereby the signor actually declares to the notary that the executor of a document has attested to the notary that the same is his/her own free act and deed.[33] A Secretarys Certificate, as that executed by petitioner in favor of the lawyers of the Angangco and Villaraza law office, only requires a jurat.[34]

Even assuming that the Secretarys Certificate was flawed, Atty. Barranda may still sign the Verification attached to the Petition at bar. A pleading is verified by an affidavit that the affiant has read the pleading and that the allegations therein are true and correct of his personal knowledge or based on authentic records. [35] The party itself need not sign the verification. A partys representative, lawyer or any other person who personally

32

knows the truth of the facts alleged in the pleading may sign the verification. [36] Atty. Barranda, as petitioners counsel, was in the position to verify the truth and correctness of the allegations of the present Petition. Hence, the Verification signed by Atty. Barranda substantially complies with the formal requirements for such.

Moreover, the Court deems it proper not to focus on the supposed technical infirmities of Atty. Barandas Verification. It must be borne in mind that the purpose of requiring a verification is to secure an assurance that the allegations of the petition has been made in good faith; or are true and correct, not merely speculative. This requirement is simply a condition affecting the form of pleadings, and non-compliance therewith does not necessarily render it fatally defective. Indeed, verification is only a formal, not a jurisdictional requirement. In the interest of substantial justice, strict observance of procedural rules may be dispensed with for compelling reasons. [37] The vital issues raised in the instant Petition on the jurisdiction of the IPO Director for Legal Affairs and the IPO Director General over trademark cases justify the liberal application of the rules, so that the Court may give the said Petition due course and resolve the same on the merits.

This Court agrees, nevertheless, that the notaries public, Rachel A. Blake and Aldrich Fitz B. Uy, were less than careful with their jurats or notarial certificates. Parties and their counsel should take care not to abuse the Courts zeal to resolve cases on their merits. Notaries public in the Philippines are reminded to exert utmost care and effort in complying with the 2004 Rules on Notarial Practice. Parties and their counsel are further charged with the responsibility of ensuring that documents notarized abroad be in their proper form before presenting said documents before Philippine courts.

Forum Shopping

Petitioner next avers that respondents are guilty of forum shopping in filing the Petition in CA-G.R. SP No. 92785, following their earlier filing of the Petition inCA-G.R SP No. 88004. Petitioner also asserts that respondents were guilty of submitting to the Court of Appeals a patently false Certification of Non-forum Shopping in CA-G.R. SP No. 92785, when they failed to mention therein the pendency of CA-G.R SP No. 88004.

Forum shopping is the institution of two or more actions or proceedings grounded on the same cause on the supposition that one or the other court would make a favorable disposition. It is an act of malpractice and is prohibited and condemned as trifling with courts and abusing their processes. In determining whether or not there is forum shopping, what is important is the vexation caused the courts and parties-litigants by a party who asks different courts and/or administrative bodies to rule on the same or related causes and/or grant the same or substantially the same reliefs and in the process creates the possibility of conflicting decisions being rendered by the different bodies upon the same issues. [38]

Forum shopping is present when, in two or more cases pending, there is identity of (1) parties (2) rights or causes of action and reliefs prayed for, and (3) the identity of the two preceding particulars is such that any judgment rendered in the other action, will, regardless of which party is successful, amount to res judicata in the action under consideration.[39]

After a cursory look into the two Petitions in CA-G.R. SP No. 88004 and CA-G.R. SP No. 92785, it would at first seem that respondents are guilty of forum shopping.

33

There is no question that both Petitions involved identical parties, and raised at least one similar ground for which they sought the same relief. Among the grounds stated by the respondents for their Petition in CA-G.R SP No. 88004 was that [T]he Bureau of Legal Affairs (sic) Decision and Resolution (1) canceling [herein respondent Sehwani, Incorporated]s certificate of registration for the mark IN-N-OUT and (2) ordering [herein respondents] to permanently cease and desist from using the subject mark on its goods and business are contrary to law and/or is (sic) not supported by evidence.[40] The same ground was again invoked by respondents in their Petition in CA-G.R. SP No. 92785, rephrased as follows: The IPO Director General committed grave error in affirming the Bureau of Legal Affairs (sic) Decision (1) canceling [her ein respondent Sehwani, Incorporated]s certificate of registration for the mark IN-N-OUT, and (2) ordering [herein respondents] to permanently cease and desist from using the subject mark on its goods and business. [41] Both Petitions, in effect, seek the reversal of the 22 December 2003 Decision of the IPO Director of Legal Affairs. Undoubtedly, a judgment in either one of these Petitions affirming or reversing the said Decision of the IPO Director of Legal Affairs based on the merits thereof would bar the Court of Appeals from making a contrary ruling in the other Petition, under the principle of resjudicata.

Upon a closer scrutiny of the two Petitions, however, the Court takes notice of one issue which respondents did not raise in CA-G.R. SP No. 88004, but can be found in CA-G.R. SP No. 92785, i.e., whether respondents are liable for unfair competition. Hence, respondents seek additional reliefs in CA-G.R. SP No. 92785, seeking the reversal of the finding of the IPO Director General that they are guilty of unfair competition, and the nullification of the award of damages in favor of petitioner resulting from said finding. Undoubtedly, respondents could not have raised the issue of unfair competition in CA-G.R. SP No. 88004 because at the time they filed their Petition therein on 28 December 2004, the IPO Director General had not yet rendered its Decision dated 23 December 2005 wherein it ruled that respondents were guilty thereof and awarded damages to petitioner.

In arguing in their Petition in CA-G.R. SP No. 92785 that they are not liable for unfair competition, it is only predictable, although not necessarily legally tenable, for respondents to reassert their right to register, own, and use the disputed mark. Respondents again raise the issue of who has the better right to the disputed mark, because their defense from the award of damages for unfair competition depends on the resolution of said issue in their favor. While this reasoning may be legally unsound, this Court cannot readily presume bad faith on the part of respondents in filing their Petition in CA-G.R. SP No. 92785; or hold that respondents breached the rule on forum shopping by the mere filing of the second petition before the Court of Appeals.

True, respondents should have referred to CA-G.R. SP No. 88004 in the Certification of Non-Forum Shopping, which they attached to their Petition in CA-G.R. SP No. 92785. Nonetheless, the factual background of this case and the importance of resolving the jurisdictional and substantive issues raised herein, justify the relaxation of another procedural rule. Although the submission of a certificate against forum shopping is deemed obligatory, it is not jurisdictional.[42] Hence, in this case in which such a certification was in fact submitted, only it was defective, the Court may still refuse to dismiss and, instead, give due course to the Petition in light of attendant exceptional circumstances.

34

The parties and their counsel, however, are once again warned against taking procedural rules lightly. It will do them well to remember that the Courts have taken a stricter stance against the disregard of procedural rules, especially in connection with the submission of the certificate against forum shopping, and it will not hesitate to dismiss a Petition for non-compliance therewith in the absence of justifiable circumstances.

The Jurisdiction of the IPO

The Court now proceeds to resolve an important issue which arose from the Court of Appeals Decision dated 18 July 2006 in CA-G.R. SP No. 92785. In the afore-stated Decision, the Court of Appeals adjudged that the IPO Director for Legal Affairs and the IPO Director General had no jurisdiction over the administrative proceedings below to rule on issue of unfair competition, because Section 163 of the Intellectual Property Code confers jurisdiction over particular provisions in the law on trademarks on regular courts exclusively. According to the said provision: Section 163. Jurisdiction of Court.All actions under Sections 150, 155, 164, and 166 to 169 shall be brought before the proper courts with appropriate jurisdiction under existing laws.

The provisions referred to in Section 163 are: Section 150 on License Contracts; Section 155 on Remedies on Infringement; Section 164 on Notice of Filing Suit Given to the Director; Section 166 on Goods Bearing Infringing Marks or Trade Names; Section 167 on Collective Marks; Section 168 on Unfair Competition, Rights, Regulation and Remedies; and Section 169 on False Designations of Origin, False Description or Representation.

The Court disagrees with the Court of Appeals.

Section 10 of the Intellectual Property Code specifically identifies the functions of the Bureau of Legal Affairs, thus: Section 10. The Bureau of Legal Affairs.The Bureau of Legal Affairs shall have the following functions: 10.1 Hear and decide opposition to the application for registration of marks; cancellation of trademarks; subject to the provisions of Section 64, cancellation of patents and utility models, and industrial designs; and petitions for compulsory licensing of patents; 10.2 (a) Exercise original jurisdiction in administrative complaints for violations of laws involving intellectual property rights; Provided, That its jurisdiction is limited to complaints where the total damages claimed are not less than Two hundred thousand pesos (P200,000): Provided, futher, That availment of the provisional remedies may be granted in accordance with the Rules of Court. The Director of Legal Affairs shall have the power to hold and punish for contempt all those who disregard orders or writs issued in the course of the proceedings. (b) After formal investigation, the Director for Legal Affairs may impose one (1) or more of the following administrative penalties: (i) The issuance of a cease and desist order which shall specify the acts that the respondent shall cease and desist from and shall require him to submit a compliance report within a reasonable time which shall be fixed in the order; (ii) The acceptance of a voluntary assurance of compliance or discontinuance as may be imposed. Such voluntary assurance may include one or more of the following: (1) violated; An assurance to comply with the provisions of the intellectual property law

35

(2) An assurance to refrain from engaging in unlawful and unfair acts and practices subject of the formal investigation (3) An assurance to recall, replace, repair, or refund the money value of defective goods distributed in commerce; and (4) An assurance to reimburse the complainant the expenses and costs incurred in prosecuting the case in the Bureau of Legal Affairs. The Director of Legal Affairs may also require the respondent to submit periodic compliance reports and file a bond to guarantee compliance of his undertaking. (iii) The condemnation or seizure of products which are subject of the offense. The goods seized hereunder shall be disposed of in such manner as may be deemed appropriate by the Director of Legal Affairs, such as by sale, donation to distressed local governments or to charitable or relief institutions, exportation, recycling into other goods, or any combination thereof, under such guidelines as he may provide; (iv) The forfeiture of paraphernalia and all real and personal properties which have been used in the commission of the offense; (v) The imposition of administrative fines in such amount as deemed reasonable by the Director of Legal Affairs, which shall in no case be less than Five thousand pesos (P5,000) nor more than One hundred fifty thousand pesos (P150,000). In addition, an additional fine of not more than One thousand pesos (P1,000) shall be imposed for each day of continuing violation; (vi) The cancellation of any permit, license, authority, or registration which may have been granted by the Office, or the suspension of the validity thereof for such period of time as the Director of Legal Affairs may deem reasonable which shall not exceed one (1) year; (vii) The withholding of any permit, license, authority, or registration which is being secured by the respondent from the Office; (viii) (ix) (x) The assessment of damages; Censure; and Other analogous penalties or sanctions.

10.3 The Director General may by Regulations establish the procedure to govern the implementation of this Section.[43] (Emphasis provided.)

Unquestionably, petitioners complaint, which seeks the cancellation of the disputed mark in the name of respondent Sehwani, Incorporated, and damages for violation of petitioners intellectual property rights, falls within the jurisdiction of the IPO Director of Legal Affairs.

The Intellectual Property Code also expressly recognizes the appellate jurisdiction of the IPO Director General over the decisions of the IPO Director of Legal Affairs, to wit: Section 7. The Director General and Deputies Director General. 7.1 Fuctions.The Director General shall exercise the following powers and functions: xxxx b) Exercise exclusive appellate jurisdiction over all decisions rendered by the Director of Legal Affairs, the Director of Patents, the Director of Trademarks, and the Director of Documentation, Information and Technology Transfer Bureau. The decisions of the Director General in the exercise of his appellate jurisdiction in respect of the decisions of the Director of Patents, and the Director of Trademarks shall be appealable to the Court of Appeals in accordance with the Rules of Court; and those in respect of the decisions of the Director of Documentation, Information and Technology Transfer Bureau shall be appealable to the Secretary of Trade and Industry;

36

The Court of Appeals erroneously reasoned that Section 10(a) of the Intellectual Property Code, conferring upon the BLA-IPO jurisdiction over administrative complaints for violations of intellectual property rights, is a general provision, over which the specific provision of Section 163 of the same Code, found under Part III thereof particularly governing trademarks, service marks, and tradenames, must

prevail. Proceeding therefrom, the Court of Appeals incorrectly concluded that all actions involving trademarks, including charges of unfair competition, are under the exclusive jurisdiction of civil courts.

Such interpretation is not supported by the provisions of the Intellectual Property Code. While Section 163 thereof vests in civil courts jurisdiction over cases of unfair competition, nothing in the said section states that the regular courts have sole jurisdiction over unfair competition cases, to the exclusion of administrative bodies. On the contrary, Sections 160 and 170, which are also found under Part III of the Intellectual Property Code, recognize the concurrent jurisdiction of civil courts and the IPO over unfair competition cases. These two provisions read: 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. xxxx 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, Section168, and Subsection169.1.

Based on the foregoing discussion, the IPO Director of Legal Affairs had jurisdiction to decide the petitioners administrati ve case against respondents and the IPO Director General had exclusive jurisdiction over the appeal of the judgment of the IPO Director of Legal Affairs.

Unfair Competition

The Court will no longer touch on the issue of the validity or propriety of the 22 December 2003 Decision of the IPO Director of Legal Affairs which: (1) directed the cancellation of the certificate of registration of respondent Sehwani, Incorporated for the mark IN-N-OUT and (2) ordered respondents to permanently cease and desist from using the disputed mark on its goods and business. Such an issue has already been settled by this Court in its final and executory Decision dated15 October 2007 in G.R. No. 171053, Sehwani, Incorporated v. In-N-Out Burger,[44] ultimately affirming the foregoing judgment of the IPO Director of Legal Affairs. That petitioner has the superior right to own and use the IN-N-OUT trademarks vis--vis respondents is a finding which this Court may no longer disturb under the doctrine of conclusiveness of judgment. In conclusiveness of judgment, any right, fact, or matter in issue directly adjudicated or necessarily involved in the determination of an action before a competent court in which judgment is rendered on the merits is conclusively settled by the judgment therein and cannot again be litigated between the parties and their privies whether or not the claims, demands, purposes, or subject matters of the two actions are the same.[45]

Thus, the only remaining issue for this Court to resolve is whether the IPO Director General correctly found respondents guilty of unfair competition for which he awarded damages to petitioner.

37

The essential elements of an action for unfair competition are (1) confusing similarity in the general appearance of the goods and (2) intent to deceive the public and defraud a competitor. The confusing similarity may or may not result from similarity in the marks, but may result from other external factors in the packaging or presentation of the goods. The intent to deceive and defraud may be inferred from the similarity of the appearance of the goods as offered for sale to the public. Actualfraudulent intent need not be shown.[46]

In his Decision dated 23 December 2005, the IPO Director General ably explains the basis for his finding of the existence of unfair competition in this case, viz: The evidence on record shows that the [herein respondents] were not using their registered trademark but that of the [petitioner]. [Respondent] SEHWANI, INC. was issued a Certificate of Registration for IN N OUT (with the Inside of the Letter O Formed like a Star) for restaurant business in 1993. The restaurant opened only in 2000 but under the name IN-N-OUT BURGER. Apparently, the [respondents] started constructing the restaurant only after the [petitioner] demanded that the latter desist from claiming ownership of the mark IN-N-OUT and voluntarily cancel their trademark registration. Moreover, [respondents] are also using [petitioners] registered mark Double-Double for use on hamburger products. In fact, the burger wrappers and the French fries receptacles the [respondents] are using do not bear the mark registered by the [respondent], but the [petitioners] IN-N-OUT Burgers name and trademark IN-N-OUT with Arrow design. There is no evidence that the [respondents] were authorized by the [petitioner] to use the latters marks in the business. [Respondents] explanation that they are not using their own registered trademark due to the difficulty in printing the star does not justify the unauthorized use of the [petitioners] trademark instead. Further, [respondents] are giving their products the general appearance that would likely influence purchasers to believe that these products are those of the [petitioner]. The intention to deceive may be inferred from the similarity of the goods as packed and offered for sale, and, thus, action will lie to restrain such unfair competition. x x x. xxxx [Respondents] use of IN-N-OUT BURGER in busineses signages reveals fraudulent intent to deceive purchasers. Exhibit GG, which shows the business establishment of [respondents] illustrates the imitation of [petitioners] corporate name IN-N-OUT and signage IN-N-OUT BURGER. Even the Director noticed it and held: We also note that In-N-Out Burger is likewise, [petitioners] corporate name. It has used the INN-OUT Burger name in its restaurant business in Baldwin Park,California in the United States of America since 1948. Thus it has the exclusive right to use the tradenems In-N-Out Burger in the Philippines and the respondents are unlawfully using and appropriating the same. The Office cannot give credence to the [respondents] claim of good faith and that they have openly and conti nuously used the subject mark since 1982 and is (sic) in the process of expanding its business. They contend that assuming that there is value in the foreign registrations presented as evidence by the [petitioner], the purported exclusive right to the use of the subject mark based on such foreign registrations is not essential to a right of action for unfair competition. [Respondents] also claim that actual or probable deception and confusion on the part of customers by reason of respondents practices mus t always appear, and in the present case, the BLA has found none. This Office finds the arguments untenable. In contrast, the [respondents] have the burden of evidence to prove that they do not have fraudulent intent in using the mark IN-N-OUT. To prove their good faith, [respondents] could have easily offered evidence of use of their registered trademark, which they claimed to be using as early as 1982, but did not. [Respondents] also failed to explain why they are using the marks of [petitioner] particularly DOUBLE DOUBLE, and the mark IN-N-OUT Burger and Arrow Design. Even in their listing of menus, [respondents] used [Appellants] marks of DOUBLE DOUBLE and IN-N-OUT Burger and Arrow Design. In addition, in the wrappers and receptacles being used by the [respondents] which also contained the marks of the [petitioner], there is no notice in such wrappers and receptacles that the hamburger and French fries are products of the [respondents]. Furthermore, the receipts issued by the [respondents] even indicate representing IN-N-OUT. These acts cannot be considered acts in good faith. [47]

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Administrative proceedings are governed by the substantial evidence rule. A finding of guilt in an administrative case would have to be sustained for as long as it is supported by substantial evidence that the respondent has committed acts stated in the complaint or formal charge. As defined, substantial evidence is such relevant evidence as a reasonable mind may accept as adequate to support a conclusion. [48] As recounted by the IPO Director General in his decision, there is more than enough substantial evidence to support his finding that respondents are guilty of unfair competition.

With such finding, the award of damages in favor of petitioner is but proper. This is in accordance with Section 168.4 of the Intellectual Property Code, which provides that the remedies under Sections 156, 157 and 161 for infringement shall apply mutatis mutandis to unfair competition. The remedies provided under Section 156 include the right to damages, to be computed in the following manner: Section 156. Actions, and Damages and Injunction for Infringement.156.1 The owner of a registered mark may recover damages from any person who infringes his rights, and the measure of the damages suffered shall be either the reasonable profit which the complaining party would have made, had the defendant not infringed his rights, or the profit which the defendant actually made out of the infringement, or in the event such measure of damages cannot be readily ascertained with reasonable certainty, then the court may award as damages a reasonable percentage based upon the amount of gross sales of the defendant or the value of the services in connection with which the mark or trade name was used in the infringement of the rights of the complaining party.

In the present case, the Court deems it just and fair that the IPO Director General computed the damages due to petitioner by applying the reasonable percentage of 30% to the respondents gross sales, and then doubling the amount thereof on account of respondents actual intent to mislead the public or defraud the petitioner,[49] thus, arriving at the amount of actual damages of P212,574.28.

Taking into account the deliberate intent of respondents to engage in unfair competition, it is only proper that petitioner be awarded exemplary damages. Article 2229 of the Civil Code provides that such damages may be imposed by way of example or correction for the public good, such as the enhancement of the protection accorded to intellectual property and the prevention of similar acts of unfair competition. However, exemplary damages are not meant to enrich one party or to impoverish another, but to serve as a deterrent against or as a negative incentive to curb socially deleterious action.[50] While there is no hard and fast rule in determining the fair amount of exemplary damages, the award of exemplary damages should be commensurate with the actual loss or injury suffered. [51] Thus, exemplary damages of P500,000.00 should be reduced to P250,000.00 which more closely approximates the actual damages awarded.

In accordance with Article 2208(1) of the Civil Code, attorneys fees may likewise be awarded to petitioner since exemplary d amages are awarded to it. Petitioner was compelled to protect its rights over the disputed mark. The amount of P500,000.00 is more than reasonable, given the fact that the case has dragged on for more than seven years, despite the respondents failure to present countervail ing evidence. Considering moreover the reputation of petitioners counsel, the actual attorneys fees paid by petitioner would far exceed the amount th at was awarded to it.[52]

IN VIEW OF THE FOREGOING, the instant Petition is GRANTED. The assailed Decision of the Court of Appeals in CA-G.R. SP No. 92785, promulgated on 18 July 2006, is REVERSED. The Decision of the IPO Director General, dated 23 December 2005, is hereby REINSTATED IN PART, with the modification that the amount of exemplary damages awarded be reduced to P250,000.00. SO ORDERED.

39

SECOND DIVISION PHIL PHARMAWEALTH, INC., Petitioner, G.R. No. 167715 Present: CARPIO, J., Chairperson, NACHURA, PERALTA, ABAD, and MENDOZA, JJ. Promulgated: PFIZER, INC. and PFIZER (PHIL.) INC., Respondents. November 17, 2010

- versus -

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

DECISION

PERALTA, J.:

Before the Court is a petition for review on certiorari seeking to annul and set aside the Resolutions dated January 18, 2005 [1] and April 11, 2005[2] by the Court of Appeals (CA) in CA-G.R. SP No. 82734.

The instant case arose from a Complaint[3] for patent infringement filed against petitioner Phil Pharmawealth, Inc. by respondent companies, Pfizer, Inc. and Pfizer (Phil.), Inc., with the Bureau of Legal Affairs of the Intellectual Property Office (BLA-IPO). The Complaint alleged as follows: xxxx 6. Pfizer is the registered owner of Philippine Letters Patent No. 21116 (the Patent) which was issued by this Honorable Office on July 16, 1987. The patent is valid until July 16, 2004. The claims of this Patent are directed to a method of increasing the effectiveness of a beta-lactam antibiotic in a mammalian subject, which comprises co-administering to said subject a beta-lactam antibiotic effectiveness increasing amount of a compound of the formula IA. The scope of the claims of the Patent extends to a combination of penicillin such as ampicillin sodium and beta-lactam antibiotic like sulbactam sodium. 7. Patent No. 21116 thus covers ampicillin sodium/sulbactam sodium (hereafter Sulbactam Ampicillin). Ampicillin sodium is a specific example of the broad beta-lactam antibiotic disclosed and claimed in the Patent. It is the compound which efficacy is being enhanced by co-administering the same with sulbactam sodium. Sulbactam sodium, on the other hand, is a specific compound of the formula IA disclosed and claimed in the Patent. 8. Pfizer is marketing Sulbactam Ampicillin under the brand n ame Unasyn. Pfizer's Unasyn products, which come in oral and IV formulas, are covered by Certificates of Product Registration (CPR) issued by the Bureau of Food and Drugs (BFAD) under the name of complainants. The sole and exclusive distributor of Unasyn products in the Philippines is Zuellig Pharma Corporation, pursuant to a Distribution Services Agreement it executed with Pfizer Phils. on January 23, 2001.

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9. Sometime in January and February 2003, complainants came to know that respondent [herein petitioner] submitted bids for the supply of Sulbactam Ampicillin to several hospitals without the consent of complainants and in violation of the complainants' intellectual property rights. x x x xxxx 10. Complainants thus wrote the above hospitals and demanded that the latter immediately cease and desist from accepting bids for the supply [of] Sulbactam Ampicillin or awarding the same to entities other than complainants. Complainants, in the same letters sent through undersigned counsel, also demanded that respondent immediately withdraw its bids to supply Sulbactam Ampicillin. 11. In gross and evident bad faith, respondent and the hospitals named in paragraph 9 hereof, willfully ignored complainants' just, plain and valid demands, refused to comply therewith and continued to infringe the Patent, all to the damage and prejudice of complainants. As registered owner of the Patent, Pfizer is entitled to protection under Section 76 of the IP Code. x x x x[4] Respondents prayed for permanent injunction, damages and the forfeiture and impounding of the alleged infringing products. They also asked for the issuance of a temporary restraining order and a preliminary injunction that would prevent herein petitioner, its agents, representatives and assigns, from importing, distributing, selling or offering the subject product for sale to any entity in the Philippines.

In an Order[5] dated July 15, 2003 the BLA-IPO issued a preliminary injunction which was effective for ninety days from petitioner's receipt of the said Order.

Prior to the expiration of the ninety-day period, respondents filed a Motion for Extension of Writ of Preliminary Injunction [6] which, however, was denied by the BLA-IPO in an Order[7] dated October 15, 2003.

Respondents filed a Motion for Reconsideration but the same was also denied by the BLA-IPO in a Resolution[8] dated January 23, 2004.

Respondents then filed a special civil action for certiorari with the CA assailing the October 15, 2003 and January 23, 2004 Resolutions of the BLA-IPO. Respondents also prayed for the issuance of a preliminary mandatory injunction for the reinstatement and extension of the writ of preliminary injunction issued by the BLA-IPO.

While the case was pending before the CA, respondents filed a Complaint [9] with the Regional Trial Court (RTC) of Makati City for infringement and unfair competition with damages against herein petitioner. In said case, respondents prayed for the issuance of a temporary restraining order and preliminary injunction to prevent herein petitioner from importing, distributing, selling or offering for sale sulbactam ampicillin products to any entity in the Philippines. Respondents asked the trial court that, after trial, judgment be rendered awarding damages in their favor and making the injunction permanent.

On August 24, 2004, the RTC of Makati City issued an Order [10] directing the issuance of a temporary restraining order conditioned upon respondents' filing of a bond.

In a subsequent Order[11] dated April 6, 2005, the same RTC directed the issuance of a writ of preliminary injunction prohibiting and restraining [petitioner], its agents, representatives and assigns from importing, distributing or selling Sulbactam Ampicillin products to any entity in the Philippines.

41

Meanwhile, on November 16, 2004, petitioner filed a Motion to Dismiss[12] the petition filed with the CA on the ground of forum shopping, contending that the case filed with the RTC has the same objective as the petition filed with the CA, which is to obtain an injunction prohibiting petitioner from importing, distributing and selling Sulbactam Ampicillin products.

On January 18, 2005, the CA issued its questioned Resolution [13] approving the bond posted by respondents pursuant to the Resolution issued by the appellate court on March 23, 2004 which directed the issuance of a temporary restraining order conditioned upon the filing of a bond. On even date, the CA issued a temporary restraining order[14] which prohibited petitioner from importing, distributing, selling or offering for sale Sulbactam Ampicillin products to any hospital or to any other entity in the Philippines, or from infringing Pfizer Inc.'s Philippine Patent No. 21116 and impounding all the sales invoices and other documents evidencing sales by [petitioner] of Sulbactam Ampicillin products.

On February 7, 2005, petitioner again filed a Motion to Dismiss[15] the case for being moot and academic, contending that respondents' patent had already lapsed. In the same manner, petitioner also moved for the reconsideration of the temporary restraining order issued by the CA on the same basis that the patent right sought to be protected has been extinguished due to the lapse of the patent license and on the ground that the CA has no jurisdiction to review the order of the BLA-IPO as said jurisdiction is vested by law in the Office of the Director General of the IPO.

On April 11, 2005, the CA rendered its presently assailed Resolution denying the Motion to Dismiss, dated November 16, 2004, and the motion for reconsideration, as well as Motion to Dismiss, both dated February 7, 2005.

Hence, the present petition raising the following issues: a) Can an injunctive relief be issued based on an action of patent infringement when the patent allegedly infringed has already lapsed? b) What tribunal has jurisdiction to review the decisions of the Director of Legal Affairs of the Intellectual Property Office? c) Is there forum shopping when a party files two actions with two seemingly different causes of action and yet pray for the same relief?[16]

In the first issue raised, petitioner argues that respondents' exclusive right to monopolize the subject matter of the patent exists only within the term of the patent. Petitioner claims that since respondents' patent expired on July 16, 2004, the latter no longer possess any right of monopoly and, as such, there is no more basis for the issuance of a restraining order or injunction against petitioner insofar as the disputed patent is concerned.

The Court agrees.

Section 37 of Republic Act No. (RA) 165,[17] which was the governing law at the time of the issuance of respondents' patent, provides: Section 37. Rights of patentees. A patentee shall have the exclusive right to make, use and sell the patented machine, article or product, and to use the patented process for the purpose of industry or commerce, throughout the territory of

42

the Philippines for the term of the patent; and such making, using, or selling by any person without the authorization of the patentee constitutes infringement of the patent.[18]

It is clear from the above-quoted provision of law that the exclusive right of a patentee to make, use and sell a patented product, article or process exists only during the term of the patent. In the instant case, Philippine Letters Patent No. 21116, which was the basis of respondents in filing their complaint with the BLA-IPO, was issued on July 16, 1987. This fact was admitted by respondents themselves in their complaint. They also admitted that the validity of the said patent is until July 16, 2004, which is in conformity with Section 21 of RA 165, providing that the term of a patent shall be seventeen (17) years from the date of issuance thereof. Section 4, Rule 129 of the Rules of Court provides that an admission, verbal or written, made by a party in the course of the proceedings in the same case, does not require proof and that the admission may be contradicted only by showing that it was made through palpable mistake or that no such admission was made. In the present case, there is no dispute as to respondents' admission that the term of their patent expired on July 16, 2004. Neither is there evidence to show that their admission was made through palpable mistake. Hence, contrary to the pronouncement of the CA, there is no longer any need to present evidence on the issue of expiration of respondents' patent.

On the basis of the foregoing, the Court agrees with petitioner that after July 16, 2004, respondents no longer possess the exclusive right to make, use and sell the articles or products covered by Philippine Letters Patent No. 21116.

Section 3, Rule 58, of the Rules of Court lays down the requirements for the issuance of a writ of preliminary injunction, viz: (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 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, or agency or a person is doing, threatening, or 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.

In this connection, pertinent portions of Section 5, Rule 58 of the same Rules provide that if the matter is of extreme urgency and the applicant will suffer grave injustice and irreparable injury, a temporary restraining order may be issued ex parte.

From the foregoing, it can be inferred that two requisites must exist to warrant the issuance of an injunctive relief, namely: (1) the existence of a clear and unmistakable right that must be protected; and (2) an urgent and paramount necessity for the writ to prevent serious damage. [19]

In the instant case, it is clear that when the CA issued its January 18, 2005 Resolution approving the bond filed by respondents, the latter no longer had a right that must be protected, considering that Philippine Letters Patent No. 21116 which was issued to them already expired on July 16, 2004. Hence, the issuance by the CA of a temporary restraining order in favor of the respondents is not proper.

43

In fact, the CA should have granted petitioner's motion to dismiss the petition for certiorari filed before it as the only issue raised therein is the propriety of extending the writ of preliminary injunction issued by the BLA-IPO. Since the patent which was the basis for issuing the injunction, was no longer valid, any issue as to the propriety of extending the life of the injunction was already rendered moot and academic.

As to the second issue raised, the Court, is not persuaded by petitioner's argument that, pursuant to the doctrine of primary jurisdiction, the Director General of the IPO and not the CA has jurisdiction to review the questioned Orders of the Director of the BLA-IPO.

It is true that under Section 7(b) of RA 8293, otherwise known as the Intellectual Property Code of the Philippines, which is the presently prevailing law, the Director General of the IPO exercises exclusive appellate jurisdiction over all decisions rendered by the Director of the BLA-IPO. However, what is being questioned before the CA is not a decision, but an interlocutory order of the BLA-IPO denying respondents' motion to extend the life of the preliminary injunction issued in their favor.

RA 8293 is silent with respect to any remedy available to litigants who intend to question an interlocutory order issued by the BLA-IPO. Moreover, Section 1(c), Rule 14 of the Rules and Regulations on Administrative Complaints for Violation of Laws Involving Intellectual Property Rights simply provides that interlocutory orders shall not be appealable. The said Rules and Regulations do not prescribe a procedure within the administrative machinery to be followed in assailing orders issued by the BLA-IPO pending final resolution of a case filed with them. Hence, in the absence of such a remedy, the provisions of the Rules of Court shall apply in a suppletory manner, as provided under Section 3, Rule 1 of the same Rules and Regulations. Hence, in the present case, respondents correctly resorted to the filing of a special civil action for certiorari with the CA to question the assailed Orders of the BLA-IPO, as they cannot appeal therefrom and they have no other plain, speedy and adequate remedy in the ordinary course of law. This is consistent with Sections 1 [20] and 4,[21] Rule 65 of the Rules of Court, as amended. In the first place, respondents' act of filing their complaint originally with the BLA-IPO is already in consonance with the doctrine of primary jurisdiction. This Court has held that: [i]n cases involving specialized disputes, the practice has been to refer the same to an administrative agency of special competence in observance of the doctrine of primary jurisdiction. The Court has ratiocinated that it cannot or will not determine a controversy involving a question which is within the jurisdiction of the administrative tribunal prior to the resolution of that question by the administrative tribunal, where the question demands the exercise of sound administrative discretion requiring the special knowledge, experience and services of the administrative tribunal to determine technical and intricate matters of fact, and a uniformity of ruling is essential to comply with the premises of the regulatory statute administered. The objective of the doctrine of primary jurisdiction is to guide a court in determining whether it should refrain from exercising its jurisdiction until after an administrative agency has determined some question or some aspect of some question arising in the proceeding before the court. It applies where the claim is originally cognizable in the courts and comes into play whenever enforcement of the claim requires the resolution of issues which, under a regulatory scheme, has been placed within the special competence of an administrative body; in such case, the judicial process is suspended pending referral of such issues to the administrative body for its view.[22]

Based on the foregoing, the Court finds that respondents' initial filing of their complaint with the BLA-IPO, instead of the regular courts, is in keeping with the doctrine of primary jurisdiction owing to the fact that the determination of the basic issue of whether petitioner violated respondents' patent rights requires the exercise by the IPO of sound administrative discretion which is based on the agency's special competence, knowledge and experience.

44

However, the propriety of extending the life of the writ of preliminary injunction issued by the BLA-IPO in the exercise of its quasi-judicial power is no longer a matter that falls within the jurisdiction of the said administrative agency, particularly that of its Director General. The resolution of this issue which was raised before the CA does not demand the exercise by the IPO of sound administrative discretion requiring special knowledge, experience and services in determining technical and intricate matters of fact. It is settled that one of the exceptions to the doctrine of primary jurisdiction is where the question involved is purely legal and will ultimately have to be decided by the courts of justice.[23] This is the case with respect to the issue raised in the petition filed with the CA.

Moreover, as discussed earlier, RA 8293 and its implementing rules and regulations do not provide for a procedural remedy to question interlocutory orders issued by the BLA-IPO. In this regard, it bears to reiterate that the judicial power of the courts, as provided for under the Constitution, includes the authority of the courts to determine in an appropriate action the validity of the acts of the political departments. [24] Judicial power also includes the duty of the courts of justice to settle actual controversies involving rights which are legally demandable and enforceable, and to determine whether or not there has been a grave abuse of discretion amounting to lack or excess of jurisdiction on the part of any branch or instrumentality of the Government.[25] Hence, the CA, and not the IPO Director General, has jurisdiction to determine whether the BLA-IPO committed grave abuse of discretion in denying respondents' motion to extend the effectivity of the writ of preliminary injunction which the said office earlier issued. Lastly, petitioner avers that respondents are guilty of forum shopping for having filed separate actions before the IPO and the RTC praying for the same relief.

The Court agrees.

Forum shopping is defined as the act of a party against whom an adverse judgment has been rendered in one forum, of seeking another (and possibly favorable) opinion in another forum (other than by appeal or the special civil action of certiorari), or the institution of two (2) or more actions or proceedings grounded on the same cause on the supposition that one or the other court would make a favorable disposition.[26]

The elements of forum shopping are: (a) identity of parties, or at least such parties that represent the same interests in both actions; (b) identity of rights asserted and reliefs prayed for, the reliefs being founded on the same facts; (c) identity of the two preceding particulars, such that any judgment rendered in the other action will, regardless of which party is successful, amount to res judicata in the action under consideration.[27]

There is no question as to the identity of parties in the complaints filed with the IPO and the RTC.

Respondents argue that they cannot be held guilty of forum shopping because their complaints are based on different causes of action as shown by the fact that the said complaints are founded on violations of different patents. The Court is not persuaded.

Section 2, Rule 2 of the Rules of Court defines a cause of action as the act or omission by which a party violates a right of another. In the instant case, respondents' cause of action in their complaint filed with the IPO is the alleged act of petitioner in importing, distributing, selling or

45

offering for sale Sulbactam Ampicillin products, acts that are supposedly violative of respondents' right to the exclusive sale of the said products which are covered by the latter's patent. However, a careful reading of the complaint filed with the RTC of Makati City would show that respondents have the same cause of action as in their complaint filed with the IPO. They claim that they have the exclusive right to make, use and sell Sulbactam Ampicillin products and that petitioner violated this right. Thus, it does not matter that the patents upon which the complaints were based are different. The fact remains that in both complaints the rights violated and the acts violative of such rights are identical.

In fact, respondents seek substantially the same reliefs in their separate complaints with the IPO and the RTC for the purpose of accomplishing the same objective.

It is settled by this Court in several cases that the filing by a party of two apparently different actions but with the same objective constitutes forum shopping.[28]The Court discussed this species of forum shopping as follows: Very simply stated, the original complaint in the court a quo which gave rise to the instant petition was filed by the buyer (herein private respondent and his predecessors-in-interest) against the seller (herein petitioners) to enforce the alleged perfected sale of real estate. On the other hand, the complaint in the Second Case seeks to declare such purported sale involving the same real property as unenforceable as against the Bank, which is the petitioner herein. In other words, in the Second Case, the majority stockholders, in representation of the Bank, are seeking to accomplish what the Bank itself failed to do in the original case in the trial court. In brief, the objective or the relief being sought, though worded differently, is the same, namely, to enable the petitioner Bank to escape from the obligation to sell the property to respondent.[29]

In Danville Maritime, Inc. v. Commission on Audit,[30] the Court ruled as follows: In the attempt to make the two actions appear to be different, petitioner impleaded different respondents therein PNOC in the case before the lower court and the COA in the case before this Court and sought what seems to be different reliefs. Petitioner asks this Court to set aside the questioned letter-directive of the COA dated October 10, 1988 and to direct said body to approve the Memorandum of Agreement entered into by and between the PNOC and petitioner, while in the complaint before the lower court petitioner seeks to enjoin the PNOC from conducting a rebidding and from selling to other parties the vessel T/T Andres Bonifacio, and for an extension of time for it to comply with the paragraph 1 of the memorandum of agreement and damages. One can see that although the relief prayed for in the two (2) actions are ostensibly different, the ultimate objective in both actions is the same, that is, the approval of the sale of vessel in favor of petitioner, and to overturn the letter directive of the COA of October 10, 1988 disapproving the sale.[31]

In the instant case, the prayer of respondents in their complaint filed with the IPO is as follows: A. Immediately upon the filing of this action, issue an ex parte order (a) temporarily restraining respondent, its agents, representatives and assigns from importing, distributing, selling or offering for sale Sulbactam Ampicillin products to the hospitals named in paragraph 9 of this Complaint or to any other entity in the Philippines, or from otherwise infringing Pfizer Inc.'s Philippine Patent No. 21116; and (b) impounding all the sales invoices and other documents evidencing sales by respondent of Sulbactam Ampicillin products. B. After hearing, issue a writ of preliminary injunction enjoining respondent, its agents, representatives and assigns from importing, distributing, selling or offering for sale Sulbactam Ampicillin products to the hospitals named in paragraph 9 of the Complaint or to any other entity in the Philippines, or from otherwise infringing Pfizer Inc.'s Philippine Patent No. 21116; and C. After trial, render judgment: (i) declaring that respondent has infringed Pfizer Inc.'s Philippine Patent No. 21116 and that respondent has no right whatsoever over complainant's patent; ordering respondent to pay complainants the following amounts:

(ii)

46

(a) (b) (d) (d)

at least P1,000,000.00 as actual damages; P700,000.00 as attorney's fees and litigation P1,000,000.00 as exemplary damages; and costs of this suit.

expenses;

(iii) ordering the condemnation, seizure or forfeiture of respondent's infringing goods or products, wherever they may be found, including the materials and implements used in the commission of infringement, to be disposed of in such manner as may be deemed appropriate by this Honorable Office; and (iv) making the injunction permanent.[32]

In an almost identical manner, respondents prayed for the following in their complaint filed with the RTC: (a) Immediately upon the filing of this action, issue an ex parte order:

(1) temporarily restraining Pharmawealth, its agents, representatives and assigns from importing, distributing, selling or offering for sale infringing sulbactam ampicillin products to various government and private hospitals or to any other entity in the Philippines, or from otherwise infringing Pfizer Inc.'s Philippine Patent No. 26810. (2) impounding all the sales invoices and other documents evidencing sales by pharmawealth of sulbactam ampicillin products; and disposing of the infringing goods outside the channels of commerce.

(3) (b)

After hearing, issue a writ of preliminary injunction: (1) enjoining Pharmawealth, its agents, representatives and assigns from importing, distributing, selling or offering for sale infringing sulbactam ampicillin products to various government hospitals or to any other entity in the Philippines, or from otherwise infringing Patent No. 26810; impounding all the sales invoices and other documents Pharmawealth of sulbactam ampicillin products; and disposing of the infringing goods outside evidencing sales

(2) by (3) commerce. (c)

the channels of

After trial, render judgment: (1) finding Pharmawealth to have infringed Patent No. declaring Pharmawealth to have no right whatsoever over plaintiff's patent; (2) ordering Pharmawealth to pay plaintiffs the (i) (ii) following amounts: 26810 and

fees and (iii) (iv) (3)

at least P3,000,000.00 as actual damages; P500,000.00 as attorney's P1,000,000.00 as litigation expenses; P3,000,000.00 as exemplary damages; and costs of this suit.

ordering the condemnation, seizure or forfeiture of Pharmawealth's infringing goods or products, wherever they may be found, including the materials and implements used in the commission of infringement, to be disposed of in such manner as may be deemed appropriate by this Honorable Court; and making the injunction permanent.[33]

(4)

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It is clear from the foregoing that the ultimate objective which respondents seek to achieve in their separate complaints filed with the RTC and the IPO, is to ask for damages for the alleged violation of their right to exclusively sell Sulbactam Ampicillin products and to permanently prevent or prohibit petitioner from selling said products to any entity. Owing to the substantial identity of parties, reliefs and issues in the IPO and RTC cases, a decision in one case will necessarily amount to res judicata in the other action. It bears to reiterate that what is truly important to consider in determining whether forum shopping exists or not is the vexation caused the courts and parties-litigant by a party who asks different courts and/or administrative agencies to rule on the same or related causes and/or to grant the same or substantially the same reliefs, in the process creating the possibility of conflicting decisions being rendered by the different fora upon the same issue.[34] Thus, the Court agrees with petitioner that respondents are indeed guilty of forum shopping. Jurisprudence holds that if the forum shopping is not considered willful and deliberate, the subsequent case shall be dismissed without prejudice, on the ground of either litis pendentia or res judicata.[35] However, if the forum shopping is willful and deliberate, both (or all, if there are more than two) actions shall be dismissed with prejudice.[36] In the present case, the Court finds that respondents did not deliberately violate the rule on non-forum shopping. Respondents may not be totally blamed for erroneously believing that they can file separate actions simply on the basis of different patents. Moreover, in the suit filed with the RTC of Makati City, respondents were candid enough to inform the trial court of the pendency of the complaint filed with the BLA-IPO as well as the petition for certiorari filed with the CA. On these bases, only Civil Case No. 04-754 should be dismissed on the ground of litis pendentia.

WHEREFORE, the petition is PARTLY GRANTED. The assailed Resolutions of the Court of Appeals, dated January 18, 2005 and April 11, 2005, in CA-G.R. No. 82734, are REVERSED and SET ASIDE. The petition for certiorari filed with the Court of Appeals is DISMISSED for being moot and academic.

Civil Case No. 04-754, filed with the Regional Trial Court of Makati City, Branch 138, is likewise DISMISSED on the ground of litis pendentia.

SO ORDERED.

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

SMITH KLINE BECKMAN CORPORATION, petitioner, vs. THE HONORABLE COURT OF APPEALS and TRYCO PHARMA CORPORATION,respondents. DECISION CARPIO-MORALES, J.:

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Smith Kline Beckman Corporation (petitioner), a corporation existing by virtue of the laws of the state of Pennsylvania, United States of America (U.S.) and licensed to do business in the Philippines, filed on October 8, 1976, as assignee, before the Philippine Patent Office (now Bureau of Patents, Trademarks and Technology Transfer) an application for patent over an invention entitle d Methods and Compositions for Producing Biphasic Parasiticide Activity Using Methyl 5 Propylthio-2-Benzimidazole Carbamate. The application bore Serial No. 18989. On September 24, 1981, Letters Patent No. 14561 [1] for the aforesaid invention was issued to petitioner for a term of seventeen (17) years. The letters patent provides in its claims[2] that the patented invention consisted of a new compound named methyl 5 propylthio-2benzimidazole carbamate and the methods or compositions utilizing the compound as an active ingredient in fighting infections caused by gastrointestinal parasites and lungworms in animals such as swine, sheep, cattle, goats, horses, and even pet animals. Tryco Pharma Corporation (private respondent) is a domestic corporation that manufactures, distributes and sells veterinary products including Impregon, a drug that has Albendazole for its active ingredient and is claimed to be effective against gastro-intestinal roundworms, lungworms, tapeworms and fluke infestation in carabaos, cattle and goats. Petitioner sued private respondent for infringement of patent and unfair competition before the Caloocan City Regional Trial Court (RTC). [3] It claimed that its patent covers or includes the substance Albendazole such that private respondent, by manufacturing, selling, using, and causing to be sold and used the drug Impregon without its authorization, infringed Claims 2, 3, 4, 7, 8 and 9 of Letters Patent No. 14561[4] as well as committed unfair competition under Article 189, paragraph 1 of the Revised Penal Code and Section 29 of Republic Act No. 166 (The Trademark Law) for advertising and selling as its own the drug Impregon al though the same contained petitioners patented Albendazole.[5] On motion of petitioner, Branch 125 of the Caloocan RTC issued a temporary restraining order against private respondent enjoining it from committing acts of patent infringement and unfair competition.[6] A writ of preliminary injunction was subsequently issued. [7] Private respondent in its Answer[8] averred that Letters Patent No. 14561 does not cover the substance Albendazole for nowhere in it does that word appear; that even if the patent were to include Albendazole, such substance is unpatentable; that the Bureau of Food and Drugs allowed it to manufacture and market Impregon with Albendazole as its known ingredient; that there is no proof that it passed off in any way its veterinary products as those of petitioner; that Letters Patent No. 14561 is null and void, the application for the issuance thereof having been filed beyond the one year period from the filing of an application abroad for the same invention covered thereby, in violation of Section 15 of Republic Act No. 165 (The Patent Law); and that petitioner is not the registered patent holder. Private respondent lodged a Counterclaim against petitioner for such amount of actual damages as may be proven; P1,000,000.00 in moral damages; P300,000.00 in exemplary damages; and P150,000.00 in attorneys fees. Finding for private respondent, the trial court rendered a Decision dated July 23, 1991,[9] the dispositive portion of which reads: WHEREFORE, in view of the foregoing, plaintiffs complaint should be, as it is hereby, DISMISSED. The Writ of injunction issued in connection with the case is hereby ordered DISSOLVED. The Letters Patent No. 14561 issued by the then Philippine Patents Office is hereby declared null and void for being in violation of Sections 7, 9 and 15 of the Patents Law. Pursuant to Sec. 46 of the Patents Law, the Director of Bureau of Patents is hereby directed to cancel Letters Patent No. 14561 issued to the plaintiff and to publish such cancellation in the Official Gazette. Defendant Tryco Pharmaceutical Corporation is hereby awarded P330,000.00 actual damages and P100,000.00 attorneys fees as prayed for in its counterclaim but said amount awarded to defendant is subject to the lien on correct payment of filing fees. SO ORDERED. (Underscoring supplied) On appeal, the Court of Appeals, by Decision of April 21, 1995,[10] upheld the trial courts finding that private respondent was not liable for any infringement of the patent of petitioner in light of the latters failure to show that Albendazole is the same as the compound subject of Letters Patent No. 14561. Noting petitioners admission of the issuance by the U.S. of a patent for Albendazole in the name of Smith Kline and French Laboratories which was petitioners former corporate name, the appellate court considered the U.S. patent as implying that Al bendazole is different from methyl 5 propylthio-2-benzimidazole carbamate. It likewise found that private respondent was not guilty of deceiving the public by misrepresenting that Impregon is its product. The appellate court, however, declared that Letters Patent No. 14561 was not void as it sustained petitioners explanation th at Patent Application Serial No. 18989 which was filed on October 8, 1976 was a divisional application of Patent Application Serial No. 17280 filed on June 17, 1975 with the Philippine Patent Office, well within one year from petitioners filing on June 19, 1974 of its Foreign App lication Priority Data No. 480,646 in the U.S. covering the same compound subject of Patent Application Serial No. 17280. Applying Section 17 of the Patent Law, the Court of Appeals thus ruled that Patent Application Serial No. 18989 was deemed filed on June 17, 1995 or still within one year from the filing of a patent application abroad in compliance with the one-year rule under Section 15 of the Patent Law. And it rejected the submission that the compound in Letters Patent No. 14561 was not patentable, citing the jurisprudentially established

49

presumption that the Patent Offices determination of patentability is correct. Finally, it ruled that petitioner established itself to be the one and the same assignee of the patent notwithstanding changes in its corporate name. Thus the appellate court disposed: WHEREFORE, the judgment appealed from is AFFIRMED with the MODIFICATION that the orders for the nullification of Letters Patent No. 14561 and for its cancellation are deleted therefrom. SO ORDERED. Petitioners motion for reconsideration of the Court of Appeals decision having been denied [11] the present petition for review on certiorari[12] was filed, assigning as errors the following: I. THE COURT OF APPEALS GRAVELY ERRED IN NOT FINDING THAT ALBENDAZOLE, THE ACTIVE INGREDIENT IN TRYCOS IMPREGON DRUG, IS INCLUDED IN PETITIONERS LETTERS PATENT NO. 14561, AND THAT CONSEQUENTLY TRYCO IS ANSWERABLE FOR PATENT INFRINGEMENT. II. THE COURT OF APPEALS GRAVELY ERRED IN AWARDING TO PRIVATE RESPONDENT TRYCO PHARMA CORPORATION P330,000.00 ACTUAL DAMAGES AND P100,000.00 ATTORNEYS FEES. Petitioner argues that under the doctrine of equivalents for determining patent infringement, Albendazole, the active ingredient it alleges was appropriated by private respondent for its drug Impregon, is substantially the same as methyl 5 propylthio-2-benzimidazole carbamate covered by its patent since both of them are meant to combat worm or parasite infestation in animals. It cites the unrebutted testimony of its witness Dr. Godofredo C. Orinion (Dr. Orinion) that the chemical formula in Letters Patent No. 14561 refers to the compound Albendazole. Petitioner adds that the two substances substantially do the same function in substantially the same way to achieve the same results, thereby making them truly identical. Petitioner thus submits that the appellate court should have gone beyond the literal wordings used in Letters Patent No. 14561, beyond merely applying the literal infringement test, for in spite of the fact that the word Albendazole does not appear in petition ers letters patent, it has ably shown by evidence its sameness with methyl 5 propylthio-2-benzimidazole carbamate. Petitioner likewise points out that its application with the Philippine Patent Office on account of which it was granted Letters Patent No. 14561 was merely a divisional application of a prior application in the U. S. which granted a patent for Albendazole. Hence, petitioner concludes that both methyl 5 propylthio-2-benzimidazole carbamate and the U.S.-patented Albendazole are dependent on each other and mutually contribute to produce a single result, thereby making Albendazole as much a part of Letters Patent No. 14561 as the other substance is. Petitioner concedes in its Sur-Rejoinder[13] that although methyl 5 propylthio-2-benzimidazole carbamate is not identical with Albendazole, the former is an improvement or improved version of the latter thereby making both substances still substantially the same. With respect to the award of actual damages in favor of private respondent in the amount of P330,000.00 representing lost profits, petitioner assails the same as highly speculative and conjectural, hence, without basis. It assails too the award of P100,000.00 in attorneys fees as not falling under any of the instances enumerated by law where recovery of attorneys fees is allowed. In its Comment,[14] private respondent contends that application of the doctrine of equivalents would not alter the outcome of the case, Albendazole and methyl 5 propylthio-2-benzimidazole carbamate being two different compounds with different chemical and physical properties. It stresses that the existence of a separate U.S. patent for Albendazole indicates that the same and the compound in Letters Patent No. 14561 are different from each other; and that since it was on account of a divisional application that the patent for methyl 5 propylthio-2-benzimidazole carbamate was issued, then, by definition of a divisional application, such a compound is just one of several independent inventions alongside Albendazole under petitioners original patent application. As has repeatedly been held, only questions of law may be raised in a petition for review on certiorari before this Court. Unless the factual findings of the appellate court are mistaken, absurd, speculative, conjectural, conflicting, tainted with grave abuse of discretion, or contrary to the findings culled by the court of origin,[15] this Court does not review them. From an examination of the evidence on record, this Court finds nothing infirm in the appellate courts conclusions with respect to the principal issue of whether private respondent committed patent infringement to the prejudice of petitioner. The burden of proof to substantiate a charge for patent infringement rests on the plaintiff. [16] In the case at bar, petitioners evidence consists primarily of its Letters Patent No. 14561, and the testimony of Dr. Orinion, its general manager in the Philippines for its Animal Health Products Division, by which it sought to show that its patent for the compound methyl 5 propylthio-2-benzimidazole carbamate also covers the substance Albendazole. From a reading of the 9 claims of Letters Patent No. 14561 in relation to the other portions thereof, no mention is made of the compound Albendazole. All that the claims disclose are: the covered invention, that is, the compound methyl 5 propylthio-2-benzimidazole carbamate; the compounds being anthelmintic but nontoxic for animals or its ability to destroy parasites without harming the host animals; and the patented methods, compositions or preparations involving the compound to maximize its efficacy against certain kinds of parasites infecting specified animals. When the language of its claims is clear and distinct, the patentee is bound thereby and may not claim anything beyond them. [17] And so are the courts bound which may not add to or detract from the claims matters not expressed or necessarily implied, nor may they enlarge the patent beyond the scope of that which the inventor claimed and the patent office allowed, even if the patentee may have been entitled to something more than the words it had chosen would include.[18]

50

It bears stressing that the mere absence of the word Albendazole in Letters Patent No. 14561 is not determinative of Albendaz oles noninclusion in the claims of the patent. While Albendazole is admittedly a chemical compound that exists by a name different from that covered in petitioners letters patent, the language of Letter Patent No. 14561 fails to yield anything at all regarding Albenda zole. And no extrinsic evidence had been adduced to prove that Albendazole inheres in petitioners patent in spite of its omission therefrom or that the meaning of the claims of the patent embraces the same. While petitioner concedes that the mere literal wordings of its patent cannot establish private respondents infringement, it urges this Court to apply the doctrine of equivalents. The doctrine of equivalents provides that an infringement also takes place when a device appropriates a prior invention by incorporating its innovative concept and, although with some modification and change, performs substantially the same function in substantially the same way to achieve substantially the same result.[19] Yet again, a scrutiny of petitioners evidence fails to convince this Court of the substantial sameness of petitioners patented compound and Albendazole. While both compounds have the effect of neutralizing parasites in animals, identity of result does not amount to infringement of patent unless Albendazole operates in substantially the same way or by substantially the same means as the patented compound, even though it performs the same function and achieves the same result.[20] In other words, the principle or mode of operation must be the same or substantially the same.[21] The doctrine of equivalents thus requires satisfaction of the function-means-and-result test, the patentee having the burden to show that all three components of such equivalency test are met.[22] As stated early on, petitioners evidence fails to explain how Albendazole is in every essential detail identical to methyl 5 propylthio-2benzimidazole carbamate. Apart from the fact that Albendazole is an anthelmintic agent like methyl 5 propylthio-2-benzimidazole carbamate, nothing more is asserted and accordingly substantiated regarding the method or means by which Albendazole weeds out parasites in animals, thus giving no information on whether that method is substantially the same as the manner by which petitioners compound works. The testimony of Dr. Orinion lends no support to petitioners cause, he not having been presented or qualified as an expert witness who has the knowledge or expertise on the matter of chemical compounds. As for the concept of divisional applications proffered by petitioner, it comes into play when two or more inventions are claimed in a single application but are of such a nature that a single patent may not be issued for them. [23] The applicant thus is required to divide, that is, to limit the claims to whichever invention he may elect, whereas those inventions not elected may be made the subject of separate applications which are called divisional applications.[24] What this only means is that petitioners methyl 5 propylthio -2-benzimidazole carbamate is an invention distinct from the other inventions claimed in the original application divided out, Albendazole being one of those other inventions. Otherwise, methyl 5 propylthio-2-benzimidazole carbamate would not have been the subject of a divisional application if a single patent could have been issued for it as well as Albendazole. The foregoing discussions notwithstanding, this Court does not sustain the awa rd of actual damages and attorneys fees in favor of private respondent. The claimed actual damages of P330,000.00 representing lost profits or revenues incurred by private respondent as a result of the issuance of the injunction against it, computed at the rate of 30% of its alleged P100,000.00 monthly gross sales for eleven months, were supported by the testimonies of private respondents President[25] and Executive Vice-President that the average monthly sale of Impregon was P100,000.00 and that sales plummeted to zero after the issuance of the injunction.[26] While indemnification for actual or compensatory damages covers not only the loss suffered (damnum emergens) but also profits which the obligee failed to obtain (lucrum cessans or ganacias frustradas), it is necessary to prove the actual amount of damages with a reasonable degree of certainty based on competent proof and on the best evidence obtainable by the injured party.[27] The testimonies of private respondents officers are not the competent proof or best evidence obtainable to establish its right to actual or compensatory damages for such damages also require presentation of documentary evidence to substantiate a claim therefor. [28] In the same vein, this Court does not sustain the grant by the appellate court of attorneys fees to private respondent ancho red on Article 2208 (2) of the Civil Code, private respondent having been allegedly forced to litigate as a result of petitioners suit. Even if a claimant is compelled to litigate with third persons or to incur expenses to protect its rights, still attorneys fees may not be awarded where no suf ficient showing of bad faith could be reflected in a partys persistence in a case other than an erroneous conviction of the righteousness of his cause. [29] There exists no evidence on record indicating that petitioner was moved by malice in suing private respondent. This Court, however, grants private respondent temperate or moderate damages in the amount of P20,000.00 which it finds reasonable under the circumstances, it having suffered some pecuniary loss the amount of which cannot, from the nature of the case, be established with certainty. [30] WHEREFORE, the assailed decision of the Court of Appeals is hereby AFFIRMED with MODIFICATION. The award of actual or compensatory damages and attorneys fees to private respondent, Tryco Pharma Corporation, is DELETED; instead, it is hereby a warded the amount of P20,000.00 as temperate or moderate damages. SO ORDERED. Puno, (Chairman), Panganiban, Sandoval-Gutierrez, and Corona, JJ., concur.

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G.R. No. 114508 November 19, 1999 PRIBHDAS J. MIRPURI, petitioner, vs. COURT OF APPEALS, DIRECTOR OF PATENTS and the BARBIZON CORPORATION, respondents.

PUNO, J.: The Convention of Paris for the Protection of Industrial Property is a multi-lateral treaty which the Philippines bound itself to honor and enforce in this country. As to whether or not the treaty affords protection to a foreign corporation against a Philippine applicant for the registration of a similar trademark is the principal issue in this case. On June 15, 1970, one Lolita Escobar, the predecessor-in-interest of petitioner Pribhdas J. Mirpuri, filed an application with the Bureau of Patents for the registration of the trademark "Barbizon" for use in brassieres and ladies undergarments. Escobar alleged that she had been manufacturing and selling these products under the firm name "L & BM Commercial" since March 3, 1970. Private respondent Barbizon Corporation, a corporation organized and doing business under the laws of New York, U.S.A., opposed the application. It claimed that: The mark BARBIZON of respondent-applicant is confusingly similar to the trademark BARBIZON which opposer owns and has not abandoned. That opposer will be damaged by the registration of the mark BARBIZON and its business reputation and goodwill will suffer great and irreparable injury. That the respondent-applicant's use of the said mark BARBIZON which resembles the trademark used and owned by opposer, constitutes an unlawful appropriation of a mark previously used in the Philippines and not abandoned and therefore a statutory violation of Section 4 (d) of Republic Act No. 166, as amended. 1 This was docketed as Inter Partes Case No. 686 (IPC No. 686). After filing of the pleadings, the parties submitted the case for decision. On June 18, 1974, the Director of Patents rendered judgment dismissing the opposition and giving due course to Escobar's application, thus: WHEREFORE, the opposition should be, as it is hereby, DISMISSED. Accordingly, Application Serial No. 19010 for the registration of the trademark BARBIZON, of respondent Lolita R. Escobar, is given due course. IT IS SO ORDERED. 2 This decision became final and on September 11, 1974, Lolita Escobar was issued a certificate of registration for the trademark "Barbizon." The trademark was "for use in "brassieres and lady's underwear garments like panties." 3 Escobar later assigned all her rights and interest over the trademark to petitioner Pribhdas J. Mirpuri who, under his firm name then, the "Bonito Enterprises," was the sole and exclusive distributor of Escobar's "Barbizon" products. In 1979, however, Escobar failed to file with the Bureau of Patents the Affidavit of Use of the trademark required under Section 12 of Republic Act (R.A.) No. 166, the Philippine Trademark Law. Due to this failure, the Bureau of Patents cancelled Escobar's certificate of registration. On May 27, 1981, Escobar reapplied for registration of the cancelled trademark. Mirpuri filed his own application for registration of Escobar's trademark. Escobar later assigned her application to herein petitioner and this application was opposed by private respondent. The case was docketed as Inter Partes Case No. 2049 (IPC No. 2049). In its opposition, private respondent alleged that: (a) The Opposer has adopted the trademark BARBIZON (word), sometime in June 1933 and has then used it on various kinds of wearing apparel. On August 14, 1934, Opposer obtained from the United States Patent Office a more recent registration of the

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said mark under Certificate of Registration No. 316,161. On March 1, 1949, Opposer obtained from the United States Patent Office a more recent registration for the said trademark under Certificate of Registration No. 507,214, a copy of which is herewith attached as Annex "A." Said Certificate of Registration covers the following goods wearing apparel: robes, pajamas, lingerie, nightgowns and slips; (b) Sometime in March 1976, Opposer further adopted the trademark BARBIZON and Bee design and used the said mark in various kinds of wearing apparel. On March 15, 1977, Opposer secured from the United States Patent Office a registration of the said mark under Certificate of Registration No. 1,061,277, a copy of which is herein enclosed as Annex "B." The said Certificate of Registration covers the following goods: robes, pajamas, lingerie, nightgowns and slips; (c) Still further, sometime in 1961, Opposer adopted the trademark BARBIZON and a Representation of a Woman and thereafter used the said trademark on various kinds of wearing apparel. Opposer obtained from the United States Patent Office registration of the said mark on April 5, 1983 under Certificate of Registration No. 1,233,666 for the following goods: wearing apparel: robes, pajamas, nightgowns and lingerie. A copy of the said certificate of registration is herewith enclosed as Annex "C." (d) All the above registrations are subsisting and in force and Opposer has not abandoned the use of the said trademarks. In fact, Opposer, through a wholly-owned Philippine subsidiary, the Philippine Lingerie Corporation, has been manufacturing the goods covered by said registrations and selling them to various countries, thereby earning valuable foreign exchange for the country. As a result of respondent-applicant's misappropriation of Opposer's BARBIZON trademark, Philippine Lingerie Corporation is prevented from selling its goods in the local market, to the damage and prejudice of Opposer and its wholly-owned subsidiary. (e) The Opposer's goods bearing the trademark BARBIZON have been used in many countries, including the Philippines, for at least 40 years and has enjoyed international reputation and good will for their quality. To protect its registrations in countries where the goods covered by the registrations are being sold, Opposer has procured the registration of the trademark BARBIZON in the following countries: Australia, Austria, Abu Dhabi, Argentina, Belgium, Bolivia, Bahrain, Canada, Chile, Colombia, Denmark, Ecuador, France, West Germany, Greece, Guatemala, Hongkong, Honduras, Italy, Japan, Jordan, Lebanon, Mexico, Morocco, Panama, New Zealand, Norway, Sweden, Switzerland, Syria, El Salvador, South Africa, Zambia, Egypt, and Iran, among others; (f) To enhance its international reputation for quality goods and to further promote goodwill over its name, marks and products, Opposer has extensively advertised its products, trademarks and name in various publications which are circulated in the United States and many countries around the world, including the Philippines; (g) The trademark BARBIZON was fraudulently registered in the Philippines by one Lolita R. Escobar under Registration No. 21920, issued on September 11, 1974, in violation of Article 189 (3) of the Revised Penal Code and Section 4 (d) of the Trademark Law. Herein respondent applicant acquired by assignment the "rights" to the said mark previously registered by Lolita Escobar, hence respondent-applicant's title is vitiated by the same fraud and criminal act. Besides, Certificate of Registration No. 21920 has been cancelled for failure of either Lolita Escobar or herein respondent-applicant, to seasonably file the statutory affidavit of use. By applying for a re-registration of the mark BARBIZON subject of this opposition, respondent-applicant seeks to perpetuate the fraud and criminal act committed by Lolita Escobar. (h) Opposer's BARBIZON as well as its BARBIZON and Bee Design and BARBIZON and Representation of a Woman trademarks qualify as well-known trademarks entitled to protection under Article 6bis of the Convention of Paris for the Protection of Industrial Property and further amplified by the Memorandum of the Minister of Trade to the Honorable Director of Patents dated October 25, 1983 [sic], 4 Executive Order No. 913 dated October 7, 1963 and the Memorandum of the Minister of Trade and Industry to the Honorable Director of Patents dated October 25, 1983. (i) The trademark applied for by respondent applicant is identical to Opposer's BARBIZON trademark and constitutes the dominant part of Opposer's two other marks namely, BARBIZON and Bee design and BARBIZON and a Representation of a Woman. The continued use by respondent-applicant of Opposer's trademark BARBIZON on goods belonging to Class 25 constitutes a clear case of commercial and criminal piracy and if allowed registration will violate not only the Trademark Law but also Article 189 of the Revised Penal Code and the commitment of the Philippines to an international treaty. 5 Replying to private respondent's opposition, petitioner raised the defense of res judicata. On March 2, 1982, Escobar assigned to petitioner the use of the business name "Barbizon International." Petitioner registered the name with the Department of Trade and Industry (DTI) for which a certificate of registration was issued in 1987. Forthwith, private respondent filed before the Office of Legal Affairs of the DTI a petition for cancellation of petitioner's business name.

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On November 26, 1991, the DTI, Office of Legal Affairs, cancelled petitioner's certificate of registration, and declared private respondent the owner and prior user of the business name "Barbizon International." Thus: WHEREFORE, the petition is hereby GRANTED and petitioner is declared the owner and prior user of the business name "BARBIZON INTERNATIONAL" under Certificate of Registration No. 87-09000 dated March 10, 1987 and issued in the name of respondent, is [sic] hereby ordered revoked and cancelled. . . . . 6 Meanwhile, in IPC No. 2049, the evidence of both parties were received by the Director of Patents. On June 18, 1992, the Director rendered a decision declaring private respondent's opposition barred by res judicata and giving due course to petitioner's application for registration, to wit: WHEREFORE, the present Opposition in Inter Partes Case No. 2049 is hereby DECLARED BARRED by res judicata and is hereby DISMISSED. Accordingly, Application Serial No. 45011 for trademark BARBIZON filed by Pribhdas J. Mirpuri is GIVEN DUE COURSE. SO ORDERED. 7 Private respondent questioned this decision before the Court of Appeals in CA-G.R. SP No. 28415. On April 30, 1993, the Court of Appeals reversed the Director of Patents finding that IPC No. 686 was not barred by judgment in IPC No. 2049 and ordered that the case be remanded to the Bureau of Patents for further proceedings, viz: WHEREFORE, the appealed Decision No. 92-13 dated June 18, 1992 of the Director of Patents in Inter Partes Case No. 2049 is hereby SET ASIDE; and the case is hereby remanded to the Bureau of Patents for further proceedings, in accordance with this pronouncement. No costs. 8 In a Resolution dated March 16, 1994, the Court of Appeals denied reconsideration of its decision. 9 Hence, this recourse. Before us, petitioner raises the following issues: 1. WHETHER OR NOT THE DECISION OF THE DIRECTOR OF PATENTS IN INTER PARTES CASE NO. 686 RENDERED ON JUNE 18, 1974, ANNEX C HEREOF, CONSTITUTED RES JUDICATA IN SO FAR AS THE CASE BEFORE THE DIRECTOR OF PATENTS IS CONCERNED; 2. WHETHER OR NOT THE DIRECTOR OF PATENTS CORRECTLY APPLIED THE PRINCIPLE OFRES JUDICATA IN DISMISSING PRIVATE RESPONDENT BARBIZON'S OPPOSITION TO PETITIONER'S APPLICATION FOR REGISTRATION FOR THE TRADEMARK BARBIZON, WHICH HAS SINCE RIPENED TO CERTIFICATE OF REGISTRATION NO. 53920 ON NOVEMBER 16, 1992; 3. WHETHER OR NOT THE REQUISITE THAT A "JUDGMENT ON THE MERITS" REQUIRED A "HEARING WHERE BOTH PARTIES ARE SUPPOSED TO ADDUCE EVIDENCE" AND WHETHER THE JOINT SUBMISSION OF THE PARTIES TO A CASE ON THE BASIS OF THEIR RESPECTIVE PLEADINGS WITHOUT PRESENTING TESTIMONIAL OR DOCUMENTARY EVIDENCE FALLS WITHIN THE MEANING OF "JUDGMENT ON THE MERITS" AS ONE OF THE REQUISITES TO CONSTITUTERES JUDICATA; 4. WHETHER A DECISION OF THE DEPARTMENT OF TRADE AND INDUSTRY CANCELLING PETITIONER'S FIRM NAME "BARBIZON INTERNATIONAL" AND WHICH DECISION IS STILL PENDING RECONSIDERATION NEVER OFFERED IN EVIDENCE BEFORE THE DIRECTOR OF PATENTS IN INTER PARTES CASE NO. 2049 HAS THE RIGHT TO DECIDE SUCH CANCELLATION NOT ON THE BASIS OF THE BUSINESS NAME LAW (AS IMPLEMENTED BY THE BUREAU OF DOMESTIC TRADE) BUT ON THE BASIS OF THE PARIS CONVENTION AND THE TRADEMARK LAW (R.A. 166) WHICH IS WITHIN THE ORIGINAL AND EXCLUSIVE JURISDICTION OF THE DIRECTOR OF PATENTS. 10 Before ruling on the issues of the case, there is need for a brief background on the function and historical development of trademarks and trademark law. A "trademark" is defined under R.A. 166, the Trademark Law, as including "any word, name, symbol, emblem, sign or device or any combination thereof adopted and used by a manufacturer or merchant to identify his goods and distinguish them from those manufactured, sold or dealt in by others. 11 This definition has been simplified in R.A. No. 8293, the Intellectual Property Code of the Philippines, which defines a "trademark" as "any visible sign capable of distinguishing goods." 12 In Philippine jurisprudence, the function of a trademark is to point out distinctly the origin or ownership of the goods to which it is affixed; to secure to him, who has been instrumental in bringing into the market a superior article of

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merchandise, the fruit of his industry and skill; to assure the public that they are procuring the genuine article; to prevent fraud and imposition; and to protect the manufacturer against substitution and sale of an inferior and different article as his product. 13 Modern authorities on trademark law view trademarks as performing three distinct functions: (1) they indicate origin or ownership of the articles to which they are attached; (2) they guarantee that those articles come up to a certain standard of quality; and (3) they advertise the articles they symbolize. 14 Symbols have been used to identify the ownership or origin of articles for several centuries. 15 As early as 5,000 B.C., markings on pottery have been found by archaeologists. Cave drawings in southwestern Europe show bison with symbols on their flanks. 16 Archaeological discoveries of ancient Greek and Roman inscriptions on sculptural works, paintings, vases, precious stones, glassworks, bricks, etc. reveal some features which are thought to be marks or symbols. These marks were affixed by the creator or maker of the article, or by public authorities as indicators for the payment of tax, for disclosing state monopoly, or devices for the settlement of accounts between an entrepreneur and his workmen. 17 In the Middle Ages, the use of many kinds of marks on a variety of goods was commonplace. Fifteenth century England saw the compulsory use of identifying marks in certain trades. There were the baker's mark on bread, bottlemaker's marks, smith's marks, tanner's marks, watermarks on paper, etc. 18 Every guild had its own mark and every master belonging to it had a special mark of his own. The marks were not trademarks but police marks compulsorily imposed by the sovereign to let the public know that the goods were not "foreign" goods smuggled into an area where the guild had a monopoly, as well as to aid in tracing defective work or poor craftsmanship to the artisan. 19 For a similar reason, merchants also used merchants' marks. Merchants dealt in goods acquired from many sources and the marks enabled them to identify and reclaim their goods upon recovery after shipwreck or piracy. 20 With constant use, the mark acquired popularity and became voluntarily adopted. It was not intended to create or continue monopoly but to give the customer an index or guarantee of quality. 21 It was in the late 18th century when the industrial revolution gave rise to mass production and distribution of consumer goods that the mark became an important instrumentality of trade and commerce. 22 By this time, trademarks did not merely identify the goods; they also indicated the goods to be of satisfactory quality, and thereby stimulated further purchases by the consuming public. 23 Eventually, they came to symbolize the goodwill and business reputation of the owner of the product and became a property right protected by law. 24 The common law developed the doctrine of trademarks and tradenames "to prevent a person from palming off his goods as another's, from getting another's business or injuring his reputation by unfair means, and, from defrauding the public." 25 Subsequently, England and the United States enacted national legislation on trademarks as part of the law regulating unfair trade. 26 It became the right of the trademark owner to exclude others from the use of his mark, or of a confusingly similar mark where confusion resulted in diversion of trade or financial injury. At the same time, the trademark served as a warning against the imitation or faking of products to prevent the imposition of fraud upon the public. 27 Today, the trademark is not merely a symbol of origin and goodwill; it is often the most effective agent for the actual creation and protection of goodwill. It imprints upon the public mind an anonymous and impersonal guaranty of satisfaction, creating a desire for further satisfaction. In other words, the mark actually sells the goods. 28 The mark has become the "silent salesman," the conduit through which direct contact between the trademark owner and the consumer is assured. It has invaded popular culture in ways never anticipated that it has become a more convincing selling point than even the quality of the article to which it refers. 29 In the last half century, the unparalleled growth of industry and the rapid development of communications technology have enabled trademarks, tradenames and other distinctive signs of a product to penetrate regions where the owner does not actually manufacture or sell the product itself. Goodwill is no longer confined to the territory of actual market penetration; it extends to zones where the marked article has been fixed in the public mind through advertising. 30 Whether in the print, broadcast or electronic communications medium, particularly on the Internet, 31 advertising has paved the way for growth and expansion of the product by creating and earning a reputation that crosses over borders, virtually turning the whole world into one vast marketplace. This is the mise-en-scene of the present controversy. Petitioner brings this action claiming that "Barbizon" products have been sold in the Philippines since 1970. Petitioner developed this market by working long hours and spending considerable sums of money on advertisements and promotion of the trademark and its products. Now, almost thirty years later, private respondent, a foreign corporation, "swaggers into the country like a conquering hero," usurps the trademark and invades petitioner's market. 32 Justice and fairness dictate that private respondent be prevented from appropriating what is not its own. Legally, at the same time, private respondent is barred from questioning petitioner's ownership of the trademark because of res judicata. 33 Literally, res judicata means a matter adjudged, a thing judicially acted upon or decided; a thing or matter settled by judgment. 34 In res judicata, the judgment in the first action is considered conclusive as to every matter offered and received therein, as to any other admissible matter which might have been offered for that purpose, and all other matters that could have been adjudged therein. 35 Res judicata is an absolute bar to a subsequent action for the same cause; and its requisites are: (a) the former judgment or order must be final; (b) the judgment or order must be one on the merits; (c) it must have been rendered by a court having jurisdiction over the subject matter and parties; (d) there must be between the first and second actions, identity of parties, of subject matter and of causes of action. 36 The Solicitor General, on behalf of respondent Director of Patents, has joined cause with petitioner. Both claim that all the four elements of res judicata have been complied with: that the judgment in IPC No. 686 was final and was rendered by the Director of Patents who had jurisdiction over the subject matter and parties; that the judgment in IPC No. 686 was on the merits; and that the lack of a hearing was immaterial because substantial issues were raised by the parties and passed upon by the Director of Patents. 37

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The decision in IPC No. 686 reads as follows: xxx xxx xxx. Neither party took testimony nor adduced documentary evidence. They submitted the case for decision based on the pleadings which, together with the pertinent records, have all been carefully considered. Accordingly, the only issue for my disposition is whether or not the herein opposer would probably be damaged by the registration of the trademark BARBIZON sought by the respondent-applicant on the ground that it so resembles the trademark BARBIZON allegedly used and owned by the former to be "likely to cause confusion, mistake or to deceive purchasers." On record, there can be no doubt that respondent-applicant's sought-to-be-registered trademark BARBIZON is similar, in fact obviously identical, to opposer's alleged trademark BARBIZON, in spelling and pronunciation. The only appreciable but very negligible difference lies in their respective appearances or manner of presentation. Respondent-applicant's trademark is in bold letters (set against a black background), while that of the opposer is offered in stylish script letters. It is opposer's assertion that its trademark BARBIZON has been used in trade or commerce in the Philippines prior to the date of application for the registration of the identical mark BARBIZON by the respondent-applicant. However, the allegation of facts in opposer's verified notice of opposition is devoid of such material information. In fact, a reading of the text of said verified opposition reveals an apparent, if not deliberate, omission of the date (or year) when opposer's alleged trademark BARBIZON was first used in trade in the Philippines (see par. No. 1, p. 2, Verified Notice of Opposition, Rec.). Thus, it cannot here and now be ascertained whether opposer's alleged use of the trademark BARBIZON could be prior to the use of the identical mark by the herein respondent-applicant, since the opposer attempted neither to substantiate its claim of use in local commerce with any proof or evidence. Instead, the opposer submitted the case for decision based merely on the pleadings. On the other hand, respondent-applicant asserted in her amended application for registration that she first used the trademark BARBIZON for brassiere (or "brasseire") and ladies underwear garments and panties as early as March 3, 1970. Be that as it may, there being no testimony taken as to said date of first use, respondent-applicant will be limited to the filing date, June 15, 1970, of her application as the date of first use (Rule 173, Rules of Practice in Trademark Cases). From the foregoing, I conclude that the opposer has not made out a case of probable damage by the registration of the respondent-applicant's mark BARBIZON. WHEREFORE, the opposition should be, as it is hereby, DISMISSED. Accordingly, Application Serial No. 19010, for the registration of the trademark BARBIZON of respondent Lolita R. Escobar, is given due course. 38 The decision in IPC No. 686 was a judgment on the merits and it was error for the Court of Appeals to rule that it was not. A judgment is on the merits when it determines the rights and liabilities of the parties based on the disclosed facts, irrespective of formal, technical or dilatory objections. 39 It is not necessary that a trial should have been conducted. If the court's judgment is general, and not based on any technical defect or objection, and the parties had a full legal opportunity to be heard on their respective claims and contentions, it is on the merits although there was no actual hearing or arguments on the facts of the case. 40 In the case at bar, the Director of Patents did not dismiss private respondent's opposition on a sheer technicality. Although no hearing was conducted, both parties filed their respective pleadings and were given opportunity to present evidence. They, however, waived their right to do so and submitted the case for decision based on their pleadings. The lack of evidence did not deter the Director of Patents from ruling on the case, particularly on the issue of prior use, which goes into the very substance of the relief sought by the parties. Since private respondent failed to prove prior use of its trademark, Escobar's claim of first use was upheld. The judgment in IPC No. 686 being on the merits, petitioner and the Solicitor General allege that IPC No. 686 and IPC No. 2049 also comply with the fourth requisite of res judicata, i.e., they involve the same parties and the same subject matter, and have identical causes of action. Undisputedly, IPC No. 686 and IPC No. 2049 involve the same parties and the same subject matter. Petitioner herein is the assignee of Escobar while private respondent is the same American corporation in the first case. The subject matter of both cases is the trademark "Barbizon." Private respondent counter-argues, however, that the two cases do not have identical causes of action. New causes of action were allegedly introduced in IPC No. 2049, such as the prior use and registration of the trademark in the United States and other countries worldwide, prior use in the Philippines, and the fraudulent registration of the mark in violation of Article 189 of the Revised Penal Code. Private respondent also cited protection of the trademark under the Convention of Paris for the Protection of Industrial Property, specifically Article 6 bis thereof, and the implementation of Article 6bis by two Memoranda dated November 20, 1980 and October 25, 1983 of the Minister of Trade and Industry to the Director of Patents, as well as Executive Order (E.O.) No. 913.

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The Convention of Paris for the Protection of Industrial Property, otherwise known as the Paris Convention, is a multilateral treaty that seeks to protect industrial property consisting of patents, utility models, industrial designs, trademarks, service marks, trade names and indications of source or appellations of origin, and at the same time aims to repress unfair competition. 41 The Convention is essentially a compact among various countries which, as members of the Union, have pledged to accord to citizens of the other member countries trademark and other rights comparable to those accorded their own citizens by their domestic laws for an effective protection against unfair competition. 42 In short, foreign nationals are to be given the same treatment in each of the member countries as that country makes available to its own citizens. 43 Nationals of the various member nations are thus assured of a certain minimum of international protection of their industrial property. 44 The Convention was first signed by eleven countries in Paris on March 20, 1883. 45 It underwent several revisions at Brussels in 1900, at Washington in 1911, at The Hague in 1925, at London in 1934, at Lisbon in 1958, 46 and at Stockholm in 1967. Both the Philippines and the United States of America, herein private respondent's country, are signatories to the Convention. The United States acceded on May 30, 1887 while the Philippines, through its Senate, concurred on May 10, 1965. 47 The Philippines' adhesion became effective on September 27, 1965, 48 and from this date, the country obligated itself to honor and enforce the provisions of the Convention. 49 In the case at bar, private respondent anchors its cause of action on the first paragraph of Article 6bis of the Paris Convention which reads as follows: Article 6bis (1) The countries of the Union undertake, either administratively if their legislation so permits, or at the request of an interested party, to refuse or to cancel the registration and to prohibit the use, of a trademark which constitutes a reproduction, an imitation, or a translation, liable to create confusion, of a mark considered by the competent authority of the country of registration or use to be well-known in that country as being already the mark of a person entitled to the benefits of this Convention and used for identical or similar goods. These provisions shall also apply when the essential part of the mark constitutes a reproduction of any such well-known mark or an imitation liable to create confusion therewith. (2) A period of at least five years from the date of registration shall be allowed for seeking the cancellation of such a mark. The countries of the Union may provide for a period within which the prohibition of use must be sought. (3) No time limit shall be fixed for seeking the cancellation or the prohibition of the use of marks registered or used in bad faith. 50 This Article governs protection of well-known trademarks. Under the first paragraph, each country of the Union bound itself to undertake to refuse or cancel the registration, and prohibit the use of a trademark which is a reproduction, imitation or translation, or any essential part of which trademark constitutes a reproduction, liable to create confusion, of a mark considered by the competent authority of the country where protection is sought, to be well-known in the country as being already the mark of a person entitled to the benefits of the Convention, and used for identical or similar goods. Art. 6bis was first introduced at The Hague in 1925 and amended in Lisbon in 1952. 51 It is a self-executing provision and does not require legislative enactment to give it effect in the member country. 52 It may be applied directly by the tribunals and officials of each member country by the mere publication or proclamation of the Convention, after its ratification according to the public law of each state and the order for its execution. 53 The essential requirement under Article 6bis is that the trademark to be protected must be "well-known" in the country where protection is sought. The power to determine whether a trademark is well-known lies in the "competent authority of the country of registration or use." This competent authority would be either the registering authority if it has the power to decide this, or the courts of the country in question if the issue comes before a court. 54 Pursuant to Article 6bis, on November 20, 1980, then Minister Luis Villafuerte of the Ministry of Trade issued a Memorandum to the Director of Patents. The Minister ordered the Director that: Pursuant to the Paris Convention for the Protection of Industrial Property to which the Philippines is a signatory, you are hereby directed to reject all pending applications for Philippine registration of signature and other world-famous trademarks by applicants other than its original owners or users. The conflicting claims over internationally known trademarks involve such name brands as Lacoste, Jordache, Vanderbilt, Sasson, Fila, Pierre Cardin, Gucci, Christian Dior, Oscar de la Renta, Calvin Klein, Givenchy, Ralph Lauren, Geoffrey Beene, Lanvin and Ted Lapidus.

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It is further directed that, in cases where warranted, Philippine registrants of such trademarks should be asked to surrender their certificates of registration, if any, to avoid suits for damages and other legal action by the trademarks' foreign or local owners or original users. You are also required to submit to the undersigned a progress report on the matter. For immediate compliance. 55 Three years later, on October 25, 1983, then Minister Roberto Ongpin issued another Memorandum to the Director of Patents, viz: Pursuant to Executive Order No. 913 dated 7 October 1983 which strengthens the rule-making and adjudicatory powers of the Minister of Trade and Industry and provides inter alia, that "such rule-making and adjudicatory powers should be revitalized in order that the Minister of Trade and Industry can . . . apply more swift and effective solutions and remedies to old and new problems . . . such as infringement of internationally-known tradenames and trademarks . . ." and in view of the decision of the Intermediate Appellate Court in the case of LA CHEMISE LACOSTE, S.A., versus RAM SADWHANI [AC-G.R. SP NO. 13359 (17) June 1983] 56 which affirms the validity of the MEMORANDUM of then Minister Luis R. Villafuerte dated 20 November 1980 confirming our obligations under the PARIS CONVENTION FOR THE PROTECTION OF INDUSTRIAL PROPERTY to which the Republic of the Philippines is a signatory, you are hereby directed to implement measures necessary to effect compliance with our obligations under said Convention in general, and, more specifically, to honor our commitment under Section 6bis 57 thereof, as follows: 1. Whether the trademark under consideration is well-known in the Philippines or is a mark already belonging to a person entitled to the benefits of the CONVENTION, this should be established, pursuant to Philippine Patent Office procedures in inter partesand ex parte cases, according to any of the following criteria or any combination thereof: (a) a declaration by the Minister of Trade and Industry that the trademark being considered is already well-known in the Philippines such that permission for its use by other than its original owner will constitute a reproduction, imitation, translation or other infringement; (b) that the trademark is used in commerce internationally, supported by proof that goods bearing the trademark are sold on an international scale, advertisements, the establishment of factories, sales offices, distributorships, and the like, in different countries, including volume or other measure of international trade and commerce; (c) that the trademark is duly registered in the industrial property office(s) of another country or countries, taking into consideration the date of such registration; (d) that the trademark has long been established and obtained goodwill and international consumer recognition as belonging to one owner or source; (e) that the trademark actually belongs to a party claiming ownership and has the right to registration under the provisions of the aforestated PARIS CONVENTION. 2. The word trademark, as used in this MEMORANDUM, shall include tradenames, service marks, logos, signs, emblems, insignia or other similar devices used for identification and recognition by consumers. 3. The Philippine Patent Office shall refuse all applications for, or cancel the registration of, trademarks which constitute a reproduction, translation or imitation of a trademark owned by a person, natural or corporate, who is a citizen of a country signatory to the PARIS CONVENTION FOR THE PROTECTION OF INDUSTRIAL PROPERTY. 4. The Philippine Patent Office shall give due course to the Opposition in cases already or hereafter filed against the registration of trademarks entitled to protection of Section 6 bis of said PARIS CONVENTION as outlined above, by remanding applications filed by one not entitled to such protection for final disallowance by the Examination Division.

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5. All pending applications for Philippine registration of signature and other world-famous trademarks filed by applicants other than their original owners or users shall be rejected forthwith. Where such applicants have already obtained registration contrary to the abovementioned PARIS CONVENTION and/or Philippine Law, they shall be directed to surrender their Certificates of Registration to the Philippine Patent Office for immediate cancellation proceedings. xxx xxx xxx. 58 In the Villafuerte Memorandum, the Minister of Trade instructed the Director of Patents to reject all pending applications for Philippine registration of signature and other world-famous trademarks by applicants other than their original owners or users. The Minister enumerated several internationally-known trademarks and ordered the Director of Patents to require Philippine registrants of such marks to surrender their certificates of registration. In the Ongpin Memorandum, the Minister of Trade and Industry did not enumerate well-known trademarks but laid down guidelines for the Director of Patents to observe in determining whether a trademark is entitled to protection as a well-known mark in the Philippines under Article 6bis of the Paris Convention. This was to be established through Philippine Patent Office procedures in inter partes and ex parte cases pursuant to the criteria enumerated therein. The Philippine Patent Office was ordered to refuse applications for, or cancel the registration of, trademarks which constitute a reproduction, translation or imitation of a trademark owned by a person who is a citizen of a member of the Union. All pending applications for registration of world-famous trademarks by persons other than their original owners were to be rejected forthwith. The Ongpin Memorandum was issued pursuant to Executive Order No. 913 dated October 7, 1983 of then President Marcos which strengthened the rule-making and adjudicatory powers of the Minister of Trade and Industry for the effective protection of consumers and the application of swift solutions to problems in trade and industry. 59 Both the Villafuerte and Ongpin Memoranda were sustained by the Supreme Court in the 1984 landmark case of La Chemise Lacoste, S.A. v. Fernandez. 60 This court ruled therein that under the provisions of Article 6bis of the Paris Convention, the Minister of Trade and Industry was the "competent authority" to determine whether a trademark is well-known in this country. 61 The Villafuerte Memorandum was issued in 1980, i.e., fifteen (15) years after the adoption of the Paris Convention in 1965. In the case at bar, the first inter partes case, IPC No. 686, was filed in 1970, before the Villafuerte Memorandum but five (5) years after the effectivity of the Paris Convention. Article 6bis was already in effect five years before the first case was instituted. Private respondent, however, did not cite the protection of Article 6bis, neither did it mention the Paris Convention at all. It was only in 1981 when IPC No. 2049 was instituted that the Paris Convention and the Villafuerte Memorandum, and, during the pendency of the case, the 1983 Ongpin Memorandum were invoked by private respondent. The Solicitor General argues that the issue of whether the protection of Article 6 bis of the Convention and the two Memoranda is barred by res judicata has already been answered in Wolverine Worldwide, Inc. v. Court of Appeals. 62 In this case, petitioner Wolverine, a foreign corporation, filed with the Philippine Patent Office a petition for cancellation of the registration certificate of private respondent, a Filipino citizen, for the trademark "Hush Puppies" and "Dog Device." Petitioner alleged that it was the registrant of the internationally-known trademark in the United States and other countries, and cited protection under the Paris Convention and the Ongpin Memorandum. The petition was dismissed by the Patent Office on the ground of res judicata. It was found that in 1973 petitioner's predecessor-in-interest filed two petitions for cancellation of the same trademark against respondent's predecessor-in-interest. The Patent Office dismissed the petitions, ordered the cancellation of registration of petitioner's trademark, and gave due course to respondent's application for registration. This decision was sustained by the Court of Appeals, which decision was not elevated to us and became final and executory. 63 Wolverine claimed that while its previous petitions were filed under R.A. No. 166, the Trademark Law, its subsequent petition was based on a new cause of action, i.e., the Ongpin Memorandum and E.O. No. 913 issued in 1983, after finality of the previous decision. We held that the said Memorandum and E.O. did not grant a new cause of action because it did "not amend the Trademark Law," . . . "nor did it indicate a new policy with respect to the registration in the Philippines of world-famous trademarks." 64 This conclusion was based on the finding that Wolverine's two previous petitions and subsequent petition dealt with the same issue of ownership of the trademark. 65 In other words, since the first and second cases involved the same issue of ownership, then the first case was a bar to the second case. In the instant case, the issue of ownership of the trademark "Barbizon" was not raised in IPC No. 686. Private respondent's opposition therein was merely anchored on: (a) "confusing similarity" of its trademark with that of Escobar's; (b) that the registration of Escobar's similar trademark will cause damage to private respondent's business reputation and goodwill; and

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(c) that Escobar's use of the trademark amounts to an unlawful appropriation of a mark previously used in the Philippines which act is penalized under Section 4 (d) of the Trademark Law. In IPC No. 2049, private respondent's opposition set forth several issues summarized as follows: (a) as early as 1933, it adopted the word "BARBIZON" as trademark on its products such as robes, pajamas, lingerie, nightgowns and slips; (b) that the trademark "BARBIZON" was registered with the United States Patent Office in 1934 and 1949; and that variations of the same trademark, i.e., "BARBIZON" with Bee design and "BARBIZON" with the representation of a woman were also registered with the U.S. Patent Office in 1961 and 1976; (c) that these marks have been in use in the Philippines and in many countries all over the world for over forty years. "Barbizon" products have been advertised in international publications and the marks registered in 36 countries worldwide; (d) Escobar's registration of the similar trademark "BARBIZON" in 1974 was based on fraud; and this fraudulent registration was cancelled in 1979, stripping Escobar of whatsoever right she had to the said mark; (e) Private respondent's trademark is entitled to protection as a well-known mark under Article 6bis of the Paris Convention, Executive Order No. 913, and the two Memoranda dated November 20, 1980 and October 25, 1983 of the Minister of Trade and Industry to the Director of Patents; (f) Escobar's trademark is identical to private respondent's and its use on the same class of goods as the latter's amounts to a violation of the Trademark Law and Article 189 of the Revised Penal Code. IPC No. 2049 raised the issue of ownership of the trademark, the first registration and use of the trademark in the United States and other countries, and the international recognition and reputation of the trademark established by extensive use and advertisement of private respondent's products for over forty years here and abroad. These are different from the issues of confusing similarity and damage in IPC No. 686. The issue of prior use may have been raised in IPC No. 686 but this claim was limited to prior use in the Philippines only. Prior use in IPC No. 2049 stems from private respondent's claim as originator of the word and symbol "Barbizon," 66 as the first and registered user of the mark attached to its products which have been sold and advertised worldwide for a considerable number of years prior to petitioner's first application for registration of her trademark in the Philippines. Indeed, these are substantial allegations that raised new issues and necessarily gave private respondent a new cause of action. Res judicata does not apply to rights, claims or demands, although growing out of the same subject matter, which constitute separate or distinct causes of action and were not put in issue in the former action. 67 Respondent corporation also introduced in the second case a fact that did not exist at the time the first case was filed and terminated. The cancellation of petitioner's certificate of registration for failure to file the affidavit of use arose only after IPC No. 686. It did not and could not have occurred in the first case, and this gave respondent another cause to oppose the second application. Res judicata extends only to facts and conditions as they existed at the time judgment was rendered and to the legal rights and relations of the parties fixed by the facts so determined. 68 When new facts or conditions intervene before the second suit, furnishing a new basis for the claims and defenses of the parties, the issues are no longer the same, and the former judgment cannot be pleaded as a bar to the subsequent action. 69 It is also noted that the oppositions in the first and second cases are based on different laws. The opposition in IPC No. 686 was based on specific provisions of the Trademark Law, i.e., Section 4 (d) 70 on confusing similarity of trademarks and Section 8 71 on the requisite damage to file an opposition to a petition for registration. The opposition in IPC No. 2049 invoked the Paris Convention, particularly Article 6 bis thereof, E.O. No. 913 and the two Memoranda of the Minister of Trade and Industry. This opposition also invoked Article 189 of the Revised Penal Code which is a statute totally different from the Trademark Law. 72 Causes of action which are distinct and independent from each other, although arising out of the same contract, transaction, or state of facts, may be sued on separately, recovery on one being no bar to subsequent actions on others. 73 The mere fact that the same relief is sought in the subsequent action will not render the judgment in the prior action operative as res judicata, such as where the two actions are based on different statutes. 74 Res judicatatherefore does not apply to the instant case and respondent Court of Appeals did not err in so ruling. Intellectual and industrial property rights cases are not simple property cases. Trademarks deal with the psychological function of symbols and the effect of these symbols on the public at large. 75 Trademarks play a significant role in communication, commerce and trade, and serve valuable and interrelated business functions, both nationally and internationally. For this reason, all agreements concerning industrial property, like those on trademarks and tradenames, are intimately connected with economic development. 76 Industrial property encourages investments in new ideas and inventions and stimulates creative efforts for the satisfaction of human needs. They speed up transfer of technology and industrialization, and thereby bring about social and economic progress. 77 These advantages have been acknowledged by the Philippine government itself. The Intellectual Property Code of the Philippines declares that "an effective intellectual and industrial property system is vital to the development of domestic and

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creative activity, facilitates transfer of technology, it attracts foreign investments, and ensures market access for our products." 78 The Intellectual Property Code took effect on January 1, 1998 and by its express provision, 79 repealed the Trademark Law, 80 the Patent Law, 81 Articles 188 and 189 of the Revised Penal Code, the Decree on Intellectual Property, 82 and the Decree on Compulsory Reprinting of Foreign Textbooks. 83 The Code was enacted to strengthen the intellectual and industrial property system in the Philippines as mandated by the country's accession to the Agreement Establishing the World Trade Organization (WTO). 84 The WTO is a common institutional framework for the conduct of trade relations among its members in matters related to the multilateral and plurilateral trade agreements annexed to the WTO Agreement. 85 The WTO framework ensures a "single undertaking approach" to the administration and operation of all agreements and arrangements attached to the WTO Agreement. Among those annexed is the Agreement on Trade-Related Aspects of Intellectual Property Rights or TRIPs. 86 Members to this Agreement "desire to reduce distortions and impediments to international trade, taking into account the need to promote effective and adequate protection of intellectual property rights, and to ensure that measures and procedures to enforce intellectual property rights do not themselves become barriers to legitimate trade." To fulfill these objectives, the members have agreed to adhere to minimum standards of protection set by several Conventions. 87 These Conventions are: the Berne Convention for the Protection of Literary and Artistic Works (1971), the Rome Convention or the International Convention for the Protection of Performers, Producers of Phonograms and Broadcasting Organisations, the Treaty on Intellectual Property in Respect of Integrated Circuits, and the Paris Convention (1967), as revised in Stockholm on July 14, 1967. 88 A major proportion of international trade depends on the protection of intellectual property rights. 89 Since the late 1970's, the unauthorized counterfeiting of industrial property and trademarked products has had a considerable adverse impact on domestic and international trade revenues. 90 The TRIPs Agreement seeks to grant adequate protection of intellectual property rights by creating a favorable economic environment to encourage the inflow of foreign investments, and strengthening the multi-lateral trading system to bring about economic, cultural and technological independence. 91 The Philippines and the United States of America have acceded to the WTO Agreement. This Agreement has revolutionized international business and economic relations among states, and has propelled the world towards trade liberalization and economic globalization. 92 Protectionism and isolationism belong to the past. Trade is no longer confined to a bilateral system. There is now "a new era of global economic cooperation, reflecting the widespread desire to operate in a fairer and more open multilateral trading system." 93 Conformably, the State must reaffirm its commitment to the global community and take part in evolving a new international economic order at the dawn of the new millenium. IN VIEW WHEREOF, the petition is denied and the Decision and Resolution of the Court of Appeals in CA-G.R. SP No. 28415 are affirmed. SO ORDERED. BERRIS AGRICULTURAL CO., INC., Petitioner, G.R. No. 183404 Present: VELASCO, JR., J.,* NACHURA,** Acting Chairperson, LEONARDO-DE CASTRO,*** BRION,**** and MENDOZA, JJ. Promulgated: Respondent. October 13, 2010 x------------------------------------------------------------------------------------x

- versus -

NORVY ABYADANG,

DECISION

NACHURA, J.:

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This petition for review[1] on certiorari under Rule 45 of the Rules of Court seeks the reversal of the Decision dated April 14, 2008[2] and the Resolution dated June 18, 2008[3] of the Court of Appeals (CA) in CA-G.R. SP No. 99928.

The antecedents

On January 16, 2004, respondent Norvy A. Abyadang (Abyadang), proprietor of NS Northern Organic Fertilizer, with address at No. 43 Lower QM, Baguio City, filed with the Intellectual Property Office (IPO) a trademark application for the mark NS D -10 PLUS for use in connection with Fungicide (Class 5) with active ingredient 80% Mancozeb. The application, under Application Serial No. 4-2004-00450, was given due course and was published in the IPO e-Gazette for opposition on July 28, 2005.

On August 17, 2005, petitioner Berris Agricultural Co., Inc. (Berris), with business address in Barangay Masiit, Calauan, Laguna, filed with the IPO Bureau of Legal Affairs (IPO-BLA) a Verified Notice of Opposition[4] against the mark under application allegedly because NS D-10 PLUS is similar and/or confusingly similar to its registered trademark D-10 80 WP, also used for Fungicide (Class 5) with active ingredient 80% Mancozeb. The opposition was docketed as IPC No. 14-2005-00099.

After an exchange of pleadings, on April 28, 2006, Director Estrellita Beltran-Abelardo (Director Abelardo) of the IPO-BLA issued Decision No. 2006-24[5](BLA decision), the dispositive portion of which reads WHEREFORE, viewed in the light of all the foregoing, this Bureau finds and so holds that Respondent-Applicants mark NS D-10 PLUS is confusingly similar to the Opposers mark and as su ch, the opposition is hereby SUSTAINED. Consequently, trademark application bearing Serial No. 4-2004-00450 for the mark NS D-10 PLUS filed on January 16, 2004 by Norvy A. Ab[yada]ng covering the goods fungicide under Class 5 of the International Classification of goods is, as it is hereby, REJECTED. Let the filewrapper of the trademark NS D-10 PLUS subject matter under consideration be forwarded to the Administrative, Financial and Human Resources Development Services Bureau (AFHRDSB) for appropriate action in accordance with this Order with a copy to be furnished the Bureau of Trademark (BOT) for information and to update its records. SO ORDERED.[6]

Abyadang filed a motion for reconsideration, and Berris, in turn, filed its opposition to the motion.

On August 2, 2006, Director Abelardo issued Resolution No. 2006-09(D)[7] (BLA resolution), denying the motion for reconsideration and disposing as follows IN VIEW OF THE FOREGOING, the Motion for Reconsideration filed by the Respondent-Applicant is hereby DENIED FOR LACK OF MERIT. Consequently, Decision No. 2006-24 dated April 28, 2006 STANDS. Let the filewrapper of the trademark NS D-10 PLUS subject matter under consideration be forwarded to the Bureau of Trademarks for appropriate action in accordance with this Resolution. SO ORDERED.[8]

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Aggrieved, Abyadang filed an appeal on August 22, 2006 with the Office of the Director General, Intellectual Property Philippines (IPPDG), docketed as Appeal No. 14-06-13.

With the filing of the parties respective memoranda, Director General Adrian S. Cristobal, Jr. of the IPPDG rendered a decis ion dated July 20, 2007,[9] ruling as follows Wherefore, premises considered[,] the appeal is hereby DENIED. Accordingly, the appealed Decision of the Director is hereby AFFIRMED. Let a copy of this Decision as well as the trademark application and records be furnished and returned to the Director of Bureau of Legal Affairs for appropriate action. Further, let also the Directors of the Bureau of Trademarks, the Administrative, Financial and Human Resources Development Services Bureau, and the library of the Documentation, Information and Technology Transfer Bureau be furnished a copy of this Decision for information, guidance, and records purposes. SO ORDERED.[10]

Undeterred, Abyadang filed a petition for review[11] before the CA.

In its Decision dated April 14, 2008, the CA reversed the IPPDG decision. It held In sum, the petition should be granted due to the following reasons: 1) petitioners mark NS D-10 PLUS is not confusingly similar with respondents trademark D-10 80 WP; 2) respondent failed to establish its ownership of the mark D10 80 WP and 3) respondents trademark registration for D-10 80 WP may be cancelled in the present case to avoid multiplicity of suits. WHEREFORE, the petition is GRANTED. The decision dated July 20, 2007 of the IPO Director General in Appeal No. 14-06-13 (IPC No. 14-2005-00099) is REVERSEDand SET ASIDE, and a new one is entered giving due course to petitioners application for registration of the mark NS D-10 PLUS, and canceling respondents trademark registration for D10 80 WP. SO ORDERED.[12]

Berris filed a Motion for Reconsideration, but in its June 18, 2008 Resolution, the CA denied the motion for lack of merit. Hence, this petition anchored on the following arguments I. The Honorable Court of Appeals finding that there exists no confusing similarity between Petitioners and respondents marks is based on misapprehension of facts, surmise and conjecture and not in accord with the Intellectual Property Code and applicable Decisions of this Honorable Court [Supreme Court]. The Honorable Court of Appeals Decision reversing and setting aside the technical findings of the Intellectual Property Office even without a finding or, at the very least, an allegation of grave abuse of discretion on the part of said agency is not in accord with law and earlier pronouncements of this Honorable Court [Supreme Court]. The Honorable Court of Appeals Decision ordering the cancellation of herein Petitioners duly registered and validly existing trademark in the absence of a properly filed Petition for Cancellation before the Intellectual Property Office is not in accord with the Intellectual Property Code and applicable Decisions of this Honorable Court [Supreme Court]. [13]

II.

III.

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The basic law on trademark, infringement, and unfair competition is Republic Act (R.A.) No. 8293 [14] (Intellectual Property Code of the Philippines), specifically Sections 121 to 170 thereof. It took effect on January 1, 1998. Prior to its effectivity, the applicable law was R.A. No. 166,[15] as amended.

Interestingly, R.A. No. 8293 did not expressly repeal in its entirety R.A. No. 166, but merely provided in Section 239.1 [16] that Acts and parts of Acts inconsistent with it were repealed. In other words, only in the instances where a substantial and irreconcilable conflict is found between the provisions of R.A. No. 8293 and of R.A. No. 166 would the provisions of the latter be deemed repealed.

R.A. No. 8293 defines a mark as any visible sign capable of distinguishing the goods (trademark) or services (service mark) of an enterprise and shall include a stamped or marked container of goods. [17] It also defines a collective mark as any visible sign designated as such in the application for registration and capable of distinguishing the origin or any other common characteristic, including the quality of goods or services of different enterprises which use the sign under the control of the registered owner of the collective mark. [18]

On the other hand, R.A. No. 166 defines a trademark as 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 another.[19] A trademark, being a special property, is afforded protection by law. But for one to enjoy this legal protection, legal protection ownership of the trademark should rightly be established.

The ownership of a trademark is acquired by its registration and its actual use by the manufacturer or distributor of the goods made available to the purchasing public. Section 122[20] of R.A. No. 8293 provides that the rights in a mark shall be acquired by means of its valid registration with the IPO. A certificate of registration of a mark, once issued, constitutes prima facie evidence of the validity of the registration, of the registrants ownership of the mark, and of the registrants exclusive right to use the same in connection with the goods or services and those that are related thereto specified in the certificate.[21] R.A. No. 8293, however, requires the applicant for registration or the registrant to file a declaration of actual use (DAU) of the mark, with evidence to that effect, within three (3) years from the filing of the application for registration; otherwise, the application shall be refused or the mark shall be removed from the register. [22] In other words, the prima faciepresumption brought about by the registration of a mark may be challenged and overcome, in an appropriate action, by proof of the nullity of the registration or of non-use of the mark, except when excused.[23] Moreover, the presumption may likewise be defeated by evidence of prior use by another person, i.e., it will controvert a claim of legal appropriation or of ownership based on registration by a subsequent user. This is because a trademark is a creation of use and belongs to one who first used it in trade or commerce.[24]

The determination of priority of use of a mark is a question of fact. Adoption of the mark alone does not suffice. One may make advertisements, issue circulars, distribute price lists on certain goods, but these alone will not inure to the claim of ownership of the mark until the goods bearing the mark are sold to the public in the market. Accordingly, receipts, sales invoices, and testimonies of witnesses as customers, or orders of buyers, best prove the actual use of a mark in trade and commerce during a certain period of time.[25] In the instant case, both parties have submitted proof to support their claim of ownership of their respective trademarks.

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Culled from the records, Berris, as oppositor to Abyadangs application for registration of his trademark, presented the foll owing evidence: (1) its trademark application dated November 29, 2002 [26] with Application No. 4-2002-0010272; (2) its IPO certificate of registration dated October 25, 2004,[27] with Registration No. 4-2002-010272 and July 8, 2004 as the date of registration; (3) a photocopy of its packaging [28] bearing the mark D-10 80 WP; (4) photocopies of its sales invoices and official receipts;[29] and (5) its notarized DAU dated April 23, 2003,[30] stating that the mark was first used on June 20, 2002, and indicating that, as proof of actual use, copies of official receipts or sales invoices of goods using the mark were attached as Annex B.

On the other hand, Abyadangs proofs consisted of the following: (1) a photocopy of the packaging [31] for his marketed fungicide bearing mark NS D-10 PLUS; (2) Abyadangs Affidavit dated February 14, 2006, [32] stating among others that the mark NS D-10 PLUS was his own creation derived from: N for Norvy, his name; S for Soledad, his wifes name; D the first letter for December, his birth month; 10 for October, the 10th month of the year, the month of his business name registration; and PLUS to connote superior quality; that when he applied for registration, there was nobody applying for a mark similar to NS D-10 PLUS; that he did not know of the existence of Berris or any of its products; that D -10 could not have been associated with Berris because the latter never engaged in any commercial activity to sell D-10 80 WP fungicide in the local market; and that he could not have copied Berris mark because he registered his packaging with the Fertilizer and Pesticide Authority (FPA) ahead of Berris; (3) Certification dated December 19, 2005[33] issued by the FPA, stating that NS D-10 PLUS is owned and distributed by NS Northern Organic Fertilizer, registered with the FPA since May 26, 2003, and had been in the market since July 30, 2003; (4) Certification dated October 11, 2005[34] issued by the FPA, stating that, per monitoring among dealers in Region I and in the Cordillera Administrative Region registered with its office, the Regional Officer neither encountered the fungicide with mark D -10 80 WP nor did the FPA provincial officers from the same area receive any report as to the presence or sale of Berris product; (5) Certification dated March 14, 2006 [35] issued by the FPA, certifying that all pesticides must be registered with the said office pursuant to Section 9[36] of Presidential Decree (P.D.) No. 1144[37] and Section 1, Article II of FPA Rules and Regulations No. 1, Series of 1977; (6) Certification dated March 16, 2006 [38] issued by the FPA, certifying that the pesticide D-10 80 WP was registered by Berris on November 12, 2004; and (7) receipts from Sunrise Farm Supply [39] in La Trinidad, Benguet of the sale of Abyadangs goods referred to as D-10 and D-10+.

Based on their proffered pieces of evidence, both Berris and Abyadang claim to be the prior user of their respective marks.

We rule in favor of Berris.

Berris was able to establish that it was using its mark D-10 80 WP since June 20, 2002, even before it filed for its registration with the IPO on November 29, 2002, as shown by its DAU which was under oath and notarized, bearing the stamp of the Bureau of Trademarks of the IPO on April 25, 2003,[40] and which stated that it had an attachment as Annex B sales invoices and official receipts of goods bearing the mark. Indeed, the DAU, being a notarized document, especially when received in due course by the IPO, is evidence of the facts it stated and has the presumption of regularity, entitled to full faith and credit upon its face. Thus, the burden of proof to overcome the presumption of authenticity and due execution lies on the party contesting it, and the rebutting evidence should be clear, strong, and convincing as to preclude all controversy as to the falsity of the

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certificate.[41] What is more, the DAU is buttressed by the Certification dated April 21, 2006 [42]issued by the Bureau of Trademarks that Berris mark is still valid and existing.

Hence, we cannot subscribe to the contention of Abyadang that Berris DAU is fraudulent based only on his assumption that Ber ris could not have legally used the mark in the sale of its goods way back in June 2002 because it registered the product with the FPA only on November 12, 2004. As correctly held by the IPPDG in its decision on Abyadangs appeal, the question of whether or not Berris violated P.D. No. 1144, because it sold its product without prior registration with the FPA, is a distinct and separate matter from the jurisdiction and concern of the IPO. Thus, even a determination of violation by Berris of P.D. No. 1144 would not controvert the fact that it did submit evidence that it had used the mark D-10 80 WP earlier than its FPA registration in 2004.

Furthermore, even the FPA Certification dated October 11, 2005, stating that the office had neither encountered nor received reports about the sale of the fungicide D-10 80 WP within Region I and the Cordillera Administrative Region, could not negate the fact that Berris was selling its product using that mark in 2002, especially considering that it first traded its goods in Calauan, Laguna, where its business office is located, as stated in the DAU.

Therefore, Berris, as prior user and prior registrant, is the owner of the mark D -10 80 WP. As such, Berris has in its favor the rights conferred by Section 147 of R.A. No. 8293, which provides Sec. 147. Rights Conferred. 147.1. The owner of a registered mark shall have the exclusive right to prevent all third parties not having the owners consent from using in the course of trade identical or similar signs or containers for goods or services which are identical or similar to those in respect of which the trademark is registered where such use would result in a likelihood of confusion. In case of the use of an identical sign for identical goods or services, a likelihood of confusion shall be presumed. 147.2. The exclusive right of the owner of a well-known mark defined in Subsection 123.1(e) which is registered in the Philippines, shall extend to goods and services which are not similar to those in respect of which the mark is registered: Provided, That use of that mark in relation to those goods or services would indicate a connection between those goods or services and the owner of the registered mark: Provided, further, That the interests of the owner of the registered mark are likely to be damaged by such use.

Now, we confront the question, Is Abyadangs mark NS D-10 PLUS confusingly similar to that of Berris D-10 80 WP such that the latter can rightfully prevent the IPO registration of the former? We answer in the affirmative.

According to Section 123.1(d) of R.A. No. 8293, a mark cannot be registered if it is identical with a registered mark belonging to a different proprietor with an earlier filing or priority date, with respect to: (1) the same goods or services; (2) closely related goods or services; or (3) near resemblance of such mark as to likely deceive or 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,

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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. [43]

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.[44]

Comparing Berris mark D-10 80 WP with Abyadangs mark NS D-10 PLUS, as appearing on their respective packages, one cannot but notice that both have a common component which is D-10. On Berris package, the D-10 is written with a bigger font than the 80 WP. Admittedly, the D-10 is the dominant feature of the mark. The D-10, being at the beginning of the mark, is what is most remembered of it. Although, it appears in Berris certificate of registration in the same font size as the 80 WP, its dominancy in the D -10 80 WP mark stands since the difference in the form does not alter its distinctive character. [45]

Applying the Dominancy Test, it cannot be gainsaid that Abyadangs NS D-10 PLUS is similar to Berris D-10 80 WP, that confusion or mistake is more likely to occur. Undeniably, both marks pertain to the same type of goods fungicide with 80% Mancozeb as an active ingredient and used for the same group of fruits, crops, vegetables, and ornamental plants, using the same dosage and manner of application. They also belong to the same classification of goods under R.A. No. 8293. Both depictions of D-10, as found in both marks, are similar in size, such that this portion is what catches the eye of the purchaser. Undeniably, the likelihood of confusion is present.

This likelihood of confusion and mistake is made more manifest when the Holistic Test is applied, taking into consideration the packaging, for both use the same type of material (foil type) and have identical color schemes (red, green, and white); and the marks are both predominantly red in color, with the same phrase BROAD SPECTRUM FUNGICIDE written underneath.

Considering these striking similarities, predominantly the D-10, the buyers of both products, mainly farmers, may be misled into thinking that NS D-10 PLUS could be an upgraded formulation of the D-10 80 WP.

Moreover, notwithstanding the finding of the IPPDG that the D-10 is a fanciful component of the trademark, created for the sole purpose of functioning as a trademark, and does not give the name, quality, or description of the product for which it is used, nor does it describe the place of origin, such that the degree of exclusiveness given to the mark is closely restricted, [46] and considering its challenge by Abyadang with respect to the meaning he has given to it, what remains is the fact that Berris is the owner of the mark D -10 80 WP, inclusive of its dominant feature D-10, as established by its prior use, and prior registration with the IPO. Therefore, Berris properly opposed and the IPO correctly rejected Abyadangs application for registration of the mark NS D-10 PLUS.

Verily, 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

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on these goods.[47] On this matter of particular concern, administrative agencies, such as the IPO, by reason of their special knowledge and expertise over matters falling under their jurisdiction, are in a better position to pass judgment thereon. Thus, their findings of fact in that regard are generally accorded great respect, if not finality by the courts, as long as they are supported by substantial evidence, even if such evidence might not be overwhelming or even preponderant. It is not the task of the appellate court to weigh once more the evidence submitted before the administrative body and to substitute its own judgment for that of the administrative agency in respect to sufficiency of evidence.[48]

Inasmuch as the ownership of the mark D-10 80 WP fittingly belongs to Berris, and because the same should not have been cancelled by the CA, we consider it proper not to belabor anymore the issue of whether cancellation of a registered mark may be done absent a petition for cancellation.

WHEREFORE, the petition is GRANTED. The assailed Decision dated April 14, 2008 and Resolution dated June 18, 2008 of the Court of Appeals in CA-G.R. SP No. 99928 are REVERSED and SET ASIDE. Accordingly, the Decision No. 2006-24 dated April 28, 2006 and the Resolution No. 2006-09(D) dated August 2, 2006 in IPC No. 14-2005-00099, and the Decision dated July 20, 2007 in Appeal No. 14-06-13 are REINSTATED. Costs against respondent.

SO ORDERED. COFFEE PARTNERS, INC., Petitioner, G.R. No. 169504 Present: CARPIO, J., Chairperson, VELASCO, JR.,* DEL CASTILLO, ABAD, and PEREZ, JJ.

- versus -

SAN FRANCISCO COFFEE & Promulgated: ROASTERY, INC., Respondent. March 3, 2010 x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - x

DECISION

CARPIO, J.:

The Case

This is a petition for review[1] of the 15 June 2005 Decision[2] and the SP

1 September 2005 Resolution[3] of the Court of Appeals in CA-G.R.

No. 80396. In its 15 June 2005 Decision, the Court of Appeals set aside the 22 October 2003 Decision [4] of the Office of the Director General-

Intellectual Property Office and reinstated the 14 August 2002 Decision [5] of the Bureau of Legal Affairs-Intellectual Property Office. In its 1 September 2005 Resolution, the Court of Appeals denied petitioners motion for reconsideration and respondents motion for pa rtial reconsideration.

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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 agreement[6] 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. Responden t had since built a customer base that included Figaro Company, Tagaytay Highlands, Fat Willys, 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, petitioners 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. Peti tioner maintained its mark could not be confused with respondents trade name because of the notable distinctions in their appearances. Petitioner a rgued 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 f ormer 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 petitioners trademark infringed on respondents 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 petitioners 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 po rtion of

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respondents trade name and petitioners 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 respondents 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 respondents claim of moral damages, but granted its claim of attorneys 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 GeneralIntellectual Property Office

In its 22 October 2003 Decision, the ODG-IPO reversed the BLA-IPO. It ruled that petitioners 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 respondents claim for actual damages and retained the award of attorneys fees. In its 1 September 2005 Resolution, the Court of Appeals denied petitioners motion for reconsideration and respondents motion for partial reconsideration.

The Issue

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

The Courts Ruling

The petition has no merit.

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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 respondents registration of its business name with the D TI 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 respondents 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 respondents 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 petitioners trademark is confusingly similar to respondents trade name. Respondent stresses ordinarily prudent consumers are likely to be misled about the source, affiliation, or sponsorship of petitioners 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 the same need not be registered; Property Office; however, in infringement of trade name,

(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

71

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. 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, PETITIONERS SAN FRANCISCO COFFEE TRADEMARK IS A CLEAR INFRINGEMENT OF RESPONDENTS SAN FRANCISCO COFFEE & ROASTERY, INC. TRADE NAME.

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THE DESCRIPTIVE WORDS SAN FRANCISCO COFFEE ARE PRECISELY THE DOMINANT FEATURES OF RESPONDENTS 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 PETITIONERS COFFEE SHOPS. PETITIONERS 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, RESPONDENTS 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 RESPONDENTS 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 RESPONDENTS 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.

COSTS AGAINST PETITIONER.

SO ORDERED.

FREDCO MANUFACTURING CORPORATION, Petitioner,

G.R. No. 185917

Present: CARPIO, J., Chairperson, NACHURA,

- versus -

PERALTA, ABAD, and MENDOZA, JJ.

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PRESIDENT AND FELLOWS OF HARVARD COLLEGE (HARVARD UNIVERSITY), Respondents. June 1, 2011 Promulgated:

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

DECISION

CARPIO, J.:

The Case

Before the Court is a petition for review1 assailing the 24 October 2008 Decision2 and 8 January 2009 Resolution3 of the Court of Appeals in CAG.R. SP No. 103394.

The Antecedent Facts

On 10 August 2005, petitioner Fredco Manufacturing Corporation (Fredco), a corporation organized and existing under the laws of the Philippines, filed a Petition for Cancellation of Registration No. 56561 before the Bureau of Legal Affairs of the Intellectual Property Office (IPO) against respondents President and Fellows of Harvard College (Harvard University), a corporation organized and existing under the laws of Massachusetts, United States of America. The case was docketed as Inter Partes Case No. 14-2005-00094.

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Fredco alleged that Registration No. 56561 was issued to Harvard University on 25 November 1993 for the mark Harvard Veritas Shield Symbol for decals, tote bags, serving trays, sweatshirts, t-shirts, hats and flying discs under Classes 16, 18, 21, 25 and 28 of the Nice International Classification of Goods and Services. Fredco alleged that the mark Harvard for t -shirts, polo shirts, sandos, briefs, jackets and slacks was first used in the Philippines on 2 January 1982 by New York Garments Manufacturing & Export Co., Inc. (New York Garments), a domestic corporation and Fredcos predecessor-in-interest. On 24 January 1985, New York Garments filed for trademark registration of the mark Harvard for goods under Class 25. The application matured into a registration and a Certificate of Registration was issued on 12 December 1988, with a 20-year term subject to renewal at the end of the term. The registration was later assigned to Romeo Chuateco, a member of the family that owned New York Garments.

Fredco alleged that it was formed and registered with the Securities and Exchange Commission on 9 November 1995 and had since then handled the manufacture, promotion and marketing of Harvard clothing articles. Fredco alleged that at the time of issuance of Registration No. 56561 to Harvard University, New York Garments had already registered the mark Harvard for goods under Class 25. Fredco alleged that the registration was cancelled on 30 July 1998 when New York Garments inadvertently failed to file an affidavit of use/non-use on the fifth anniversary of the registration but the right to the mark Harvard remained with its predecessor New York Garments and now with Fredco.

Harvard University, on the other hand, alleged that it is the lawful owner of the name and mark Harvard in numerous countries worldwide, including the Philippines. Among the countries where Harvard University has registered its name and mark Harvard are:

1. 2. 3. 4. 5. 6. 7. 8. 9.

Argentina 26. South Korea Benelux4 27. Malaysia Brazil 28. Mexico Canada 29. New Zealand Chile 30. Norway China P.R. 31. Peru Colombia 32. Philippines Costa Rica 33. Poland Cyprus 34. Portugal

10. Czech Republic 35. Russia 11. Denmark 36. South Africa 12. Ecuador 37. Switzerland 13. Egypt 38. Singapore 14. Finland 39. Slovak Republic 15. France 40. Spain 16. Great Britain 41. Sweden 17. Germany 42. Taiwan 18. Greece 43. Thailand

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19. Hong Kong 44. Turkey 20. India 45. United Arab Emirates 21. Indonesia 46. Uruguay 22. Ireland 47. United States of America 23. Israel 48. Venezuela 24. Italy 49. Zimbabwe 25. Japan 50. European Community5

The name and mark Harvard was adopted in 1639 as the name of Harvard College 6 of Cambridge, Massachusetts, U.S.A. The name and mark Harvard was allegedly used in commerce as early as 1872. Harvard University is over 350 years old and is a highly regarded institution of higher learning in the United States and throughout the world. Harvard University promotes, uses, and advertises its name Harvard through vari ous publications, services, and products in foreign countries, including the Philippines. Harvard University further alleged that the name and the mark have been rated as one of the most famous brands in the world, valued between US $750,000,000 and US $1,000,000,000.

Harvard University alleged that in March 2002, it discovered, through its international trademark watch program, Fredcos website www.harvardusa.com. The website advertises and promotes the brand name Harvard Jeans USA without Harvard Universitys consent. The websites main page shows an oblong logo bearing the mark Harvard Jeans USA, Established 1936, and Cambridge, Massachusetts. On 20 April 2004, Harvard University filed an administrative complaint against Fredco before the IPO for trademark infringement and/or unfair competition with damages.

Harvard University alleged that its valid and existing certificates of trademark registration in the Philippines are:

1.

Trademark Registration No. 56561 issued on 25 November 1993 for Harvard Veritas Shield Design for goods and services in Cla sses 16, 18, 21, 25 and 28 (decals, tote bags, serving trays, sweatshirts, t-shirts, hats and flying discs) of the Nice International Classification of Goods and Services;

2.

Trademark Registration No. 57526 issued on 24 March 1994 for Harvard Veritas Shield Symbol for services in Class 41; Tradem ark Registration No. 56539 issued on 25 November 1998 for Harvard for services in Class 41; and

3.

Trademark Registration No. 66677 issued on 8 December 1998 for Harvard Graphics for goods in Class 9. Harvard University fu rther alleged that it filed the requisite affidavits of use for the mark Harvard Veritas Shield Symbol with the IPO. Further, on 7 May 2003 Harvard University filed Trademark Application No. 4-2003-04090 for Harvard Medical International & Shield Design for services in Classes 41 and 44. In 1989, Harvard

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University established the Harvard Trademark Licensing Program, operated by the Office for Technology and Trademark Licensing, to oversee and manage the worldwide licensing of the Harvard name and trademarks for various goods and services. Harvard University stated that it never authorized or licensed any person to use its name and mark Harvard in connection with any goods or services in the Philippines.

In a Decision7 dated 22 December 2006, Director Estrellita Beltran-Abelardo of the Bureau of Legal Affairs, IPO cancelled Harvard Universitys registration of the mark Harvard under Class 25, as follows:

WHEREFORE, premises considered, the Petition for Cancellation is hereby GRANTED. Consequently, Trademark Registration Number 56561 for the trademark HARVARD VE RI TAS SHIELD SYMBOL issued on November 25, 1993 to PRESIDENT AND FELLOWS OF HARVARD COLLEGE (HARVARD UNIVERSITY) should be CANCELLED only with respect to goods falling under Class 25. On the other hand, considering that the goods of Respondent-Registrant falling under Classes 16, 18, 21 and 28 are not confusingly similar with the Petitioners goods, the Respondent -Registrant has acquired vested right over the same and therefore, should not be cancelled.

Let the filewrapper of the Trademark Registration No. 56561 issued on November 25, 1993 for the trademark HARVARD VE RI TAS SHIELD SYMBOL, subject matter of this case together with a copy of this Decision be forwarded to the Bureau of Trademarks (BOT) for appropriate action. SO ORDERED.8

Harvard University filed an appeal before the Office of the Director General of the IPO. In a Decision 9 dated 21 April 2008, the Office of the Director General, IPO reversed the decision of the Bureau of Legal Affairs, IPO.

The Director General ruled that more than the use of the trademark in the Philippines, the applicant must be the owner of the mark sought to be registered. The Director General ruled that the right to register a trademark is based on ownership and when the applicant is not the owner, he has no right to register the mark. The Director General noted that the mark covered by Harvard Universitys Registration No. 56561 i s not only the word Harvard but also the logo, emblem or symbol of Harvard University. The Director General ruled that Fredco failed to explain how its predecessor New York Garments came up with the mark Harvard. In addition, there was no evidence that Fredco or New York Garments was li censed or authorized by Harvard University to use its name in commerce or for any other use.

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The dispositive portion of the decision of the Office of the Director General, IPO reads:

WHEREFORE, premises considered, the instant appeal is GRANTED. The appealed decision is hereby REVERSED and SET ASIDE. Let a copy of this Decision as well as the trademark application and records be furnished and returned to the Director of Bureau of Legal Affairs for appropriate action. Further, let also the Directors of the Bureau of Trademarks and the Administrative, Financial and Human Resources Development Services Bureau, and the library of the Documentation, Information and Technology Transfer Bureau be furnished a copy of this Decision for information, guidance, and records purposes. SO ORDERED.10

Fredco filed a petition for review before the Court of Appeals assailing the decision of the Director General.

The Decision of the Court of Appeals

In its assailed decision, the Court of Appeals affirmed the decision of the Office of the Director General of the IPO.

The Court of Appeals adopted the findings of the Office of the Director General and ruled that the latter correctly set aside the cancellation by the Director of the Bureau of Legal Affairs of Harvard Universitys trademark registration under Class 25. The Court of Appeals r uled that Harvard University was able to substantiate that it appropriated and used the marks Harvard and Harvard Veritas Shield Symbol in Class 25 way ahead of Fredco and its predecessor New York Garments. The Court of Appeals also ruled that the records failed to disclose any explana tion for Fredcos use of the name and mark Harvard and the words USA, Established 1936, and Cambridge, Massachusetts within an oblong device, US Legend and Europes No. 1 Brand. Citing Shangri-La International Hotel Management, Ltd. v. Developers Group of Companies, Inc .,11 the Court of Appeals ruled:

One who has imitated the trademark of another cannot bring an action for infringement, particularly against the true owner of the mark, because he would be coming to court with unclean hands. Priority is of no avail to the bad faith plaintiff. Good faith is required in order to ensure that a second user may not merely take advantage of the goodwill established by the true owner. 12 The dispositive portion of the decision of the Court of Appeals reads:

WHEREFORE, premises considered, the petition for review is DENIED. The Decision dated April 21, 2008 of the Director General of the IPO in Appeal No. 14-07-09 Inter Partes Case No. 14-2005-00094 is hereby AFFIRMED. SO ORDERED.13

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Fredco filed a motion for reconsideration.

In its Resolution promulgated on 8 January 2009, the Court of Appeals denied the motion for lack of merit.

Hence, this petition before the Court.

The Issue

The issue in this case is whether the Court of Appeals committed a reversible error in affirming the decision of the Office of the Director General of the IPO.

The Ruling of this Court

The petition has no merit.

There is no dispute that the mark Harvard used by Fredco is the same as the mark Harvard in the Harvard Veritas Shield Symbol of Harvard University. It is also not disputed that Harvard University was named Harvard College in 1639 and that then, as now, Harvard University is located in Cambridge, Massachusetts, U.S.A. It is also unrefuted that Harvard University has been using the mark Harvard in commerce since 1872. It is also established that Harvard University has been using the marks Harvard and Harvard Veritas Shield Symbol for Class 25 goods in the United States since 1953. Further, there is no dispute that Harvard University has registered the name and mark Harvard in at least 50 countries.

On the other hand, Fredcos predecessor-in-interest, New York Garments, started using the mark Harvard in the Philippines only in 1982. New York Garments filed an application with the Philippine Patent Office in 1985 to register the mark Harvard, which applicatio n was approved in 1988. Fredco insists that the date of actual use in the Philippines should prevail on the issue of who has the better right to register the marks.

Under Section 2 of Republic Act No. 166,14 as amended (R.A. No. 166), before a trademark can be registered, it must have been actually used in commerce for not less than two months in the Philippines prior to the filing of an application for its registration. While Harvard University had actual

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prior use of its marks abroad for a long time, it did not have actual prior use in the Philippines of the mark Harvard Veritas Shield Symbol before its application for registration of the mark Harvard with the then Philippine Patents Office. However, Harvard Universitys registration of the name Harvard is based on home registration which is allowed under Section 37 of R.A. No. 166. 15 As pointed out by Harvard University in its Comment:

Although Section 2 of the Trademark law (R.A. 166) requires for the registration of trademark that the applicant thereof must prove that the same has been actually in use in commerce or services for not less than two (2) months in the Philippines before the application for registration is filed, where the trademark sought to be registered has already been registered in a foreign country that is a member of the Paris Convention, the requirement of proof of use in the commerce in the Philippines for the said period is not necessary. An applicant for registration based on home certificate of registration need not even have used the mark or trade name in this country.16

Indeed, in its Petition for Cancellation of Registration No. 56561, Fredco alleged that Harvard Universitys registration is based on ho me registration for the mark Harvard Veritas Shield for Class 25.17

In any event, under Section 239.2 of Republic Act No. 8293 (R.A. No. 8293), 18 [m]arks registered under Republic Act No. 166 shall remain in force but shall be deemed to have been granted under this Act x x x, which does not require actual prior use of the mark in the Philippines. Since the mark Harvard Veritas Shield Symbol is now deemed granted under R.A. No. 8293, any alleged defect arising from the absence of actual prior use in the Philippines has been cured by Section 239.2. 19 In addition, Fredcos registration was already cancelled on 30 July 1998 when it failed to file the required affidavit of use/non-use for the fifth anniversary of the marks registration. Hence, at the time of Fredcos filing of the Petition for Cancellation before the Bureau of Legal Affairs of the IPO, Fredco was no longer the registrant or presumptive owner of the mark Harvard.

There are two compelling reasons why Fredcos petition must fail.

First, Fredcos registration of the mark Harvard and its identification of origin as Cambridge, Massachusetts falsely suggest that Fredco or its goods are connected with Harvard University, which uses the same mark Harvard and is also located in Cambridge, Massachuset ts. This can easily be gleaned from the following oblong logo of Fredco that it attaches to its clothing line:

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Fredcos registration of the mark Harvard should not have been allowed because Section 4(a) of R.A. No. 166 prohibits the r egistration of a mark which may disparage or falsely suggest a connection with persons, living or dead, institutions, beliefs x x x. Section 4(a) of R.A. No. 166 provides:

Section 4. Registration of trade-marks, trade-names and service- marks on the principal register. There is hereby established a register of trade-mark, trade-names and service-marks which shall be known as the principal register. The owner of a trade-mark, a trade-name or service-mark used to distinguish his goods, business or services from the goods, business or services of others shall have the right to register the same on the principal register, unless it: (a) Consists of or comprises immoral, deceptive or scandalous manner, or matter which may disparage or falsely suggest a connection with persons, living or dead, institutions, beliefs, or national symbols, or bring them into contempt or disrepute;

(b) x x x (emphasis supplied) Fredcos use of the mark Harvard, coupled with its claimed origin in Cambridge, Massachusetts, obviously suggests a false c onnection with Harvard University. On this ground alone, Fredcos registration of the mark Harvard should have been disallowed. Indisputably, Fredco does not have any affiliation or connection with Harvard University, or even with Cambridge, Massachusetts. Fredco or its predecessor New York Garments was not established in 1936, or in the U.S.A. as indicated by Fredco in its oblong logo. Fredco offered no explanation to the Court of Appeals or to the IPO why it used the mark Harvard on its oblong logo with the words Cambridge, Massachusetts, Established in 1936, and USA. Fredco now claims before this Court that it used these words to evoke a lifestyle or suggest a desirable aura of petitioners clothing lines. Fredcos belated justification merely confirms that it sought to connect or asso ciate its products with Harvard University, riding on the prestige and popularity of Harvard University, and thus appropriating part of Harvard Universitys goodwill without the latters consent. Section 4(a) of R.A. No. 166 is identical to Section 2(a) of the Lanham Act,20 the trademark law of the United States. These provisions are intended to protect the right of publicity of famous individuals and institutions from commercial exploitation of their goodwill by others. 21 What Fredco has done in using the mark Harvard and the words Cambridge, Massachusetts, USA to evoke a desirable aura to its products is precisely to exploit commercially the goodwill of Harvard University without the latters consent. This is a clear violation of Section 4( a) of R.A. No. 166. Under Section 17(c)22 of R.A. No. 166, such violation is a ground for cancellation of Fredcos registration of the mark Harvard because the regis tration was obtained in violation of Section 4 of R.A. No. 166. Second, the Philippines and the United States of America are both signatories to the Paris Convention for the Protection of Industrial Property (Paris Convention). The Philippines became a signatory to the Paris Convention on 27 September 1965. Articles 6bis and 8 of the Paris Convention state:

ARTICLE 6bis

(i) The countries of the Union undertake either administratively if their legislation so permits, or at the request of an interested party, to refuse or to cancel the registration and to prohibit the use of a trademark which constitutes a reproduction, imitation or

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translation, liable to create confusion or a mark considered by the competent authority of the country as being already the mark of a person entitled to the benefits of the present Convention and used for identical or similar goods . These provisions shall also apply when the essential part of the mark constitutes a reproduction of any such well-known mark or an imitation liable to create confusion therewith.

ARTICLE 8

A trade name shall be protected in all the countries of the Union without the obligation of filing or registration, whether or not it forms part of a trademark. (Emphasis supplied)

Thus, this Court has ruled that the Philippines is obligated to assure nationals of countries of the Paris Convention that they are afforded an effective protection against violation of their intellectual property rights in the Philippines in the same way that their own countries are obligated to accord similar protection to Philippine nationals.23

Article 8 of the Paris Convention has been incorporated in Section 37 of R.A. No. 166, as follows: Section 37. Rights of foreign registrants. Persons who are nationals of, domiciled in, or have a bona fide or effective business or commercial establishment in any foreign country, which is a party to any international convention or treaty relating to marks or trade-names, or the repression of unfair competition to which the Philippines may be a party, shall be entitled to the benefits and subject to the provisions of this Act to the extent and under the conditions essential to give effect to any such convention and treaties so long as the Philippines shall continue to be a party thereto, except as provided in the following paragraphs of this section. xxxx

Trade-names of persons described in the first paragraph of this section shall be protected without the obligation of filing or registration whether or not they form parts of marks.24

x x x x (Emphasis supplied)

Thus, under Philippine law, a trade name of a national of a State that is a party to the Paris Convention, whether or not the trade name forms part of a trademark, is protected without the obligation of filing or registration. Harvard is the trade name of the world famous Harvard University, and i t is also a trademark of Harvard University. Under Article 8 of the Paris Convention, as well as Section 37 of R.A. No. 166, Harvard University is entitled to protection in the Philippines of its tra de name Harvard even without registration of such trade name in the Philippines. This means that no educational entity in the Philippines can use the trade name Harvard without the consent of Harvard University. Likewise, no entity in the Philippines can claim, expressly or impliedly through the use of the name and mark Harvard, that its products or services are authorized, approved, or licensed by, or sourced from, Harvard University without the latters consent.

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Article 6bis of the Paris Convention has been administratively implemented in the Philippines through two directives of the then Ministry (now Department) of Trade, which directives were upheld by this Court in several cases. 25 On 20 November 1980, then Minister of Trade Secretary Luis Villafuerte issued a Memorandum directing the Director of Patents to reject, pursuant to the Paris Convention, all pending applications for Philippine registration of signature and other world-famous trademarks by applicants other than their original owners.26 The Memorandum states:

Pursuant to the Paris Convention for the Protection of Industrial Property to which the Philippines is a signatory, you are hereby directed to reject all pending applications for Philippine registration of signature and other world-famous trademarks by applicants other than its original owners or users.

The conflicting claims over internationally known trademarks involve such name brands as Lacoste, Jordache, Vanderbilt, Sasson, Fila, Pierre Cardin, Gucci, Christian Dior, Oscar de la Renta, Calvin Klein, Givenchy, Ralph Lauren, Geoffrey Beene, Lanvin and Ted Lapidus.

It is further directed that, in cases where warranted, Philippine registrants of such trademarks should be asked to surrender their certificates of registration, if any, to avoid suits for damages and other legal action by the trademarks foreign or local o wners or original users.

You are also required to submit to the undersigned a progress report on the matter. For immediate compliance.27

In a Memorandum dated 25 October 1983, then Minister of Trade and Industry Roberto Ongpin affirmed the earlier Memorandum of Minister Villafuerte. Minister Ongpin directed the Director of Patents to implement measures necessary to comply with the Philippines obligations under the Paris Convention, thus:

1.

Whether the trademark under consideration is well-known in the Philippines or is a mark already belonging to a person entitled to the benefits of the CONVENTION, this should be established, pursuant to Philippine Patent Office procedures in inter partes and ex parte cases, according to any of the following criteria or any combination thereof:

(a) a declaration by the Minister of Trade and Industry that the trademark being considered is already well-known in the Philippines such that permission for its use by other than its original owner will constitute a reproduction, imitation, translation or other infringement; (b) that the trademark is used in commerce internationally, supported by proof that goods bearing the trademark are sold on an international scale, advertisements, the establishment of factories, sales offices, distributorships, and the like, in different countries, including volume or other measure of international trade and commerce;

(c) that the trademark is duly registered in the industrial property office(s) of another country or countries, taking into consideration the dates of such registration;

(d) that the trademark has been long established and obtained goodwill and general international consumer recognition as belonging to one owner or source;

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(e) that the trademark actually belongs to a party claiming ownership and has the right to registration under the provisions of the aforestated PARIS CONVENTION.

2. 3.

The word trademark, as used in this MEMORANDUM, shall include tradenames, service marks, logos, signs, emblems, insignia or other similar devices used for identification and recognition by consumers . The Philippine Patent Office shall refuse all applications for, or cancel the registration of, trademarks which constitute a reproduction, translation or imitation of a trademark owned by a person, natural or corporate, who is a citizen of a country signatory to the PARIS CONVENTION FOR THE PROTECTION OF INDUSTRIAL PROPERTY. x x x x28 (Emphasis supplied)

In Mirpuri, the Court ruled that the essential requirement under Article 6 bis of the Paris Convention is that the trademark to be protected must be well-known in the country where protection is sought. 29 The Court declared that the power to determine whether a trademark is well-known lies in the competent authority of the country of registration or use. 30 The Court then stated that the competent authority would either be the registering authority if it has the power to decide this, or the courts of the country in question if the issue comes before the courts. 31

To be protected under the two directives of the Ministry of Trade, an internationally well-known mark need not be registered or used in the Philippines.32 All that is required is that the mark is well-known internationally and in the Philippines for identical or similar goods, whether or not the mark is registered or used in the Philippines. The Court ruled in Sehwani, Incorporated v. In-N-Out Burger, Inc.:33

The fact that respondents 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.34 (Italics in the original decision; boldface supplied)

Indeed, Section 123.1(e) of R.A. No. 8293 now categorically states that a mark which is considered by the competent authority of the Philippines to be well-known internationally and in the Philippines, whether or not it is registered here, cannot be registered by another in the Philippines. Section 123.1(e) does not require that the well-known mark be used in commerce in the Philippines but only that it be well-known in the Philippines. Moreover, Rule 102 of the Rules and Regulations on Trademarks, Service Marks, Trade Names and Marked or Stamped Containers, which implement R.A. No. 8293, provides:

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Rule 102. Criteria for determining whether a mark is well-known. In determining whether a mark is well-known, the following criteria or any combination thereof may be taken into account:

(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 advertising or publicity and the presentation, at fairs or exhibitions, of the goods and/or services to which the mark applies;

(b) the market share, in the Philippines and in other countries, of the goods and/or services to which the mark applies;

(c) the degree of the inherent or acquired distinction of the mark; (d) the quality-image or reputation acquired by the mark;

(e) the extent to which the mark has been registered in the world;

(f) the exclusivity of registration attained by the mark in the world;

(g) the extent to which the mark has been used in the world; (h) the exclusivity of use attained by the mark in the world;

(i) the commercial value attributed to the mark in the world;

(j) the record of successful protection of the rights in the mark;

(k) the outcome of litigations dealing with the issue of whether the mark is a well-known mark; and

(l) the presence or absence of identical or similar marks validly registered for or used on identical or similar goods or services and owned by persons other than the person claiming that his mark is a well-known mark. (Emphasis supplied)

Since any combination of the foregoing criteria is sufficient to determine that a mark is well -known, it is clearly not necessary that the mark be used in commerce in the Philippines. Thus, while under the territoriality principle a mark must be used in commerce in the Philippines to be entitled to protection, internationally well-known marks are the exceptions to this rule.

In the assailed Decision of the Office of the Director General dated 21 April 2008, the Director General found that:

Traced to its roots or origin, HARVARD is not an ordinary word. It refers to no other than Harvard University, a recognized and respected institution of higher learning located in Cambridge, Massachusetts, U.S.A. Initially referred to simply as the new

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college, the institution was named Harvard College on 13 March 1639, after its first principal donor, a young clergyman named John Harvard. A graduate of Emmanuel College, Cambridge in England, John Harvard bequeathed about four hundred books in his will to form the basis of the college library collection, along with half his personal wealth worth several hundred pounds. The earliest known official reference to Harvard as a university rather than college occurred in the new Massachusetts Constitution of 1780.

Records also show that the first use of the name HARVARD was in 1638 for educational services, policy courses of instructions and training at the university level. It has a Charter. Its first commercial use of the name or mark HARVARD for Class 25 was on 31 December 1953 covered by UPTON Reg. No. 2,119,339 and 2,101,295. Assuming in arguendo, that the Appellate may have used the mark HARVARD in the Philippines ahead of the Appellant, it still cannot be denied that the Appellants use thereof was decades, even centuries, ahead of the Appellees. More importantly, the name HARVARD was the name of a person whose deeds were considered to be a cornerstone of the university. The Appellants logos, emblems or symbols are owned by Harvard University. The name HARVARD and the logos, emblems or symbols are endemic and cannot be separated from the institution.35

Finally, in its assailed Decision, the Court of Appeals ruled:

Records show that Harvard University is the oldest and one of the foremost educational institutions in the United States, it being established in 1636. It is located primarily in Cambridge, Massachusetts and was named after John Harvard, a puritan minister who left to the college his books and half of his estate. The mark Harvard College was first used in commerce in the United States in 1638 for educational services, specifically, providing courses of instruction and training at the university level (Class 41). Its application for registration with the United States Patent and Trademark Office was filed on September 20, 2000 and it was registered on October 16, 2001. The marks Harvard and Harvard Ve ri tas Shield Symbol were first used in commerce in the the United States on December 31, 1953 for athletic uniforms, boxer shorts, briefs, caps, coats, leather coats, sports coats, gym shorts, infant jackets, leather jackets, night shirts, shirts, socks, sweat pants, sweatshirts, sweaters and underwear (Class 25). The applications for registration with the USPTO were filed on September 9, 1996, the mark Harvard was registered on December 9, 1997 and the mark Harvard Ve ri tas Shield Symbol was registered on September 30, 1997.36

We also note that in a Decision37 dated 18 December 2008 involving a separate case between Harvard University and Streetward International, Inc.,38 the Bureau of Legal Affairs of the IPO ruled that the mark Harvard is a well-known mark. This Decision, which cites among others the numerous trademark registrations of Harvard University in various countries, has become final and executory.

There is no question then, and this Court so declares, that Harvard is a well-known name and mark not only in the United States but also internationally, including the Philippines. The mark Harvard is rated as one of the most famous marks in the world. It has been registered in at least 50 countries. It has been used and promoted extensively in numerous publications worldwide. It has established a considerable goodwill worldwide since the founding of Harvard University more than 350 years ago. It is easily recognizable as the trade name and mark of Harvard University of Cambridge, Massachusetts, U.S.A., internationally known as one of the leading educational institutions in the world. As such, even before Harvard University applied for registration of the mark Harvard in the Philippines, the mark was already protected under Article 6bis and Article 8 of the Paris Convention. Again, even without applying the Paris Convention, Harvard University can invoke Section 4(a) of R.A. No. 166 which prohibits the registration of a mark which may disparage or falsely suggest a connection with persons, living or dead, institutions, beliefs x x x.

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WHEREFORE, we DENY the petition. We AFFIRM the 24 October 2008 Decision and 8 January 2009 Resolution of the Court of Appeals in CAG.R. SP No. 103394.

SO ORDERED.

G.R. No. L-48226

December 14, 1942

ANA L. ANG, petitioner, vs. TORIBIO TEODORO, respondent. Cirilo Lim for petitioner. Marcial P. Lichauco and Manuel M. Mejia for respondent.

OZAETA, J.: Petitioner has appealed to this Court by certiorari to reverse the judgment of the Court of Appeals reversing that of the Court of First Instance of Manila and directing the Director of Commerce to cancel the registration of the trade-mark "Ang Tibay" in favor of said petitioner, and perpetually enjoining the latter from using said trade-mark on goods manufactured and sold by her. Respondent Toribio Teodoro, at first in partnership with Juan Katindig and later as sole proprietor, has continuously used "Ang Tibay," both as a trade-mark and as a trade-name, in the manufacture and sale of slippers, shoes, and indoor baseballs since 1910. He formally registered it as trademark on September 29, 1915, and as trade-name on January 3, 1933. The growth of his business is a thrilling epic of Filipino industry and business capacity. Starting in an obscure shop in 1910 with a modest capital of P210 but with tireless industry and unlimited perseverance, Toribio Teodoro, then an unknown young man making slippers with his own hands but now a prominent business magnate and manufacturer with a large factory operated with modern machinery by a great number of employees, has steadily grown with his business to which he has dedicated the best years of his life and which he has expanded to such proportions that his gross sales from 1918 to 1938 aggregated P8,787,025.65. His sales in 1937 amounted to P1,299,343.10 and in 1938, P1,133,165.77. His expenses for advertisement from 1919 to 1938 aggregated P210,641.56. Petitioner (defendant below) registered the same trade-mark "Ang Tibay" for pants and shirts on April 11, 1932, and established a factory for the manufacture of said articles in the year 1937. In the following year (1938) her gross sales amounted to P422,682.09. Neither the decision of the trial court nor that of the Court of Appeals shows how much petitioner has spent or advertisement. But respondent in his brief says that petitioner "was unable to prove that she had spent a single centavo advertising "Ang Tibay" shirts and pants prior to 1938. In that year she advertised the factory which she had just built and it was when this was brought to the attention of the appellee that he consulted his attorneys and eventually brought the present suit." The trial court (Judge Quirico Abeto) presiding absolved the defendant from the complaint, with costs against the plaintiff, on the grounds that the two trademarks are dissimilar and are used on different and non-competing goods; that there had been no exclusive use of the trade-mark by the plaintiff; and that there had been no fraud in the use of the said trade-mark by the defendant because the goods on which it is used are essentially different from those of the plaintiff. The second division of the Court of Appeals, composed of Justices Bengson, Padilla, Lopez Vito, Tuason, and Alex Reyes, with Justice Padilla as ponente, reversed that judgment, holding that by uninterrupted an exclusive use since 191 in the manufacture of slippers and shoes, respondent's trade-mark has acquired a secondary meaning; that the goods or articles on which the two trade-marks are used are similar or belong to the same class; and that the use by petitioner of said trade-mark constitutes a violation of sections 3 and 7 of Act No. 666. The defendant Director of Commerce did not appeal from the decision of the Court of Appeals. First. Counsel for the petitioner, in a well-written brief, makes a frontal sledge-hammer attack on the validity of respondent's trade-mark "Ang Tibay." He contends that the phrase "Ang Tibay" as employed by the respondent on the articles manufactured by him is a descriptive term because, "freely translate in English," it means "strong, durable, lasting." He invokes section 2 of Act No. 666, which provides that words or devices which related only to the name, quality, or description of the merchandise cannot be the subject of a trade-mark. He cites among others the case of Baxter vs. Zuazua (5 Phil., 16), which involved the trade-mark "Agua de Kananga" used on toilet water, and in which this Court held that the word "Kananga," which is the name of a well-known Philippine tree or its flower, could not be appropriated as a trade-mark any more than could the words

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"sugar," "tobacco," or "coffee." On the other hand, counsel for the respondent, in an equally well-prepared and exhaustive brief, contend that the words "Ang Tibay" are not descriptive but merely suggestive and may properly be regarded as fanciful or arbitrary in the legal sense. The cite several cases in which similar words have been sustained as valid trade-marks, such as "Holeproof" for hosiery, 1 "ideal for tooth brushes, 2 and "Fashionknit" for neckties and sweaters. 3 We find it necessary to go into the etymology and meaning of the Tagalog words "Ang Tibay" to determine whether they are a descriptive term, i.e., whether they relate to the quality or description of the merchandise to which respondent has applied them as a trade-mark. The word "ang" is a definite article meaning "the" in English. It is also used as an adverb, a contraction of the word "anong" (what or how). For instance, instead of saying, "Anong ganda!" ("How beautiful!"), we ordinarily say, "Ang ganda!" Tibay is a root word from which are derived the verb magpatibay (to strenghten; the nouns pagkamatibay (strength, durability), katibayan (proof, support, strength), katibay-tibayan (superior strength); and the adjectives matibay (strong, durable, lasting), napakatibay(very strong), kasintibay or magkasintibay (as strong as, or of equal strength). The phrase "Ang Tibay" is an exclamation denoting administration of strength or durability. For instance, one who tries hard but fails to break an object exclaims, "Ang tibay!" (How strong!") It may also be used in a sentence thus, "Ang tibay ng sapatos mo!" (How durable your shoes are!") The phrase "ang tibay" is never used adjectively to define or describe an object. One does not say, "ang tibay sapatos" or "sapatos ang tibay" is never used adjectively to define or describe an object. One does not say, "ang tibay sapatos" or "sapatos ang tibay" to mean "durable shoes," but "matibay na sapatos" or "sapatos na matibay." From all of this we deduce that "Ang Tibay" is not a descriptive term within the meaning of the Trade-Mark Law but rather a fanciful or coined phrase which may properly and legally be appropriated as a trade-mark or trade-name. In this connection we do not fail to note that when the petitioner herself took the trouble and expense of securing the registration of these same words as a trademark of her products she or her attorney as well as the Director of Commerce was undoubtedly convinced that said words (Ang Tibay) were not a descriptive term and hence could be legally used and validly registered as a trade-mark. It seems stultifying and puerile for her now to contend otherwise, suggestive of the story of sour grapes. Counsel for the petitioner says that the function of a trade-mark is to point distinctively, either by its own meaning or by association, to the origin or ownership of the wares to which it is applied. That is correct, and we find that "Ang Tibay," as used by the respondent to designate his wares, had exactly performed that function for twenty-two years before the petitioner adopted it as a trade-mark in her own business. Ang Tibay shoes and slippers are, by association, known throughout the Philippines as products of the Ang Tibay factory owned and operated by the respondent Toribio Teodoro. Second. In her second assignment of error petitioner contends that the Court of Appeals erred in holding that the words "Ang Tibay" had acquired a secondary meaning. In view of the conclusion we have reached upon the first assignment of error, it is unnecessary to apply here the doctrine of "secondary meaning" in trade-mark parlance. This doctrine is to the effect that a word or phrase originally incapable of exclusive appropriation with reference to an article of the market, because geographically or otherwise descriptive, might nevertheless have been used so long and so exclusively by one producer with reference to his article that, in that trade and to that branch of the purchasing public, the word or phrase has come to mean that the article was his product. (G. & C. Merriam Co. vs. Salfield, 198 F., 369, 373.) We have said that the phrase "Ang Tibay," being neither geographic nor descriptive, was originally capable of exclusive appropriation as a trade-mark. But were it not so, the application of the doctrine of secondary meaning made by the Court of Appeals could nevertheless be fully sustained because, in any event, by respondent's long and exclusive use of said phrase with reference to his products and his business, it has acquired a proprietary connotation. (Landers, Frary, and Clark vs. Universal Cooler Corporation, 85 F. [2d], 46.) Third. Petitioner's third assignment of error is, that the Court of Appeals erred in holding that pants and shirts are goods similar to shoes and slippers within the meaning of sections 3 and 7 of Act No. 666. She also contends under her fourth assignment of error (which we deem convenient to pass upon together with the third) that there can neither be infringement of trade-mark under section 3 nor unfair competition under section 7 through her use of the words "Ang Tibay" in connection with pants and shirts, because those articles do not belong to the same class of merchandise as shoes and slippers. The question raised by petitioner involve the scope and application of sections 3,7, 11, 13, and 20 of the Trade-Mark Law (Act No. 666.) Section 3 provides that "any person entitled to the exclusive use of a trade-mark to designate the origin or ownership of goods he has made or deals in, may recover damages in a civil actions from any person who has sold goods of a similar kind, bearing such trade-mark . . . The complaining party . . . may have a preliminary injunction, . . . and such injunction upon final hearing, if the complainant's property in the trade-mark and the defendant's violation thereof shall be fully established, shall be made perpetual, and this injunction shall be part of the judgment for damages to be rendered in the same cause." Section 7 provides that any person who, in selling his goods, shall give them the general appearance of the goods of another either in the wrapping of the packages, or in 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 the complainant, shall be guilty of unfair competition, and shall be liable to an action for damages and to an injunction, as in the cases of trade-mark infringement under section 3. Section 11 requires the applicant for registration of a trademark to state, among others, "the general class of merchandise to which the trade-mark claimed has been appropriated." Section 13 provides that no alleged trade-mark or trade name shall be registered which is identical with a registered or known trade-mark owned by another and appropriate to the same class of merchandise, or which to nearly resembles another person's lawful trade-mark or trade-name as to be likely to cause confusion or mistake in the mind of the public, or to deceive purchasers. And section 2 authorizes the Director of Commerce to establish classes of merchandise for the purpose of the registration of trade-marks and to determine the particular description of articles included in each class; it also provides that "an application for registration of a trade-mark shall be registered only for one class of articles and only for the particular description of articles mentioned in said application."

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We have underlined the key words used in the statute: "goods of a similar kin," "general class of merchandise," "same class of merchandise," "classes of merchandise," and "class of articles," because it is upon their implications that the result of the case hinges. These phrases, which refer to the same thing, have the same meaning as the phrase "merchandise of the same descriptive properties" used in the statutes and jurisprudence of other jurisdictions. The burden of petitioner's argument is that under sections 11 and 20 the registration by respondent of the trade-mark "Ang Tibay" for shoes and slippers is no safe-guard against its being used by petitioner for pants and shirts because the latter do not belong to the same class of merchandise or articles as the former; that she cannot be held guilty of infringement of trade-mark under section 3 because respondent's mark is not a valid trademark, nor has it acquired a secondary meaning; that pants and shirts do not possess the same descriptive properties as shoes and slippers; that neither can she be held guilty of unfair competition under section 7 because the use by her of the trade-mark "Ang Tibay" upon pants and shirts is not likely to mislead the general public as to their origin or ownership; and that there is now showing that she in unfairly or fraudulently using that mark "Ang Tibay" against the respondent. If we were interpreting the statute for the first time and in the first decade of the twentieth century, when it was enacted, and were to construe it strictly and literally, we might uphold petitioner's contentions. But law and jurisprudence must keep abreast with the progress of mankind, and the courts must breathe life into the statutes if they are to serve their purpose. Our Trade-mark Law, enacted nearly forty years ago, has grown in its implications and practical application, like a constitution, in virtue of the life continually breathed into it. It is not of merely local application; it has its counterpart in other jurisdictions of the civilized world from whose jurisprudence it has also received vitalizing nourishment. We have to apply this law as it has grown and not as it was born. Its growth or development abreast with that of sister statutes and jurisprudence in other jurisdictions is reflected in the following observation of a well-known author: This fundamental change in attitude first manifested itself in the year 1915-1917. Until about then, the courts had proceeded on the theory that the same trade-mark, used on un-like goods, could not cause confusion in trade and that, therefore, there could be no objection to the use and registration of a well-known mark by a third party for a different class of goods. Since 1916 however, a growing sentiment began to arise that in the selection of a famous mark by a third party, there was generally the hidden intention to "have a free ride" on the trademark owner's reputation and good will. (Derenberg, Trade-Mark Protection & Unfair Trading, 1936 edition, p. 409.) In the present state of development of the law on Trade-Marks, Unfair Competition, and Unfair Trading, the test employed by the courts to determine whether noncompeting goods are or are not of the same class is confusion as to the origin of the goods of the second user. Although two noncompeting articles may be classified under two different classes by the Patent Office because they are deemed not to possess the same descriptive properties, they would, nevertheless, be held by the courts to belong to the same class if the simultaneous use on them of identical or closely similar trade-marks would be likely to cause confusion as to the origin, or personal source, of the second user's goods. They would be considered as not falling under the same class only if they are so dissimilar or so foreign to each other as to make it unlikely that the purchaser would think the first user made the second user's goods. Such construction of the law is induced by cogent reasons of equity and fair dealing. The courts have come to realize that there can be unfair competition or unfair trading even if the goods are non-competing, and that such unfair trading can cause injury or damage to the first user of a given trade-mark, first, by prevention of the natural expansion of his business and, second, by having his business reputation confused with and put at the mercy of the second user. Then noncompetitive products are sold under the same mark, the gradual whittling away or dispersion of the identity and hold upon the public mind of the mark created by its first user, inevitably results. The original owner is entitled to the preservation of the valuable link between him and the public that has been created by his ingenuity and the merit of his wares or services. Experience has demonstrated that when a well-known trade-mark is adopted by another even for a totally different class of goods, it is done to get the benefit of the reputation and advertisements of the originator of said mark, to convey to the public a false impression of some supposed connection between the manufacturer of the article sold under the original mark and the new articles being tendered to the public under the same or similar mark. As trade has developed and commercial changes have come about, the law of unfair competition has expanded to keep pace with the times and the element of strict competition in itself has ceased to be the determining factor. The owner of a trade-mark or trade-name has a property right in which he is entitled to protection, since there is damage to him from confusion of reputation or goodwill in the mind of the public as well as from confusion of goods. The modern trend is to give emphasis to the unfairness of the acts and to classify and treat the issue as a fraud. A few of the numerous cases in which the foregoing doctrines have been laid down in one form or another will now be cited: (1) In Teodoro Kalaw Ng Khe vs. Level Brothers Company (G.R. No. 46817), decided by this Court on April 18, 1941, the respondent company (plaintiff below) was granted injunctive relief against the use by the petitioner of the trade-mark "Lux" and "Lifebuoy" for hair pomade, they having been originally used by the respondent for soap; The Court held in effect that although said articles are noncompetitive, they are similar or belong to the same class. (2) In Lincoln Motor Co. vs. Lincoln Automobile Co. (44 F. [2d], 812), the manufacturer of the well-known Lincoln automobile was granted injunctive relief against the use of the word "Lincoln" by another company as part of its firm name. (3) The case of Aunt Jemima Mills Co. vs. Rigney & Co. (247 F., 407), involved the trade-mark "Aunt Jemima," originally used on flour, which the defendant attempted to use on syrup, and there the court held that the goods, though different, are so related as to fall within the mischief which equity should prevent. (4) In Tiffany & Co., vs. Tiffany Productions, Inc. (264 N.Y.S., 459; 23 Trade-mark Reporter, 183), the plaintiff, a jewelry concern, was granted injunctive relief against the defendant, a manufacturer of motion pictures, from using the name "Tiffany." Other famous cases cited on the margin, wherein the courts granted injunctive relief, involved the following trade-marks or trade-names: "Kodak," for cameras and photographic supplies, against its use for bicycles. 4 "Penslar," for medicines and toilet articles, against its use for cigars; 5 "Rolls-Royce," for automobiles. against its use for radio tubes; 6 "Vogue," as the name of a magazine, against its use for hats; 7"Kotex," for sanitary napkins, against the use of "Rotex" for vaginal syringes; 8 "Sun-Maid," for raisins, against its use for flour; 9 "Yale," for locks and keys, against its use for electric flashlights; 10 and "Waterman," for fountain pens, against its use for razor blades. 11lawphil.net

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Against this array of famous cases, the industry of counsel for the petitioner has enabled him to cite on this point only the following cases: (1) Mohawk Milk Products vs. General Distilleries Corporation (95 F. [2d], 334), wherein the court held that gin and canned milk and cream do not belong to the same class; (2) Fawcett Publications, Inc. vs. Popular Mechanics Co. (80 F. [2d], 194), wherein the court held that the words "Popular Mechanics" used as the title of a magazine and duly registered as a trade-mark were not infringed by defendant's use of the words "Modern Mechanics and Inventions" on a competitive magazine, because the word "mechanics" is merely a descriptive name; and (3) Oxford Book Co. vs. College Entrance Book Co. (98 F. [2d], 688), wherein the plaintiff unsuccessfully attempted to enjoin the defendant from using the word "Visualized" in connection with history books, the court holding that said word is merely descriptive. These cases cites and relied upon by petitioner are obviously of no decisive application to the case at bar. We think reasonable men may not disagree that shoes and shirts are not as unrelated as fountain pens and razor blades, for instance. The mere relation or association of the articles is not controlling. As may readily be noted from what we have heretofore said, the proprietary connotation that a trade-mark or trade-name has acquired is of more paramount consideration. The Court of Appeals found in this case that by uninterrupted and exclusive use since 1910 of respondent's registered trade-mark on slippers and shoes manufactured by him, it has come to indicate the origin and ownership of said goods. It is certainly not farfetched to surmise that the selection by petitioner of the same trade-mark for pants and shirts was motivated by a desire to get a free ride on the reputation and selling power it has acquired at the hands of the respondent. As observed in another case, 12 the field from which a person may select a trade-mark is practically unlimited, and hence there is no excuse for impinging upon or even closely approaching the mark of a business rival. In the unlimited field of choice, what could have been petitioner's purpose in selecting "Ang Tibay" if not for its fame? Lastly, in her fifth assignment of error petitioner seems to make a frantic effort to retain the use of the mark "Ang Tibay." Her counsel suggests that instead of enjoining her from using it, she may be required to state in her labels affixed to her products the inscription: "Not manufactured by Toribio Teodoro." We think such practice would be unethical and unworthy of a reputable businessman. To the suggestion of petitioner, respondent may say, not without justice though with a tinge of bitterness: "Why offer a perpetual apology or explanation as to the origin of your products in order to use my trade-mark instead of creating one of your own?" On our part may we add, without meaning to be harsh, that a self-respecting person does not remain in the shelter of another but builds one of his own. The judgment of the Court of Appeals is affirmed, with costs against the petitioner in the three instances. So ordered. Yulo, C.J., Moran, Paras and Bocobo, JJ., concur. FIRST DIVISION

FIRST DIVISION

MCDONALDS CORPORATION and MCGEORGE FOOD INDUSTRIES, INC., Petitioners,

G.R. No. 143993

Present: Davide, Jr., C.J., Chairman, - versus Quisumbing, Ynares-Santiago, Carpio, and

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Azcuna, JJ.

L.C. BIG MAK BURGER, INC., FRANCIS B. DY, EDNA A. DY, RENE B. DY, WILLIAM B. DY, JESUS AYCARDO, ARACELI AYCARDO, and GRACE HUERTO, Respondents. Promulgated: August 18, 2004

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

DECISION

CARPIO, J.:

The Case

This is a petition for review[1] of the Decision dated 26 November 1999 of the Court of Appeals [2] finding respondent L.C. Big Mak Burger, Inc. not liable for trademark infringement and unfair competition and ordering petitioners to pay respondents P1,900,000 in damages, and of its Resolution dated 11 July 2000 denying reconsideration. The Court of Appeals Decision reversed the 5 September 1994 Decision [3] of

the Regional Trial Court of Makati, Branch 137, finding respondent L.C. Big Mak Burger, Inc. liable for trademark infringement and unfair competition.

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The Facts

Petitioner McDonalds Corporation (McDonalds) is a corporation organized under the laws of Delaware, United States. McDonalds operates, by itself or through its franchisees, a global chain of fast-food restaurants. McDonalds[4] owns a family of marks[5] including the Big Mac mark for its double-decker hamburger sandwich.[6] McDonalds registered this trademark with the United States Trademark Registry on 16 October 1979.[7] Based on this Home Registration, McDonalds applied for the registration of the same mark in the Principal Register of the then Philippine Bureau of Patents, Trademarks and Technology (PBPTT), now the Intellectual Property Office (IPO). Pending approval of its application, McDonalds introduced its Big Mac hamburger sandwiches in the Philippine market in September 1981. On 18 July 1985, the PBPTT allowed registration of the Big Mac mark in the Principal Register based on its Home Registration in the United States.

Like its other marks, McDonalds displays the Big Mac mark in items [8] and paraphernalia[9] in its restaurants, and in its outdoor and indoor signages. From 1982 to 1990, McDonalds spent P10.5 million in advertisement for Big Mac hamburger sandwiches alone. [10]

Petitioner McGeorge Food Industries (petitioner McGeorge), a domestic corporation, is McDonalds Philippine franchisee. [11]

Respondent L.C. Big Mak Burger, Inc. (respondent corporation) is a domestic corporation which operates fast-food outlets and snack vans in Metro Manila and nearby provinces.[12] Respondent corporations menu includes hamburger sandwiches and other food items.[13] Respondents Francis B. Dy, Edna A. Dy, Rene B. Dy, William B. Dy, Jesus Aycardo, Araceli Aycardo, and Grace Huerto (private respondents) are the incorporators, stockholders and directors of respondent corporation. [14]

On 21 October 1988, respondent corporation applied with the PBPTT for the registration of the Big Mak mark for its hamburger sandwiches. McDonalds opposed respondent corporations application on the ground that Big Mak was a colorable imitation of its registered Big Mac mark for the same food products. McDonalds also informed respondent Francis Dy (respondent Dy), the chairman of the Board of Directors of respondent corporation, of its exclusive right to the Big Mac mark and requested him to desist from using the Big Mac mark or any similar mark.

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Having received no reply from respondent Dy, petitioners on 6 June 1990 sued respondents in the Regional Trial Court of Makati, Branch 137 (RTC), for trademark infringement and unfair competition. In its Order of 11 July 1990, the RTC issued a temporary restraining order (TRO) against respondents enjoining them from using the Big Mak mark in the operation of their business in the National Capital Region.[15] On 16 August 1990, the RTC issued a writ of preliminary injunction replacing the TRO. [16]

In their Answer, respondents admitted that they have been using the name Big Mak Burger for their fast-food business. Respondents claimed, however, that McDonalds does not have an exclusive right to the Big Mac mark or to any other similar mark. Respondents point out that the Isaiyas Group of Corporations (Isaiyas Group) registered the same mark for hamburger sandwiches with the PBPTT on 31 March 1979. One Rodolfo Topacio (Topacio) similarly registered the same mark on 24 June 1983, prior to McDonalds registration on 18 July 1985. Alternatively, respondents claimed that they are not liable for trademark infringement or for unfair competition, as the Big Mak mark they sought to re gister does not constitute a colorable imitation of the Big Mac mark. Respondents asserted that they did not fraudulently pass of f their hamburger sandwiches as those of petitioners Big Mac hamburgers.[17] Respondents sought damages in their counterclaim.

In their Reply, petitioners denied respondents claim that McDonalds is not the exclusive owner of the Big Mac mark. Petitioners asserted that while the Isaiyas Group and Topacio did register the Big Mac mark ahead of McDonalds, the Isaiyas Group did so only i n the Supplemental Register of the PBPTT and such registration does not provide any protection. McDonalds disclosed that it had acquired Topacios rights to his registration in a Deed of Assignment dated 18 May 1981. [18]

The Trial Courts Ruling

On 5 September 1994, the RTC rendered judgment (RTC Decision) finding respondent corporation liable for trademark infringement and unfair competition.However, the RTC dismissed the complaint against private respondents and the counterclaim against petitioners for lack of merit and insufficiency of evidence. The RTC held: Undeniably, the mark B[ig] M[ac] is a registered trademark for plaintiff McDonalds, and as such, it is entitled [to] protection against infringement.

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xxxx There exist some distinctions between the names B[ig] M[ac] and B[ig] M[ak] as appearing in the respective signages, wrappers and containers of the food products of the parties. But infringement goes beyond the physical features of the questioned name and the original name. There are still other factors to be considered.

xxxx

Significantly, the contending parties are both in the business of fast-food chains and restaurants. An average person who is hungry and wants to eat a hamburger sandwich may not be discriminating enough to look for a McDonalds restaurant and buy a B[ig] M[ac] hamburger. Once he sees a stall selling hamburger sandwich, in all likelihood, he will dip into his pocket and order a B[ig] M[ak] hamburger sandwich. Plaintiff McDonalds fast-food chain has attained wide popularity and acceptance by the consuming public so much so that its air-conditioned food outlets and restaurants will perhaps not be mistaken by many to be the same as defendant corporations mobile snack vans located along busy streets or highways. But the thing is that what is being sold by both contending parties is a food item a hamburger sandwich which is for immediate consumption, so that a buyer may easily be confused or deceived into thinking that the B[ig] M[ak] hamburger sandwich he bought is a foodproduct of plaintiff McDonalds, or a subsidiary or allied outlet thereof. Surely, defendant corporation has its own secret ingredients to make its hamburger sandwiches as palatable and as tasty as the other brands in the market, considering the keen competition among mushrooming hamburger stands and multinational fast-food chains and restaurants. Hence, the trademark B[ig] M[ac] has been infringed by defendant corporation when it used the name B[ig] M[ak] in its signages, wrappers, and containers in connection with its food business. xxxx

Did the same acts of defendants in using the name B[ig] M[ak] as a trademark or tradename in their signages, or in causing the name B[ig] M[ak] to be printed on the wrappers and containers of their food products also constitute an act of unfair competition under Section 29 of the Trademark Law?

The answer is in the affirmative. xxxx

The xxx provision of the law concerning unfair competition is broader and more inclusive than the law concerning the infringement of trademark, which is of more limited range, but within its narrower range recognizes a more exclusive right derived by the adoption and registration of the trademark by the person whose goods or services are first associated therewith. xxx Notwithstanding the distinction between an action for trademark infringement and an action for unfair competition, however, the law extends substantially the same relief to the injured party for both cases. (See Sections 23 and 29 of Republic Act No. 166)

Any conduct may be said to constitute unfair competition if the effect is to pass off on the public the goods of one man as the goods of another. The choice of B[ig] M[ak] as tradename by defendant corporation is not merely for sentimental reasons

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but was clearly made to take advantage of the reputation, popularity and the established goodwill of plaintiff McDonalds. For, as stated in Section 29, a person is guilty of unfair competition who in selling his goods shall give them the general appearance, of goods of another manufacturer or dealer, either as to the goods themselves or in the wrapping of the packages in which they are contained, or the devices or words thereon, or in any other feature of their appearance, which would likely influence purchasers to believe that the goods offered are those of a manufacturer or dealer other than the actual manufacturer or dealer. Thus, plaintiffs have established their valid cause of action against the defendants for trademark infringement and unfair competition and for damages.[19]

The dispositive portion of the RTC Decision provides: WHEREFORE, judgment is rendered in favor of plaintiffs McDonalds Corporation and McGeorge Food Industries, Inc. and against defendant L.C. Big Mak Burger, Inc., as follows:

1.

The writ of preliminary injunction issued in this case on [16 August 1990] is made permanent;

2. Defendant L.C. Big Mak Burger, Inc. is ordered to pay plaintiffs actual damages in the amount of P400,000.00, exemplary damages in the amount of P100,000.00, and attorneys fees and expenses of litigation in the amount of P100,000.00;

3. The complaint against defendants Francis B. Dy, Edna A. Dy, Rene B. Dy, Wiliam B. Dy, Jesus Aycardo, Araceli Aycardo and Grace Huerto, as well as all counter-claims, are dismissed for lack of merit as well as for insufficiency of evidence.[20]

Respondents appealed to the Court of Appeals.

The Ruling of the Court of Appeals

On 26 November 1999, the Court of Appeals rendered judgment (Court of Appeals Decision) reversing the RTC Decision and ordering McDonalds to pay respondents P1,600,000 as actual and compensatory damages and P300,000 as moral damages. The Court of Appeals held:

Plaintiffs-appellees in the instant case would like to impress on this Court that the use of defendants-appellants of its corporate name the whole L.C. B[ig] M[ak] B[urger], I[nc]. which appears on their food packages, signages and advertisements is an infringement of their trademark B[ig] M[ac] which they use to identify [their] double decker sandwich, sold in a Styrofoam box packaging material with the McDonalds logo of umbrella M stamped thereon, together with the printed mark in red bl[o]ck capital letters, the words being separated by a single space. Specifically, plaintiffs-appellees argue that defendants-appellants use of their corporate name is a colorable imitation of their trademark Big Mac.

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xxxx

To Our mind, however, this Court is fully convinced that no colorable imitation exists. As the definition dictates, it is not sufficient that a similarity exists in both names, but that more importantly, the over-all presentation, or in their essential, substantive and distinctive parts is such as would likely MISLEAD or CONFUSE persons in the ordinary course of purchasing the genuine article. A careful comparison of the way the trademark B[ig] M[ac] is being used by plaintiffs -appellees and corporate name L.C. Big Mak Burger, Inc. by defendants-appellants, would readily reveal that no confusion could take place, or that the ordinary purchasers would be misled by it. As pointed out by defendants-appellants, the plaintiffs-appellees trademark is used to designate only one product, a double decker sandwich sold in a Styrofoam box with the McDonalds logo. On the other hand, what the defendants-appellants corporation is using is not a trademark for its food product but a business or corporate name. They use the business name L.C. Big Mak Burger, Inc. in their restaurant business which serves diversified food items such as siopao, noodles, pizza, and sandwiches such as hotdog, ham, fish burger and hamburger. Secondly, defendantsappellants corporate or business name appearing in the food packages and signages are written in silhouette red-orange letters with the b and m in upper case letters. Above the words Big Mak are the upper case letter L.C.. Below the words Big Mak are the words Burger, Inc. spelled out in upper case letters. Furthermore, said corporate or business name appearing in such food packages and signages is always accompanied by the company mascot, a young chubby boy named Maky who wears a red T-shirt with the upper case m appearing therein and a blue lower garment. Finally, the defendants-appellants food packages are made of plastic material.

xxxx

xxx [I]t is readily apparent to the naked eye that there appears a vast difference in the appearance of the product and the manner that the tradename Big Mak is being used and presented to the public. As earlier noted, there are glaring dissimilarities between plaintiffs-appellees trademark and defendants-appellants corporate name. Plaintiffs-appellees product carrying the trademark B[ig] M[ac] is a double decker sandwich (depicted in the tray mat containing photographs of the various food products xxx sold in a Styrofoam box with the McDonalds logo and trademark in red, bl[o]ck capital letters printed thereon xxx at a price which is more expensive than the defendants-appellants comparable food products. In order tobuy a Big Mac, a customer needs to visit an air-conditioned McDonalds restaurant usually located in a nearby commercial center, advertised and identified by its logo - the umbrella M, and its mascot Ronald McDonald. A typical McDonalds restaurant boasts of a playground for kids, a second floor to accommodate additional customers, a drive-thru to allow customers with cars to make orders without alighting from their vehicles, the interiors of the building are well-lighted, distinctly decorated and painted with pastel colors xxx. In buying a B[ig] M[ac], it is necessary to specify it by its trademark. Thus, a customer needs to look for a McDonalds and enter it first before he can find a hamburger sandwich which carry the mark Big Mac. On the other hand, defendants-appellants sell their goods through snack vans xxxx Anent the allegation that defendants-appellants are guilty of unfair competition, We likewise find the same untenable. Unfair competition is defined as the employment of deception or any other means contrary to good faith by which a person shall pass off the goods manufactured by him or in which he deals, or his business, or service, for those of another who has already established good will for his similar good, business or services, or any acts calculated to produce the same result (Sec. 29, Rep. Act No. 166, as amended). To constitute unfair competition therefore it must necessarily follow that there was malice and that the entity concerned was in bad faith. In the case at bar, We find no sufficient evidence adduced by plaintiffs-appellees that defendants-appellants deliberately tried to pass off the goods manufactured by them for those of plaintiffs-appellees. The mere suspected similarity in the sound of the defendants-appellants corporate name with the plaintiffs-appellees trademark is not sufficient evidence to conclude unfair competition. Defendants-appellants explained that the name M[ak] in their corporate name was derived from both the first names of the mother and father of defendant Francis Dy, whose names are Maxima and Kimsoy. With this explanation, it is up to the plaintiffs-appellees to prove bad faith on the part of defendants-appellants. It is a settled rule that the law always presumes good faith such that any person who seeks to be awarded damages due to acts of another has the burden of proving that the latter acted in bad faith or with ill motive. [21]

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Petitioners sought reconsideration of the Court of Appeals Decision but the appellate court denied their motion in its Resolution of 11 July 2000.

Hence, this petition for review.

Petitioners raise the following grounds for their petition: I. THE COURT OF APPEALS ERRED IN FINDING THAT RESPONDENTS CORPORATE NAME L.C. BIG MAK BURGER, INC. IS NOT A COLORABLE IMITATION OF THE MCDONALDS TRADEMARK BIG MAC, SUCH COLORABLE IMITATION BEING AN ELEMENT OF TRADEMARK INFRINGEMENT. Respondents use the words Big Mak as trademark for their products and not merely as their business or corporate name.

A.

B.

As a trademark, respondents Big Mak is undeniably and unquestionably similar to petitioners Big Mac trademark based on the dominancy test and the idem sonans test resulting inexorably in confusion on the part of the consuming public.

II. THE COURT OF APPEALS ERRED IN REFUSING TO CONSIDER THE INHERENT SIMILARITY BETWEEN THE MARK BIG MAK AND THE WORD MARK BIG MAC AS AN INDICATION OF RESPONDENTS INTENT TO DECEIVE OR DEFRAUD FOR PURPOSES OF ESTABLISHING UNFAIR COMPETITION.[22]

Petitioners pray that we set aside the Court of Appeals Decision and reinstate the RTC Decision.

In their Comment to the petition, respondents question the propriety of this petition as it allegedly raises only questions of fact. On the merits, respondents contend that the Court of Appeals committed no reversible error in finding them not liable for trademark infringement and unfair competition and in ordering petitioners to pay damages.

The Issues

The issues are:

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1. Procedurally, whether the questions raised in this petition are proper for a petition for review under Rule 45.

2.

On the merits, (a) whether respondents used the words Big Mak not only as part of the corporate name L.C. Big Mak Burger, Inc.

but also as a trademark for their hamburger products, and (b) whether respondent corporation is liable for trademark infringement and unfair competition.[23]

The Courts Ruling

The petition has merit.

On Whether the Questions Raised in the Petition are Proper for a Petition for Review

A party intending to appeal from a judgment of the Court of Appeals may file with this Court a petition for review under Section 1 of Rule 45 (Section 1)[24]raising only questions of law. A question of law exists when the doubt or difference arises on what the law is on a certain state of facts. There is a question of fact when the doubt or difference arises on the truth or falsity of the alleged facts. [25]

Here, petitioners raise questions of fact and law in assailing the Court of Appeals findings on respondent corporations non -liability for trademark infringement and unfair competition. Ordinarily, the Court can deny due course to such a petition. In view, however, of the contradictory findings of fact of the RTC and Court of Appeals, the Court opts to accept the petition, this being one of the recognized exceptions to Section 1.[26] We took a similar course of action in Asia Brewery, Inc. v. Court of Appeals[27] which also involved a suit for trademark infringement and unfair competition in which the trial court and the Court of Appeals arrived at conflicting findings.

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On the Manner Respondents Used Big Mak in their Business

Petitioners contend that the Court of Appeals erred in ruling that the corporate name L.C. Big Mak Burger, Inc. appears in the packaging for respondents hamburger products and not the words Big Mak only.

The contention has merit.

The evidence presented during the hearings on petitioners motion for the issuance of a writ of preliminary injunction shows that the plastic wrappings and plastic bags used by respondents for their hamburger sandwiches bore the words Big Mak. The other descriptive words burger and 100% pure beef were set in smaller type, along with the locations of branches. [28] Respondents cash invoices simply refer to their hamburger sandwiches as Big Mak.[29] It is respondents snack vans that carry the words L.C. Big Mak Burger, Inc.[30]

It was only during the trial that respondents presented in evidence the plastic wrappers and bags for their hamburger sandwiches relied on by the Court of Appeals.[31] Respondents plastic wrappers and bags were identical with those petitioners presented during the hearings for the injunctive writ except that the letters L.C. and the words Burger, Inc. in respondents evidence were added above and below the words Big Mak, respectively. Since petitioners complaint was based on facts existing before and during the hearings on the injunctive writ, the facts established during those hearings are the proper factual bases for the disposition of the issues raised in this petition.

On the Issue of Trademark Infringement

Section 22 (Section 22) of Republic Act No. 166, as amended (RA 166), the law applicable to this case, [32] defines trademark infringement as follows:

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Infringement, what constitutes. Any person who [1] shall use, without the consent of the registrant, any reproduction, counterfeit, copy or colorable imitation of any registered mark or trade-name in connection with the sale, offering for sale, or advertising of any goods, business or services on or in connection with which such use is likely to cause confusion or mistake or to deceive purchasers or others as to the source or origin of such goods or services, or identity of such business; or [2] reproduce, counterfeit, copy, or colorably imitate any such mark or trade-name and apply such reproduction, counterfeit, copy, or colorable imitation to labels, signs, prints, packages, wrappers, receptacles or advertisements intended to be used uponor in connection with such goods, business or services, shall be liable to a civil action by the registrant for any or all of the remedies herein provided.[33]

Petitioners base their cause of action under the first part of Section 22, i.e. respondents allegedly used, without petitioners consent, a colorable imitation of the Big Mac mark in advertising and selling respondents hamburger sandwiches. This likely caused confusion in the mind of the purchasing public on the source of the hamburgers or the identity of the business.

To establish trademark infringement, the following elements must be shown: (1) the validity of plaintiffs mark; (2) the plaintiffs ownership of the mark; and (3)the use of the mark or its colorable imitation by the alleged infringer results in likelihood of confusion.[34] Of these, it is the element of likelihood of confusion that is the gravamen of trademark infringement. [35]

On the Validity of the Big MacMark and McDonalds Ownership of such Mark

A mark is valid if it is distinctive and thus not barred from

registration under Section 4[36] of RA 166 (Section 4). However, once registered, not only the marks validity but also the registrants ownership of the mark isprima facie presumed.[37]

Respondents contend that of the two words in the Big Mac mark, it is only the word Mac that is valid because the word Big is generic and descriptive (proscribed under Section 4[e]), and thus incapable of exclusive appropriation. [38]

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The contention has no merit. The Big Mac mark, which should be treated in its entirety and not dissected word for word, [39] is neither generic nor descriptive. Generic marks are commonly used as the name or description of a kind of goods,[40] such as Lite for beer[41] or Chocolate Fudge for chocolate soda drink.[42]Descriptive marks, on the other hand, convey the characteristics, functions, qualities or ingredients of a product to one who has never seen it or does not know it exists,[43] such as Arthriticare for arthritis medication.[44] On the contrary, Big Mac falls under the class of fanciful or arbitrary marks as it bears no logical relation to the actual characteristics of the product it represents.[45] As such, it is highly distinctive and thus valid. Significantly, the trademark Little Debbie for sn ack cakes was found arbitrary or fanciful.[46]

The Court also finds that petitioners have duly established McDonalds exclusive ownership of the Big Mac mark. Although Topacio and the Isaiyas Group registered the Big Mac mark ahead of McDonalds, Topacio, as petitioners disclosed, had already assig ned his rights to McDonalds. The Isaiyas Group, on the other hand, registered its trademark only in the Supplement al Register. A mark which is not registered in the Principal Register, and thus not distinctive, has no real protection.[47] Indeed, we have held that registration in the Supplemental Register is not even a prima facie evidence of the validity of the registrants exclusive right to use the mark on the goods specified in the certificate. [48]

On Types of Confusion

Section 22 covers two types of confusion arising from the use of similar or colorable imitation marks, namely, confusion of goods (product confusion) and confusion of business (source or origin confusion). In Sterling Products International, Incorporated v. Farbenfabriken Bayer Aktiengesellschaft, et al.,[49] the Court distinguished these two types of confusion, thus: [Rudolf] Callman notes two types of confusion. The first is the confusion of goods in which event the ordinarily prudent purchaser would be induced to purchase one product in the belief that he was purchasing the other. xxx The other is the confusion of business: Here though the goods of the parties are different, the defendants product is such as might reasonably be assumed to originate with the plaintiff, and the public would then be deceived either into that belief or into the belief that there is some connection between the plaintiff and defendant which, in fact, does not exist.

Under Act No. 666,[50] the first trademark law, infringement was limited to confusion of goods only, when the infringing mark is used on goods of a similar kind.[51]Thus, no relief was afforded to the party whose registered mark or its colorable imitation is used on different although related goods. To remedy this situation, Congress enacted RA 166 on 20 June 1947. In defining trademark infringement, Section 22 of RA 166 deleted the requirement in question and expanded its scope to include such use of the mark or its colorable imitation that is

likely to result in confusion on the

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source or origin of such goods or services, or identity of such business.[52] Thus, while there is confusion of goods when the products are competing, confusion of business exists when the products are non-competing but related enough to produce confusion of affiliation. [53]

On Whether Confusion of Goods and Confusion of Business are Applicable

Petitioners claim that respondents use of the Big Mak mark on respondents hamburgers results in confusion of goods, parti cularly with respect topetitioners hamburgers labeled Big Mac. Thus, petitioners alleged in their complaint: 1.15. Defendants have unduly prejudiced and clearly infringed upon the property rights of plaintiffs in the McDonalds Marks, particularly the mark B[ig] M[ac]. Defendants unauthorized acts are likely, and calculated, to confuse, mislead or deceive the public into believing that the products and services offered by defendant Big Mak Burger, and the business it is engaged in, are approved and sponsored by, or affiliated with, plaintiffs.[54] (Emphasis supplied)

Since respondents used the Big Mak mark on the same goods, i.e. hamburger sandwiches, that petitioners Big Mac mark is used, trademark infringement through confusion of goods is a proper issue in this case.

Petitioners also claim that respondents use of the Big Mak mark in the sale of hamburgers, the same business that petition ers are engaged in, results in confusion of business. Petitioners alleged in their complaint: 1.10. For some period of time, and without the consent of plaintiff McDonalds nor its licensee/franchisee, plaintiff McGeorge, and in clear violation of plaintiffs exclusive right to useand/or appropriate the McDonalds marks, defendant Big Mak Burger acting through individual defendants, has been operating Big Mak Burger, a fast food restaurant business dealing in the sale of hamburger and cheeseburger sandwiches, french fries and other food products, and has caused to be printed on the wrapper of defendants food products and incorporated in its signages the name Big Mak Burger, which is confusingly similar to and/or is a colorable imitation of the plaintiff McDonalds mark B[ig] M[ac], xxx. Defendant Big Mak Burger has thus unjustly created the impression that its business is approved and sponsored by, or affiliated with, plaintiffs. xxxx

2.2 As a consequence of the acts committed by defendants, which unduly prejudice and infringe upon the property rights of plaintiffs McDonalds and McGeorge as the real owner and rightful proprietor, and the licensee/franchisee, respectively, of the McDonalds marks, and which are likely to have caused confusion or deceived the public as to the true source, sponsorship or affiliation of defendants food products and restaurant business , plaintiffs have suffered and continue to suffer actual damages in the form of injury to their business reputation and goodwill, and of the dilution of the distinctive quality of the McDonalds marks, in particular, the mark B[ig] M[ac].[55] (Emphasis supplied)

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Respondents admit that their business includes selling hamburger sandwiches, the same food product that petitioners sell using the Big Mac mark. Thus, trademark infringement through confusion of business is also a proper issue in this case.

Respondents assert that their Big Mak hamburgers cater mainly to the low-income group while petitioners Big Mac hamburgers cater to the middle and upper income groups. Even if this is true, the likelihood of confusion of business remains, since the low-income group might be led to believe that the Big Mak hamburgers are the low-end hamburgers marketed by petitioners. After all, petitioners have the exclusive right to use the Big Mac mark. On the other hand,respondents would benefit by associating their low-end hamburgers, through the use of the Big Mak

mark, with petitioners high-end Big Mac hamburgers, leading to likelihood of confusion in the identity of business.

Respondents further claim that petitioners use the Big Mac mark only on petitioners double -decker hamburgers, while respondents use the Big Mak mark on hamburgers and other products like siopao, noodles and pizza. Respondents also point out that petitione rs sell their Big Mac double-deckers in a styrofoam box with the McDonalds logo and trademark in red, block letters at a price more expensive than the hamburgers of respondents. In contrast, respondents sell their Big Mak hamburgers in plastic wrappers and plastic bags. Respondents further point out that petitioners restaurants are air-conditioned buildings with drive-thru service, compared to respondents mobile vans.

These and other factors respondents cite cannot negate the undisputed fact that respondents use their Big Mak mark on hambu rgers, the same food product that petitioners sell with the use of their registered mark Big Mac. Whether a hamburger is single, double or triple-decker,

and whether wrapped in plastic or styrofoam, it remains the same hamburger food product. Even respondents use of the Big Mak mark on non hamburger food products cannot excuse their infringement of petitioners registered mark, otherwise registered marks will lose their protection under the law.

The registered trademark owner may use his mark on the same or similar products, in different segments of the market, and at different price levels depending on variations of the products for specific segments of the market. The Court has recognized that the registered trademark owner enjoys protection in product and market areas that are the normal potential expansion of his business. Thus, the Court has declared: Modern law recognizes that the protection to which the owner of a trademark is entitled is not limited to guarding his goods or business from actual market competition with identical or similar products of the parties, but extends to all cases in which the use by a junior appropriator of a trade-mark or trade-name is likely to lead to a confusion of source, as where prospective purchasers would be misled into thinking that the complaining party has extended his business into the

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field (see 148 ALR 56 et seq; 53 Am Jur. 576) or is in any way connected with the activities of the infringer; or when it forestalls the normal potential expansion of his business (v. 148 ALR, 77, 84; 52 Am. Jur. 576, 577). [56] (Emphasis supplied)

On Whether Respondents Use of the Big Mak Mark Results in Likelihood of Confusion

In determining likelihood of confusion, jurisprudence has developed two tests, the dominancy test and the holistic test. [57] The dominancy test focuses on the similarity of the prevalent features of the competing trademarks that might cause confusion. In contrast, the holistic test requires the court to consider the entirety of the marks as applied to the products, including the labels and packaging, in determining confusing similarity.

The Court of Appeals, in finding that there is no likelihood of confusion that could arise in the use of respondents Big Mak mark on hamburgers, relied on the holistic test. Thus, the Court of Appeals ruled that it is not sufficient that a similarity exists in both name(s), but that more importantly, the overall presentation, or in their essential, substantive and distinctive parts is such as would likely MISLEAD or CONFUSE persons in the ordinary course of purchasing the genuine article. The holistic test considers the two marks in their entirety, as they appear on the goods with their labels and packaging. It is not enough to consider their words and compare the spelling and pronunciation of the words.[58]

Respondents now vigorously argue that the Court of Appeals application of the holistic test to this case is correct and in accord with prevailing jurisprudence.

This Court, however, has relied on the dominancy test rather than the holistic test. The dominancy test considers the dominant features in the competing marks indetermining whether they are confusingly similar. Under the dominancy test, courts give greater weight to the similarity of the appearance of the product arising fromthe adoption of the dominant features of the registered mark, disregarding minor differences.[59] Courts will consider more the aural and visual impressions created by the marks in the public mind, giving little weight to factors like prices, quality, sales outlets and market segments.

Thus, in the 1954 case of Co Tiong Sa v. Director of Patents,[60] the Court ruled: xxx It has been consistently held that the question of infringement of a trademark is to be determined by the test of dominancy. Similarity in size, form and color, while relevant, is not conclusive. If the competing trademark contains the main or essential or dominant features of another, and confusion and deception is likely to result, infringement takes place . Duplication or imitation is not necessary; nor is it necessary that the infringing label should suggest an effort to imitate. (G. Heilman Brewing Co. vs. Independent Brewing Co., 191 F., 489, 495, citing Eagle White Lead Co. vs. Pflugh (CC) 180 Fed. 579). The question at issue in cases of infringement of trademarks is whether the use of the marks involved would be likely to

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cause confusion or mistakes in the mind of the public or deceive purchasers. (Auburn Rubber Corporation vs. Honover Rubber Co., 107 F. 2d 588; xxx) (Emphasis supplied.)

The Court reiterated the dominancy test in Lim Hoa v. Director of Patents,[61] Phil. Nut Industry, Inc. v. Standard Brands Inc.,[62] Converse Rubber Corporation v. Universal Rubber Products, Inc.,[63] and Asia Brewery, Inc. v. Court of Appeals.[64] of Societe Des Produits Nestl, S.A. v. Court of Appeals,[65] the Court explicitly rejected the holistic test in this wise: [T]he totality or holistic test is contrary to the elementary postulate of the law on trademarks and unfair competition that confusing similarity is to be determined on the basis ofvisual, aural, connotative comparisons and overall impressions engendered by the marks in controversy as they are encountered in the realities of the marketplace. (Emphasis supplied) In the 2001 case

The test of dominancy is now explicitly incorporated into law in Section 155.1 of the Intellectual Property Code which defines infringement as the colorable imitation of a registered mark xxx or a dominant feature thereof.

Applying the dominancy test, the Court finds that respondents use of the Big Mak mark results in likelihood of confusion. First, Big Mak sounds exactlythe same as Big Mac. Second, the first word in Big Mak is exactly the same as the first word in Big Mac. Third, the first two letters in Mak are the same as the first two letters in Mac. Fourth, the last letter in Mak while a k sounds the same as c when the word Mak is pronounced. Fifth, in Filipino, the letter k replaces c in spelling, thus Caloocan is spelled Kalookan.

In short, aurally the two marks are the same, with the first word of both marks phonetically the same, and the second word of both marks also phonetically the same. Visually, the two marks have both two words and six letters, with the first word of both marks having the same letters and the second word having the same first two letters. In spelling, considering the Filipino language, even the last letters of both marks are the same.

Clearly, respondents have adopted in Big Mak not only the dominant but also almost all the features of Big Mac. Applied to the same food product of hamburgers, the two marks will likely result in confusion in the public mind.

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The Court has taken into account the aural effects of the words and letters contained in the marks in determining the issue of confusing similarity. Thus, inMarvex Commercial Co., Inc. v. Petra Hawpia & Co., et al. ,[66] the Court held:

The following random list of confusingly similar sounds in the matter of trademarks, culled from Nims, Unfair Competition and Trade Marks, 1947, Vol. 1, will reinforce our view that SALONPAS and LIONPAS are confusingly similar in sound: Gold Dust and Gold Drop; Jantzen and Jass-Sea; Silver Flash and Supper Flash; Cascarete and Celborite; Celluloid and Cellonite; Chartreuse and Charseurs; Cutex and Cuticlean; Hebe and Meje; Kotex and Femetex; Zuso and Hoo Hoo. Leon Amdur, in his book Trade-Mark Law and Practice, pp. 419-421, cities, as coming within the purview of the idem sonans rule, Yusea and U-C-A, Steinway Pianos and Steinberg Pianos, and Seven-Up and Lemon-Up. In Co Tiong vs. Director of Patents, this Court unequivocally said that Celdura and Cordura are confusingly similar in sound; this Court held in Sapolin Co. vs. Balmaceda, 67 Phil. 795 that the name Lusolin is an infringement of the trademark Sapolin, as the sound of the two names is almost the same. (Emphasis supplied)

Certainly, Big Mac and Big Mak for hamburgers create even greater confusion, not only aurally but also visually.

Indeed, a person cannot distinguish Big Mac from Big Mak by their sound. When one hears a Big Mac or Big Mak hamburger advertisement over the radio, one would not know whether the Mac or Mak ends with a c or a k.

Petitioners aggressive promotion of the Big Mac mark, as borne by their advertisement expenses, has built goodwill and reputation for such mark making it one of the easily recognizable marks in the market today. This increases the likelihood that consumers will mistakenly associate petitioners hamburgers and business with those of respondents.

Respondents inability to explain sufficiently how and why they came to choose Big Mak for their hamburger sandwiches indicates their intent to imitate petitioners Big Mac mark. Contrary to the Court of Appeals finding, respondents claim that their Big Mak mark was inspired by the first names of respondent Dys mother (Maxima) and father (Kimsoy) is not credible. As petitioners well noted:

[R]espondents, particularly Respondent Mr. Francis Dy, could have arrived at a more creative choice for a corporate name by using the names of his parents, especially since he was allegedly driven by sentimental reasons. For one, he could have put his fathers name ahead of his mothers, as is usually done in this patriarchal society, an d derived letters from said names in that order. Or, he could have taken an equal number of letters (i.e., two) from each name, as is the more usual thing done. Surely, the more plausible reason behind Respondents choice of the word M[ak], especially when taken in conjunction with the word B[ig], was their intent to take advantage of Petitioners xxx B[ig] M[ac] trademark, with their alleged sentiment-focused explanation merely thought of as a convenient, albeit unavailing, excuse or defense for such an unfair choice of name.[67]

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Absent proof that respondents adoption of the Big Mak mark was due to honest mistake or was fortuitous,[68] the inescapable conclusion is that respondents adopted the Big Mak mark to ride on the coattails of the more established Big Mac mark. [69] This saves respondents much of the expense in advertising to create market recognition of their mark and hamburgers. [70]

Thus, we hold that confusion is likely to result in the public mind. We sustain petitioners claim of trademark infringement.

On the Lack of Proof of Actual Confusion

Petitioners failure to present proof of actual confusion does not negate their claim of trademark infringement. As noted in American Wire & Cable Co. v. Director of Patents,[71] Section 22 requires the less stringent standard of likelihood of confusion only. While proof of actual confusion is the best evidence of infringement, its absence is inconsequential.[72]

On the Issue of Unfair Competition

Section 29 (Section 29)[73] of RA 166 defines unfair competition, thus: xxxx

Any person who will employ deception or any other means contrary to good faith by which he shall pass off the goods manufactured by him or in which he deals, or his business, or services for those of the one having established such goodwill, or who shall commit any acts calculated to produce said result, shall be guilty of unfair competition, and shall be subject to an action therefor. In particular, and without in any way limiting the scope of unfair competition, the following shall be deemed guilty of unfair competition:

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(a) Any person, who in selling his goods shall give them the general appearance of goods of another manufacturer or dealer, either as to the goods themselves or in the wrapping of the packages in which they are contained, or the devices or words thereon, or in any feature of their appearance, which would be likely to influence purchasers to believe that the goods offered are those of a manufacturer or dealer, other than the actual manufacturer or dealer, or who otherwise clothes the goods with such appearance as shall deceive the public and defraud another of his legitimate trade, or any subsequent vendor of such goods or any agent of any vendor engaged in selling such goods with a like purpose; (b) Any person who by any artifice, or device, or who employs any other means calculated to induce the false belief that such person is offering the services of another who has identified such services in the mind of the public; or (c) Any person who shall make any false statement in the course of trade or who shall commit any other act contrary to good faith of a nature calculated to discredit the goods, business or services of another. (Emphasis supplied)

The essential elements of an action for unfair competition are (1) confusing similarity in the general appearance of the goods, and (2) intent to deceive the public and defraud a competitor.[74] The confusing similarity may or may not result from similarity in the marks, but may result from other external factors in the packaging or presentation of the goods. The intent to deceive and defraud may be inferred from the similarity of the appearance of the goods as offered for sale to the public.[75] Actual fraudulent intent need not be shown.[76]

Unfair competition is broader than trademark infringement and includes passing off goods with or without trademark infringement. Trademark infringement is a form of unfair competition.[77] Trademark infringement constitutes unfair competition when there is not merely likelihood of confusion, but also actual or probable deception on the public because of the general appearance of the goods. There can be trademark infringement without unfair competition as when the infringer discloses on the labels containing the mark that he manufactures the goods, thus preventing the public from being deceived that the goods originate from the trademark owner. [78]

To support their claim of unfair competition, petitioners allege that respondents fraudulently passed off their hamburgers as Big Mac hamburgers. Petitioners add that respondents fraudulent intent can be inferred from the similarity of the marks in question. [79]

Passing off (or palming off) takes place where the defendant, by imitative devices on the general appearance of the goods, misleads prospective purchasers into buying his merchandise under the impression that they are buying that of his competitors. [80] Thus, the defendant gives his goods the general appearance of the goods of his competitor with the intention of deceiving the public that the goods are those of his competitor.

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The RTC described the respective marks and the goods of petitioners and respondents in this wise:

The mark B[ig] M[ac] is used by plaintiff McDonalds to identify its double decker hamburger sandwich. The packaging material is a styrofoam box with the McDonalds logo and trademark in red with block capital letters printed on it. All letters of the B[ig] M[ac] mark are also in red and block capital letters. On the other hand, defendants B[ig] M[ak] script print is in orange with only the letter B and M being capitalized and the packaging material is plastic wrapper. xxxx Further, plaintiffs logo and mascot are the umbrella M and Ronald McDonalds, respectively, compared to the mascot of defendant Corporation which is a chubby boy called Macky displayed or printed between the words Big and Mak.[81](Emphasis supplied)

Respondents point to these dissimilarities as proof that they did not give their hamburgers the general appearance of petitio ners Big Mac hamburgers.

The dissimilarities in the packaging are minor compared to the stark similarities in the words that give respondents Big Mak hamburgers the general appearance of petitioners Big Mac hamburgers. Section 29(a) expressly provides that the similarity in the general appearance of the goods may be in the devices or words used on the wrappings. Respondents have applied on their plastic wrappers and bags almost the same words that petitioners use on their styrofoam box. What attracts the attention of the buying public are the words Big Mak which are almost the same, aurally and visually, as the words Big Mac. The dissimilarities in the material and other devices are insignificant compared to the glaring similarity in the words used in the wrappings.

Section 29(a) also provides that the defendant gives his goods the general appearance of goods of another manufacturer. Respondents goods are hamburgers which are also the goods of petitioners. If respondents sold egg sandwiches only instead of hamburger sandwiches, their use of the Big Mak mark would not give their goods the general appearance of petitioners Big Mac hamburgers. In such case, there is only trademark infringement but no unfair competition. However, since respondents chose to apply the Big Mak mark on hamburgers, just like petitioners use of the Big Mac mark on hamburgers, respondents have obviously clothed their goods with the general appearance of petitioners goods.

Moreover, there is no notice to the public that the Big Mak hamburgers are products of L.C. Big Mak Burger, Inc. Respondents introduced during the trial plastic wrappers and bags with the words L.C. Big Mak Burger, Inc. to inform the public of the name of the seller of the

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hamburgers. However, petitioners introduced during the injunctive hearings plastic wrappers and bags with the Big Mak mark without the name L.C. Big Mak Burger, Inc. Respondents belated presentation of plastic wrappers and bags bearing the name of L.C. Big Mak Burger, Inc. as the seller of the hamburgers is an after-thought designed to exculpate them from their unfair business conduct. As earlier stated, we cannot consider respondents evidence since petitioners complaint was based on facts existing before and during the injunctive hearings.

Thus, there is actually no notice to the public that the Big Mak hamburgers are products of L.C. Big Mak Burger, Inc. and not those of petitioners who have the exclusive right to the Big Mac mark. This clearly shows respondents intent to deceive the public. Had respondents placed a notice on their plastic wrappers and bags that the hamburgers are sold by L.C. Big Mak Burger, Inc., then they cou ld validly claim that they did not intend to deceive the public. In such case, there is only trademark infringement but no unfair competition. [82] Respondents, however, did not give such notice. We hold that as found by the RTC, respondent corporation is liable for unfair competition.

The Remedies Available to Petitioners

Under Section 23[83] (Section 23) in relation to Section 29 of RA 166, a plaintiff who successfully maintains trademark infringement and unfair competition claims is entitled to injunctive and monetary reliefs. Here, the RTC did not err in issuing the injunctive writ of 16 August 1990 (made permanent in its Decision of 5 September 1994) and in ordering the payment of P400,000 actual damages in favor of petitioners. The injunctive writ is indispensable to prevent further acts of infringement by respondent corporation. Also, the amount of actual damages is a reasonable percentage (11.9%) of respondent corporations gross sales for three (1988 -1989 and 1991) of the six years (1984-1990) respondents have used the Big Mak mark.[84]

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The RTC also did not err in awarding exemplary damages by way of correction for the public good [85] in view of the finding of unfair competition where intent to deceive the public is essential. The award of attorneys fees and expenses of litigation is also in order.[86]

WHEREFORE, we GRANT the instant petition. We SET ASIDE the Decision dated 26 November 1999 of the Court of Appeals and its Resolution dated 11 July 2000 and REINSTATE the Decision dated 5 September 1994 of the Regional Trial Court of Makati, Branch 137,

finding respondent L.C. Big Mak Burger, Inc. liable for trademark infringement and unfair competition.

SO ORDERED.

MCDONALDS CORPORATION and MCGEORGE FOOD INDUSTRIES, INC., Petitioners,

G.R. No. 143993

Present: Davide, Jr., C.J., Chairman, - versus Quisumbing, Ynares-Santiago, Carpio, and Azcuna, JJ.

L.C. BIG MAK BURGER, INC., FRANCIS B. DY, EDNA A. DY, RENE B. DY, WILLIAM B. DY, JESUS AYCARDO, ARACELI AYCARDO, and GRACE HUERTO, Respondents. Promulgated: August 18, 2004

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

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DECISION

CARPIO, J.:

The Case

This is a petition for review[1] of the Decision dated 26 November 1999 of the Court of Appeals[2] finding respondent L.C. Big Mak Burger, Inc. not liable for trademark infringement and unfair competition and ordering petitioners to pay respondents P1,900,000 in damages, and of its Resolution dated 11 July 2000 denying reconsideration. The Court of Appeals Decision reversed the 5 September 1994 Decision [3] of

the Regional Trial Court of Makati, Branch 137, finding respondent L.C. Big Mak Burger, Inc. liable for trademark infringement and unfair competition.

The Facts

Petitioner McDonalds Corporation (McDonalds) is a corporation organized under the laws of Delaware, United States. McDonalds operates, by itself or through its franchisees, a global chain of fast-food restaurants. McDonalds[4] owns a family of marks[5] including the Big Mac mark for its double-decker hamburger sandwich.[6] McDonalds registered this trademark with the United States Trademark Registry on 16 October 1979.[7] Based on this Home Registration, McDonalds applied for the registration of the same mark in the Principal Register of the then Philippine Bureau of Patents, Trademarks and Technology (PBPTT),now the Intellectual Property Office (IPO). Pending approval of its application,

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McDonalds introduced its Big Mac hamburger sandwiches in the Philippine market in September 1981. On 18 July 1985, the PBPTT allowed registration of the Big Mac mark in the Principal Register based on its Home Registration in the United States.

Like its other marks, McDonalds displays the Big Mac mark in items [8] and paraphernalia[9] in its restaurants, and in its outdoor and indoor signages. From 1982 to 1990, McDonalds spent P10.5 million in advertisement for Big Mac hamburger sandwiches alone.[10]

Petitioner McGeorge Food Industries (petitioner McGeorge), a domestic corporation, is McDonalds Ph ilippine franchisee.[11]

Respondent L.C. Big Mak Burger, Inc. (respondent corporation) is a domestic corporation which operates fast -food outlets and snack vans in Metro Manila and nearby provinces.[12] Respondent corporations menu includes hamburger sandwiches and other food items.[13] Respondents Francis B. Dy, Edna A. Dy, Rene B. Dy, William B. Dy, Jesus Aycardo, Araceli Aycardo, and Grace Huerto (private respondents) are the incorporators, stockholders and directors of respondent corporation.[14]

On 21 October 1988, respondent corporation applied with the PBPTT for the registration of the Big Mak mark for its hamburger sandwiches. McDonalds opposed respondent corporations application on the ground that Big Mak was a colorable imitation of its registered Big Mac mark for the same food products. McDonalds also informed respondent Francis Dy (respondent Dy), the ch airman of the Board of Directors of respondent corporation, of its exclusive right to the Big Mac mark and requested him to desist from using the Big Mac mark or any similar mark.

Having received no reply from respondent Dy, petitioners on 6 June 1990 sued respondents in the Regional Trial Court of Makati, Branch 137 (RTC), for trademark infringement and unfair competition. In its Order of 11 July 1990, the RTC issued a temporary restraining order (TRO) against respondents enjoining them from using the Big Mak mark in the operation of their business in the National Capital Region.[15] On 16 August 1990, the RTC issued a writ of preliminary injunction replacing the TRO.[16]

In their Answer, respondents admitted that they have been using the name Big Mak Burger for their fast -food business. Respondents claimed, however, that McDonalds does not have an exclusive right to the Big Mac mark or to any other similar mark. Respondents point out that the Isaiyas Group of Corporations (Isaiyas Group) registered the same mark for hamburger sandwiches wit h the PBPTT on 31 March 1979. One

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Rodolfo Topacio (Topacio) similarly registered the same mark on 24 June 1983, prior to McDonalds registration on 18 July 1985. Alternatively, respondents claimed that they are not liable for trademark infringement or fo r unfair competition, as the Big Mak mark they sought to register does not constitute a colorable imitation of the Big Mac mark. Respondents asserted that they did not fraudulently pass off thei r hamburger sandwiches as those of petitioners Big Mac hamburgers.[17] Respondents sought damages in their counterclaim.

In their Reply, petitioners denied respondents claim that McDonalds is not the exclusive owner of the Big Mac mark. Petitioners asserted that while the Isaiyas Group and Topacio did register the Big Mac mark ahead of McDonalds, the Isaiyas Group did so only i n the Supplemental Register of the PBPTT and such registration does not provide any protection. McDonalds disclosed that it had acquired Topacios rights to his registration in a Deed of Assignment dated 18 May 1981. [18]

The Trial Courts Ruling

On 5 September 1994, the RTC rendered judgment (RTC Decision) finding respondent corporation liable for trademark infringement and unfair competition.However, the RTC dismissed the complaint against private respondents and the counterclaim against petitioners for lack of merit and insufficiency of evidence. The RTC held: Undeniably, the mark B[ig] M[ac] is a registered trademark for plaintiff McDonalds, and as such, it is entitled [to] protection against infringement.

xxxx There exist some distinctions between the names B[ig] M[ac] and B[ig] M[ak] as appearing in the respective signages, wrappers and containers of the food products of the parties. But infringement goes beyond the physical features of the questioned name and the original name. There are still other factors to be considered.

xxxx

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Significantly, the contending parties are both in the business of fast-food chains and restaurants. An average person who is hungry and wants to eat a hamburger sandwich may not be discriminating enough to look for a McDonalds restaurant and buy a B[ig] M[ac] hamburger. Once he sees a stall selling hamburger sandwich, in all likelihood, he will dip into his pocket and order a B[ig] M[ak] hamburger sandwich. Plaintiff McDonalds fast-food chain has attained wide popularity and acceptance by the consuming public so much so that its air-conditioned food outlets and restaurants will perhaps not be mistaken by many to be the same as defendant corporations mobile snack vans located along busy streets or highways. But the thing is that what is being sold by both contending parties is a food item a hamburger sandwich which is for immediate consumption, so that a buyer may easily be confused or deceived into thinking that the B[ig] M[ak] hamburger sandwich he bought is a foodproduct of plaintiff McDonalds, or a subsidiary or allied outlet thereof. Surely, defendant corporation has its own secret ingredients to make its hamburger sandwiches as palatable and as tasty as the other brands in the market, considering the keen competition among mushrooming hamburger stands and multinational fast-food chains and restaurants. Hence, the trademark B[ig] M[ac] has been infringed by defendant corporation when it used the name B[ig] M[ak] in its signages, wrappers, and containers in connection with its food business. xxxx

Did the same acts of defendants in using the name B[ig] M[ak] as a trademark or tradename in their signages, or in causing the name B[ig] M[ak] to be printed on the wrappers and containers of their food products also constitute an act of unfair competition under Section 29 of the Trademark Law?

The answer is in the affirmative. xxxx

The xxx provision of the law concerning unfair competition is broader and more inclusive than the law concerning the infringement of trademark, which is of more limited range, but within its narrower range recognizes a more exclusive right derived by the adoption and registration of the trademark by the person whose goods or services are first associated therewith. xxx Notwithstanding the distinction between an action for trademark infringement and an action for unfair competition, however, the law extends substantially the same relief to the injured party for both cases. (See Sections 23 and 29 of Republic Act No. 166)

Any conduct may be said to constitute unfair competition if the effect is to pass off on the public the goods of one man as the goods of another. The choice of B[ig] M[ak] as tradename by defendant corporation is not merely for sentimental reasons but was clearly made to take advantage of the reputation, popularity and the established goodwill of plainti ff McDonalds. For, as stated in Section 29, a person is guilty of unfair competition who in selling his goods shall give them the general appearance, of goods of another manufacturer or dealer, either as to the goods themselves or in the wrapping of the packages in which they are contained, or the devices or words thereon, or in any other feature of their appearance, which would likely influence purchasers to believe that the goods offered are those of a manufacturer or dealer other than the actual manufacturer or dealer. Thus, plaintiffs have established their valid cause of action against the defendants for trademark infringement and unfair competition and for damages.[19]

The dispositive portion of the RTC Decision provides: WHEREFORE, judgment is rendered in favor of plaintiffs McDonalds Corporation and McGeorge Food Industries, Inc. and against defendant L.C. Big Mak Burger, Inc., as follows:

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1.

The writ of preliminary injunction issued in this case on [16 August 1990] is made permanent;

2. Defendant L.C. Big Mak Burger, Inc. is ordered to pay plaintiffs actual damages in the amount of P400,000.00, exemplary damages in the amount of P100,000.00, and attorneys fees and expenses of litigation in the amount of P100,000.00;

3. The complaint against defendants Francis B. Dy, Edna A. Dy, Rene B. Dy, Wiliam B. Dy, Jesus Aycardo, Araceli Aycardo and Grace Huerto, as well as all counter-claims, are dismissed for lack of merit as well as for insufficiency of evidence.[20]

Respondents appealed to the Court of Appeals.

The Ruling of the Court of Appeals

On 26 November 1999, the Court of Appeals rendered judgment (Court of Appeals Decision) reversing the RTC Decision and ordering McDonalds to pay respondents P1,600,000 as actual and compensatory damages and P300,000 as moral damages. The Court of Appeals held:

Plaintiffs-appellees in the instant case would like to impress on this Court that the use of defendants-appellants of its corporate name the whole L.C. B[ig] M[ak] B[urger], I[nc]. which appears on their food packages, signages and advertisements is an infringement of their trademark B[ig] M[ac] which they use to identify [their] double decker sandwich, sold in a Styrofoam box packaging material with the McDonalds logo of umbrella M stamped ther eon, together with the printed mark in red bl[o]ck capital letters, the words being separated by a single space. Specifically, plaintiffs-appellees argue that defendants-appellants use of their corporate name is a colorable imitation of their trademark Big Mac.

xxxx

To Our mind, however, this Court is fully convinced that no colorable imitation exists. As the definition dictates, it is not sufficient that a similarity exists in both names, but that more importantly, the over-all presentation, or in their essential, substantive and distinctive parts is such as would likely MISLEAD or CONFUSE persons in the ordinary course of purchasing the genuine article. A careful comparison of the way the trademark B[ig] M[ac] is being used b y plaintiffs-appellees and corporate name L.C. Big Mak Burger, Inc. by defendants-appellants, would readily reveal that no confusion could take place, or that the ordinary purchasers would be misled by it. As pointed out by defendants-appellants, the plaintiffs-appellees trademark is used to designate only one product, a double decker sandwich sold in a Styrofoam box with the McDonalds logo. On the other hand, what the defendants-appellants corporation is using is not a trademark for its food product but a business or corporate name. They use the business name L.C. Big Mak Burger, Inc. in their restaurant business which serves diversified food items such as siopao, noodles, pizza, and sandwiches such as hotdog, ham, fish burger and hamburger. Secondly, defendantsappellants corporate or business name appearing in the food packages and signages are written in silhouette red -orange letters with the b and m in upper case letters. Above the words Big Mak are the upper case letter L.C.. Below the words Big

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Mak are the words Burger, Inc. spelled out in upper case letters. Furthermore, said corporate or business name appearing in such food packages and signages is always accompanied by the company mascot, a young chubby boy named Maky who wears a red T-shirt with the upper case m appearing therein and a blue lower garment. Finally, the defendants-appellants food packages are made of plastic material.

xxxx

xxx [I]t is readily apparent to the naked eye that there appears a vast difference in the appearance of the product and the manner that the tradename Big Mak is being used and presented to the public. As earlier noted, there are glaring dissimilarities between plaintiffs-appellees trademark and defendants-appellants corporate name. Plaintiffs-appellees product carrying the trademark B[ig] M[ac] is a double decker sandwich (depicted in the tray mat containing photographs of the various food products xxx sold in a Styrofoam box with the McDonalds logo and tr ademark in red, bl[o]ck capital letters printed thereon xxx at a price which is more expensive than the defendants-appellants comparable food products. In order tobuy a Big Mac, a customer needs to visit an air-conditioned McDonalds restaurant usually located in a nearby commercial center, advertised and identified by its logo - the umbrella M, and its mascot Ronald McDonald. A typical McDonalds restaurant boasts of a playground for kids, a second floor to accommodate additional customers, a drive-thru to allow customers with cars to make orders without alighting from their vehicles, the interiors of the building are well-lighted, distinctly decorated and painted with pastel colors xxx. In buying a B[ig] M[ac], it is necessary to specify it by its trademark. Thus, a customer needs to look for a McDonalds and enter it first before he can find a hamburger sandwich which carry the mark Big Mac. On the other hand, defendants-appellants sell their goods through snack vans xxxx Anent the allegation that defendants-appellants are guilty of unfair competition, We likewise find the same untenable. Unfair competition is defined as the employment of deception or any other means contrary to good faith by which a person shall pass off the goods manufactured by him or in which he deals, or his business, or service, for those of another who has already established good will for his similar good, business or services, or any acts calculated to produce the same result (Sec. 29, Rep. Act No. 166, as amended). To constitute unfair competition therefore it must necessarily follow that there was malice and that the entity concerned was in bad faith. In the case at bar, We find no sufficient evidence adduced by plaintiffs-appellees that defendants-appellants deliberately tried to pass off the goods manufactured by them for those of plaintiffs-appellees. The mere suspected similarity in the sound of the defendants-appellants corporate name with the plaintiffs-appellees trademark is not sufficient evidence to conclude unfair competition. Defendants-appellants explained that the name M[ak] in their corporate name was derived from both the first names of the mother and father of defendant Francis Dy, whose names are Maxima and Kimsoy. With this explanation, it is up to the plaintiffs-appellees to prove bad faith on the part of defendants-appellants. It is a settled rule that the law always presumes good faith such that any person who seeks to be awarded damages due to acts of another has the burden of proving that the latter acted in bad faith or with ill motive. [21]

Petitioners sought reconsideration of the Court of Appeals Decision but the appellate court denied their motion in its Resolution of 11 July 2000.

Hence, this petition for review.

Petitioners raise the following grounds for their petition:

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I. THE COURT OF APPEALS ERRED IN FINDING THAT RESPONDENTS CORPORATE NAME L.C. BIG MAK BURGER, INC. IS NOT A COLORABLE IMITATION OF THE MCDONALDS TRADEMARK BIG MAC, SUCH COLORABLE IMITATION BEING AN ELEMENT OF TRADEMARK INFRINGEMENT. Respondents use the words Big Mak as trademark for their products and not merely as their business or corporate name.

A.

B.

As a trademark, respondents Big Mak is undeniably and unquestionably similar to petitioners Big Mac trademark based on the dominancy test and the idem sonans test resulting inexorably in confusion on the part of the consuming public.

II. THE COURT OF APPEALS ERRED IN REFUSING TO CONSIDER THE INHERENT SIMILARITY BETWEEN THE MARK BIG MAK AND THE WORD MARK BIG MAC AS AN INDICATION OF RESPONDENTS INTENT TO DECEIVE OR DEFRAUD FOR PURPOSES OF ESTABLISHING UNFAIR COMPETITION.[22]

Petitioners pray that we set aside the Court of Appeals Decision and reinstate the RTC De cision.

In their Comment to the petition, respondents question the propriety of this petition as it allegedly raises only questions of fact. On the merits, respondents contend that the Court of Appeals committed no reversible error in finding them not liable for trademark infringement and unfair competition and in ordering petitioners to pay damages.

The Issues

The issues are:

1. Procedurally, whether the questions raised in this petition are proper for a petition for review under Rule 45.

2.

On the merits, (a) whether respondents used the words Big Mak not only as part of the corporate name L.C. Big Mak Burger, Inc.

but also as a trademark for their hamburger products, and (b) whether respondent corporation is liable for trademark infringement and unfair competition.[23]

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The Courts Ruling

The petition has merit.

On Whether the Questions Raised in the Petition are Proper for a Petition for Review

A party intending to appeal from a judgment of the Court of Appeals may file with this Court a petition for review under Section 1 of Rule 45 (Section 1)[24]raising only questions of law. A question of law exists when the doubt or difference arises on what the law is on a certain state of facts. There is a question of fact when the doubt or difference arises on the truth or falsity of the alleged facts. [25]

Here, petitioners raise questions of fact and law in assailing the Court of Appeals findings on respondent corporations non-liability for trademark infringement and unfair competition. Ordinarily, the Court can deny due course to such a petition. In view, however, of the contradictory findings of fact of the RTC and Court of Appeals, the Court opts to accept the petition, this being one of the recognized exceptions to Section 1.[26] We took a similar course of action in Asia Brewery, Inc. v. Court of Appeals[27] which also involved a suit for trademark infringement and unfair competition in which the trial court and the Court of Appeals arrived at conflicting findings.

On the Manner Respondents Used Big Mak in their Business

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Petitioners contend that the Court of Appeals erred in ruling that the corporate name L.C. Big Mak Burger, Inc. appears in the packaging for respondents hamburger products and not the words Big Mak only.

The contention has merit.

The evidence presented during the hearings on petitioners motion for the issuance of a writ of preliminary injunction shows that the plastic wrappings and plastic bags used by respondents for their hamburger sandwiches bore the words Big Mak. The other descriptive words burger and 100% pure beef were set in smaller type, along with the locations of branches. [28] Respondents cash invoices simply refer to their hamburger sandwiches as Big Mak.[29] It is respondents snack vans that carry the words L.C. Big Mak Burger, Inc.[30]

It was only during the trial that respondents presented in evidence the plastic wrappers and bags for their hamburger sandwiches relied on by the Court of Appeals.[31] Respondents plastic wrappers and bags were identical with those petitioners presented during the hearings for the injunctive writ except that the letters L.C. and the words Burger, Inc. in respondents evidence were added above and below the words Big Mak, respectively. Since petitioners complaint was based on facts existing before and during the hearings on the injunctive writ, the facts established during those hearings are the proper factual bases for the disposition of the issues raised in this petition.

On the Issue of Trademark Infringement

Section 22 (Section 22) of Republic Act No. 166, as amended (RA 166), the law applicable to this case, [32] defines trademark infringement as follows:

Infringement, what constitutes. Any person who [1] shall use, without the consent of the registrant, any reproduction, counterfeit, copy or colorable imitation of any registered mark or trade-name in connection with the sale, offering for sale, or advertising of any goods, business or services on or in connection with which such use is likely to cause confusion or mistake or to deceive purchasers or others as to the source or origin of such goods or services, or identity of such business; or [2] reproduce, counterfeit, copy, or colorably imitate any such mark or trade-name and apply such reproduction, counterfeit, copy, or colorable imitation to labels, signs, prints, packages, wrappers, receptacles or advertisements intended to be used uponor in connection with such goods, business or services, shall be liable to a civil action by the registrant for any or all of the remedies herein provided.[33]

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Petitioners base their cause of action under the first part of Section 22, i.e. respondents allegedly used, without petitioners consent, a colorable imitation of the Big Mac mark in advertising and selling respondents hamburger sandwiches. This likely caused confusion in the mind of the purchasing public on the source of the hamburgers or the identity of the business.

To establish trademark infringement, the following elements must be shown: (1) the validity of plaintiffs mark; (2) the plaintiffs ownership of the mark; and (3)the use of the mark or its colorable imitation by the alleged infringer results in likelihood of confusion.[34] Of these, it is the element of likelihood of confusion that is the gravamen of trademark infringement. [35]

On the Validity of the Big MacMark and McDonalds Ownership of such Mark

A mark is valid if it is distinctive and thus not barred from

registration under Section 4[36] of RA 166 (Section 4). However, once registered, not only the marks validity but also the registrants ownership of the mark isprima facie presumed.[37]

Respondents contend that of the two words in the Big Mac mark, it is only the word Mac that is valid because the word Big is generic and descriptive (proscribed under Section 4[e]), and thus incapable of exclusive appropriation. [38]

The contention has no merit. The Big Mac mark, which should be treated in its entirety and not dissected word for word, [39] is neither generic nor descriptive. Generic marks are commonly used as the name or description of a kind of goods,[40] such as Lite for beer[41] or Chocolate Fudge for chocolate soda drink.[42]Descriptive marks, on the other hand, convey the characteristics, functions, qualities or ingredients of a product to one who has never seen it or does not know it exists,[43] such as Arthriticare for arthritis medication.[44] On the contrary, Big Mac falls

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under the class of fanciful or arbitrary marks as it bears no logical relation to the actual characteristics of the product it represents.[45] As such, it is highly distinctive and thus valid. Significantly, the trademark Little Debbie for sn ack cakes was found arbitrary or fanciful.[46]

The Court also finds that petitioners have duly established McDonalds exclusive ownership of the Big Mac mark. Although Topacio and the Isaiyas Group registered the Big Mac mark ahead of McDonalds, Topacio, as petitioners disclosed, had already assig ned his rights to McDonalds. The Isaiyas Group, on the other hand, registered its trademark only in the Supplement al Register. A mark which is not registered in the Principal Register, and thus not distinctive, has no real protection.[47] Indeed, we have held that registration in the Supplemental Register is not even a prima facie evidence of the validity of the registrants exclusive right to use the mark on the goods specified in the certificate. [48]

On Types of Confusion

Section 22 covers two types of confusion arising from the use of similar or colorable imitation marks, namely, confusion of goods (product confusion) and confusion of business (source or origin confusion). In Sterling Products International, Incorporated v. Farbenfabriken Bayer Aktiengesellschaft, et al.,[49] the Court distinguished these two types of confusion, thus: [Rudolf] Callman notes two types of confusion. The first is the confusion of goods in which event the ordinarily prudent purchaser would be induced to purchase one product in the belief that he was purchasing the other. xxx The other is the confusion of business: Here though the goods of the parties are different, the defendants product is such as might reasonably be assumed to originate with the plaintiff, and the public would then be deceived either into that belief or into the belief that there is some connection between the plaintiff and defendant which, in fact, does not exist.

Under Act No. 666,[50] the first trademark law, infringement was limited to confusion of goods only, when the infringing mark is used on goods of a similar kind.[51]Thus, no relief was afforded to the party whose registered mark or its colorable imitation is used on different although related goods. To remedy this situation, Congress enacted RA 166 on 20 June 1947. In defining trademark infringement, Section 22 of RA 166 deleted the requirement in question and expanded its scope to include such use of the mark or its colorable imitation that is

likely to result in confusion on the

source or origin of such goods or services, or identity of such bu siness.[52] Thus, while there is confusion of goods when the products are competing, confusion of business exists when the products are non-competing but related enough to produce confusion of affiliation.[53]

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On Whether Confusion of Goods and Confusion of Business are Applicable

Petitioners claim that respondents use of the Big Mak mark on respondents hamburgers results in confusion of goods, particularly with respect topetitioners hamburgers labeled Big Mac. Thus, petitioners alleged in their complaint: 1.15. Defendants have unduly prejudiced and clearly infringed upon the property rights of plaintiffs in the McDonalds Marks, particularly the mark B[ig] M[ac]. Defendants unauthorized acts are likely, and calculated, to confuse, mislead or deceive the public into believing that the products and services offered by defendant Big Mak Burger, and the business it is engaged in, are approved and sponsored by, or affiliated with, plaintiffs.[54] (Emphasis supplied)

Since respondents used the Big Mak mark on the same goods, i.e. hamburger sandwiches, that petitioners Big Mac mark is used, trademark infringement through confusion of goods is a proper issue in this case.

Petitioners also claim that respondents use of the Big Mak mark in the sale of hamburgers, the same business that petition ers are engaged in, results in confusion of business. Petitioners alleged in their complaint: 1.10. For some period of time, and without the consent of plaintiff McDonalds nor its licensee/franchisee, plaintiff McGeorge, and in clear violation of plaintiffs exclusive right to useand/or appropriate the McDonalds marks, defendant Big Mak Burger acting through individual defendants, has been operating Big Mak Burger, a fast food restaurant business dealing in the sale of hamburger and cheeseburger sandwiches, french fries and other food products, and has caused to be printed on the wrapper of defendants food products and incorporated in its signages the name Big Mak Burger, which is confusingly similar to and/or is a colorable imitation of the plaintiff McDonalds mark B[ig] M[ac], xxx. Defendant Big Mak Burger has thus unjustly created the impression that its business is approved and sponsored by, or affiliated with, plaintiffs. xxxx

2.2 As a consequence of the acts committed by defendants, which unduly prejudice and infringe upon the property rights of plaintiffs McDonalds and McGeorge as the real owner and rightful proprietor, and the licensee/franchisee, respectively, of the McDonalds marks, and which are likely to have caused confusion or deceived the public as to the true source, sponsorship or affiliation of defendants food products and restaurant business, plaintiffs have suffered and continue to suffer actual damages in the form of injury to their business reputation and goodwill, and of the dilution of the distinctive quality of the McDonalds marks, in particular, the mark B[ig] M[ac].[55] (Emphasis supplied)

Respondents admit that their business includes selling hamburger sandwiches, the same food product that petitioners sell usin g the Big Mac mark. Thus, trademark infringement through confusion of business is also a proper issue in this case.

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Respondents assert that their Big Mak hamburgers cater mainly to the low-income group while petitioners Big Mac hamburgers cater to the middle and upper income groups. Even if this is true, the likelihood of confusion of business remains, since the low-income group might be led to believe that the Big Mak hamburgers are the low-end hamburgers marketed by petitioners. After all, petitioners have the exclusive right to use the Big Mac mark. On the other hand,respondents would benefit by associating their low-end hamburgers, through the use of the Big Mak

mark, with petitioners high-end Big Mac hamburgers, leading to likelihood of confusion in the identity of business.

Respondents further claim that petitioners use the Big Mac mark only on petitioners double -decker hamburgers, while respondents use the Big Mak mark on hamburgers and other products like siopao, noodles and pizza. Re spondents also point out that petitioners sell their Big Mac double-deckers in a styrofoam box with the McDonalds logo and trademark in red, block letters at a price more expensive than the hamburgers of respondents. In contrast, respondents sell their Big Mak hamburgers in plastic wrappers and plastic bags. Respondents further point out that petitioners restaurants are air-conditioned buildings with drive-thru service, compared to respondents mobile vans.

These and other factors respondents cite cannot negate the undisputed fact that respondents use their Big Mak mark on hamburgers, the same food product that petitioners sell with the use of their registered mark Big Mac. Whether a hamburger is single, double or triple-decker,

and whether wrapped in plastic or styrofoam, it remains the same hamburger food product. Even respondents use of the Big Mak mark on non hamburger food products cannot excuse their infringement of petitioners registered mark, otherwise registered marks will los e their protection under the law.

The registered trademark owner may use his mark on the same or similar products, in different segments of the market, and at different price levels depending on variations of the products for specific segments of the market. The Court has recognized that the registered trademark owner enjoys protection in product and market areas that are the normal potential expansion of his business. Thus, the Court has declared: Modern law recognizes that the protection to which the owner of a trademark is entitled is not limited to guarding his goods or business from actual market competition with identical or similar products of the parties, but extends to all cases in which the use by a junior appropriator of a trade-mark or trade-name is likely to lead to a confusion of source, as where prospective purchasers would be misled into thinking that the complaining party has extended his business into the field (see 148 ALR 56 et seq; 53 Am Jur. 576) or is in any way connected with the activities of the infringer; or when it forestalls the normal potential expansion of his business (v. 148 ALR, 77, 84; 52 Am. Jur. 576, 577). [56] (Emphasis supplied)

On Whether Respondents Use of the Big Mak Mark Results in Likelihood of Confusion

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In determining likelihood of confusion, jurisprudence has developed two tests, the dominancy test and the holistic test. [57] The dominancy test focuses on the similarity of the prevalent features of the competing trademarks that might cause confusion. In contrast, the holistic test requires the court to consider the entirety of the marks as applied to the products, including the labels and packaging, in determining confusing similarity.

The Court of Appeals, in finding that there is no likelihood of confusion that could arise in the use of respondents Big Mak mark on hamburgers, relied on the holistic test. Thus, the Court of Appeals ruled that it is not sufficient that a similarity exists in both name(s), but that more importantly, the overall presentation, or in their essential, substantive and distinctive parts is such as would likely MISLEAD or CONFUSE persons in the ordinary course of purchasing the genuine article. The holistic test considers the two marks in their entirety, as they appear on the goods with their labels and packaging. It is not enough to consider their words and compare the spelling and pronunciation of the words.[58]

Respondents now vigorously argue that the Court of Appeals application of the holistic test to this case is correct and in accord with prevailing jurisprudence.

This Court, however, has relied on the dominancy test rather than the holistic test. The dominancy test considers the dominant features in the competing marks indetermining whether they are confusingly similar. Under the dominancy test, courts give greater weight to the similarity of the appearance of the product arising fromthe adoption of the dominant features of the registered mark, disregarding minor differences.[59] Courts will consider more the aural and visual impressions created by the marks in the public mind, giving little weight to factors like prices, quality, sales outlets and market segments.

Thus, in the 1954 case of Co Tiong Sa v. Director of Patents,[60] the Court ruled: xxx It has been consistently held that the question of infringement of a trademark is to be determined by the test of dominancy. Similarity in size, form and color, while relevant, is not conclusive. If the competing trademark contains the main or essential or dominant features of another, and confusion and deception is likely to result, infringement takes place . Duplication or imitation is not necessary; nor is it necessary that the infringing label should suggest an effort to imitate. (G. Heilman Brewing Co. vs. Independent Brewing Co., 191 F., 489, 495, citing Eagle White Lead Co. vs. Pflugh (CC) 180 Fed. 579). The question at issue in cases of infringement of trademarks is whether the use of the marks involved would be likely to cause confusion or mistakes in the mind of the public or deceive purchasers. (Auburn Rubber Corporation vs. Honover Rubber Co., 107 F. 2d 588; xxx) (Emphasis supplied.)

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The Court reiterated the dominancy test in Lim Hoa v. Director of Patents,[61] Phil. Nut Industry, Inc. v. Standard Brands Inc.,[62] Converse Rubber Corporation v. Universal Rubber Products, Inc.,[63] and Asia Brewery, Inc. v. Court of Appeals.[64] of Societe Des Produits Nestl, S.A. v. Court of Appeals,[65] the Court explicitly rejected the holistic test in this wise: [T]he totality or holistic test is contrary to the elementary postulate of the law on trademarks and unfair competition that confusing similarity is to be determined on the basis ofvisual, aural, connotative comparisons and overall impressions engendered by the marks in controversy as they are encountered in the realities of the marketplace. (Emphasis supplied) In the 2001 case

The test of dominancy is now explicitly incorporated into law in Section 155.1 of the Intellectual Property Code which defines infringement as the colorable imitation of a registered mark xxx or a dominant feature thereof.

Applying the dominancy test, the Court finds that respondents use of the Big Mak mark results in likelihood of confusion. First, Big Mak sounds exactlythe same as Big Mac. Second, the first word in Big Mak is exactly the same as the first word in Big Mac. Third, the first two letters in Mak are the same as the first two letters in Mac. Fourth, the last letter in Mak while a k sounds the same as c when the word Mak is pronounced. Fifth, in Filipino, the letter k replaces c in spelling, thus Caloocan is spelled Kalookan.

In short, aurally the two marks are the same, with the first word of both marks phonetically the same, and the second word of both marks also phonetically the same. Visually, the two marks have both two words and six letters, with the first word of both marks having the same letters and the second word having the same first two letters. In spelling, considering the Filipino language, even the last letters of both marks are the same.

Clearly, respondents have adopted in Big Mak not only the dominant but also almost all the features of Big Mac . Applied to the same food product of hamburgers, the two marks will likely result in confusion in the public mind.

The Court has taken into account the aural effects of the words and letters contained in the marks in determining the issue of confusing similarity. Thus, inMarvex Commercial Co., Inc. v. Petra Hawpia & Co., et al. ,[66] the Court held:

The following random list of confusingly similar sounds in the matter of trademarks, culled from Nims, Unfair Competition and Trade Marks, 1947, Vol. 1, will reinforce our view that SALONPAS and LIONPAS are confusingly similar

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in sound: Gold Dust and Gold Drop; Jantzen and Jass -Sea; Silver Flash and Supper Flash; Cascarete and Celborite; Celluloid and Cellonite; Chartreuse and Charseurs; Cutex and Cuticlean; Hebe and Meje; Kotex and Femetex; Zuso and Hoo Hoo. Leon Amdur, in his book Trade -Mark Law and Practice, pp. 419-421, cities, as coming within the purview of the idem sonans rule, Yusea and U-C-A, Steinway Pianos and Steinberg Pianos, and Seven-Up and Lemon-Up. In Co Tiong vs. Director of Patents, this Court unequivocally said that Celdura and Cordura are confusingly similar in sound; this Court held in Sapolin Co. vs. Balmaceda, 67 Phil. 795 that the name Lusolin is an infringement of the trademark Sapolin, as the sound of the two names is almost the same. (Emphasis supplied)

Certainly, Big Mac and Big Mak for hamburgers create even greater confusion, not only aurally but also visually.

Indeed, a person cannot distinguish Big Mac from Big Mak by their sound. When one hears a Big Mac or Big Mak hamburger advertisement over the radio, one would not know whether the Mac or Mak ends with a c or a k.

Petitioners aggressive promotion of the Big Mac mark, as borne by their advertisement expenses, has built goodwill and reputation for such mark making it one of the easily recognizable marks in the market today. This increases the likelihood that consumers will mistakenly associate petitioners hamburgers and business with those of respondents.

Respondents inability to explain sufficiently how and why they came to choose Big Mak for their hamburger sandwiches indicates their intent to imitate petitioners Big Mac mark. Contrary to the Court of Appeals finding, respondents claim that their Big Mak mark was inspired by the first names of respondent Dys mother (Maxima) and father (Kimsoy) is not credible. As petitioners well noted:

[R]espondents, particularly Respondent Mr. Francis Dy, could have arrived at a more creative choice for a corporate name by using the names of his parents, especially since he was allegedly driven by sentimental reasons. For one, he could have put his fathers name ahead of his mothers, as is usually done in this patriarchal society, and derived letters from said names in that order. Or, he could have taken an equal number of letters (i.e., two) from each name, as is the more usual thing done. Surely, the more plausible reason behind Respondents choice of the word M[ak], especially when taken in conjunction with the word B[ig], was their intent to take advantage of Petitioners xxx B[ig] M[ac] trademark, with their alleged sentiment-focused explanation merely thought of as a convenient, albeit unavailing, excuse or defense for such an unfair choice of name. [67]

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Absent proof that respondents adoption of the Big Mak mark was due to honest mistake or was fortuitous,[68] the inescapable conclusion is that respondents adopted the Big Mak mark to ride on the coattails of the more established Big Mac mark. [69] This saves respondents much of the expense in advertising to create market recognition of their mark and hamburgers. [70]

Thus, we hold that confusion is likely to result in the public mind. We sustain petitioners claim of trademark infringement.

On the Lack of Proof of Actual Confusion

Petitioners failure to present proof of actual confusion does not negate their claim of trademark infringement. As noted in American Wire & Cable Co. v. Director of Patents,[71] Section 22 requires the less stringent standard of likelihood of confusion only. While proof of actual confusion is the best evidence of infringement, its absence is inconsequential. [72]

On the Issue of Unfair Competition

Section 29 (Section 29)[73] of RA 166 defines unfair competition, thus: xxxx

Any person who will employ deception or any other means contrary to good faith by which he shall pass off the goods manufactured by him or in which he deals, or his business, or services for those of the one having established such goodwill, or who shall commit any acts calculated to produce said result, shall be guilty of unfair competition, and shall be subject to an action therefor. In particular, and without in any way limiting the scope of unfair competition, the following shall be deemed guilty of unfair competition: (a) Any person, who in selling his goods shall give them the general appearance of goods of another manufacturer or dealer, either as to the goods themselves or in the wrapping of the packages in which they are contained, or the devices or words thereon, or in any feature of their appearance, which would be likely to influence purchasers to believe that the goods offered are those of a manufacturer or dealer, other than the actual manufacturer or dealer, or who otherwise clothes the goods with such appearance as shall deceive the public and defraud another of his legitimate trade, or any subsequent vendor of such goods or any agent of any vendor engaged in selling such goods with a like purpose;

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(b) Any person who by any artifice, or device, or who employs any other means calculated to induce the false belief that such person is offering the services of another who has identified such services in the mind of the public; or (c) Any person who shall make any false statement in the course of trade or who shall commit any other act contrary to good faith of a nature calculated to discredit the goods, business or services of another. (Emphasis supplied)

The essential elements of an action for unfair competition are (1) confusing similarity in the general appearance of the goods, and (2) intent to deceive the public and defraud a competitor.[74] The confusing similarity may or may not result from similarity in the marks, but may result from other external factors in the packaging or presentation of the goods. The intent to deceive and defraud may be inferred from the similarity of the appearance of the goods as offered for sale to the public.[75] Actual fraudulent intent need not be shown.[76]

Unfair competition is broader than trademark infringement and includes passing off goods with or without trademark infringement. Trademark infringement is a form of unfair competition.[77] Trademark infringement constitutes unfair competition when there is not merely likelihood of confusion, but also actual or probable deception on the public because of the general appearance of the goods. There can be trademark infringement without unfair competition as when the infringer discloses on the labels containing the mark that he manufactures the goods, thus preventing the public from being deceived that the goods originate from the trademark owner. [78]

To support their claim of unfair competition, petitioners allege that respondents fraudulently passed off their hamburgers as Big Mac hamburgers. Petitioners add that respondents fraudulent intent can be inferred from the similarity of the marks in question. [79]

Passing off (or palming off) takes place where the defendant, by imitative devices on the general appearance of the goods, misleads prospective purchasers into buying his merchandise under the impression that they are buying that of his competitors. [80] Thus, the defendant gives his goods the general appearance of the goods of his competitor with the intention of deceiving the public that the goods are those of his competitor.

The RTC described the respective marks and the goods of petitioners and respondents in this wise:

The mark B[ig] M[ac] is used by plaintiff McDonalds to identify its double decker hamburger sandwich. The packaging material is a styrofoam box with the McDonalds logo and trademark in red with block capital letters printed on it. All letters of the B[ig] M[ac] mark are also in red and block capital letters. On the other hand, defendants B[ig] M[ak] script

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print is in orange with only the letter B and M being capitalized and the packaging material is plastic wrapper. xxxx Further, plaintiffs logo and mascot are the umbrella M and Ronald McDonalds, respectively, compared to the mascot of defendant Corporation which is a chubby boy called Macky displayed or printed between the words Big and Mak.[81](Emphasis supplied)

Respondents point to these dissimilarities as proof that they did not give their hamburgers the general appearance of pet itioners Big Mac hamburgers.

The dissimilarities in the packaging are minor compared to the stark similarities in the words that give respondents Big Mak hamburgers the general appearance of petitioners Big Mac hamburgers. Section 29(a) expressly provides that the similarity in the general appearance of the goods may be in the devices or words used on the wrappings. Respondents have applied on their plastic wrappers and bags almost the same words that petitioners use on their styrofoam box. What attracts the attention of the buying public are the words Big Mak which are almost the same, aurally and visually, as the words Big Mac. The dissimilarities in the material and other devices are insignificant compared to the glaring similarity in the words used in the wrappings.

Section 29(a) also provides that the defendant gives his goods the general appearance of goods of another manufacturer. Respondents goods are hamburgers which are also the goods of petitioners. If respondents sold egg sandwiches only instead of hamburger sandwiches, their use of the Big Mak mark would not give their goods the general appearance of petitioners Big Mac hamburgers. In such case, there is only trademark infringement but no unfair competition. However, since respondents chose to apply the Big Mak mark on hamburgers, just like petitioners use of the Big Mac mark on hamburgers, respondents have obviously clothed their goods with the general appearance of petitioners goods.

Moreover, there is no notice to the public that the Big Mak hamburgers are products of L.C. Big Mak Burger, Inc. Respondents introduced during the trial plastic wrappers and bags with the words L.C. Big Mak Burger, Inc. to inform the public of the name of the seller of the hamburgers. However, petitioners introduced during the injunctive hearings plastic wrappers and bags with the Big Mak mark without the name L.C. Big Mak Burger, Inc. Respondents belated presentation of plastic wrappers and bags bearing the name of L.C. Big Mak Burger, Inc. as the

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seller of the hamburgers is an after-thought designed to exculpate them from their unfair business conduct. As earlier stated, we cannot consider respondents evidence since petitioners complaint was based on facts existing before and during the injunctive hearings.

Thus, there is actually no notice to the public that the Big Mak hamburgers are products of L.C. Big Mak Burger, Inc. and not those of petitioners who have the exclusive right to the Big Mac mark. This clearly shows respondents intent to deceive the public. Had respondents placed a notice on their plastic wrappers and bags that the hamburgers are sold by L.C. Big Mak Burger, Inc., then they cou ld validly claim that they did not intend to deceive the public. In such case, there is only trademark infringement but no unfair competition. [82] Respondents, however, did not give such notice. We hold that as found by the RTC, respondent corporation is liable for unfair competition.

The Remedies Available to Petitioners

Under Section 23[83] (Section 23) in relation to Section 29 of RA 166, a plaintiff who successfully maintains trademark infringement and unfair competition claims is entitled to injunctive and monetary reliefs. Here, the RTC did not err in issuing the injunctive writ of 16 August 1990 (made permanent in its Decision of 5 September 1994) and in ordering the payment of P400,000 actual damages in favor of petitioners. The injunctive writ is indispensable to prevent further acts of infringement by respondent corporation. Also, the amount of actual damages is a reasonable percentage (11.9%) of respondent corporations gross sales for three (1988 -1989 and 1991) of the six years (1984-1990) respondents have used the Big Mak mark.[84]

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The RTC also did not err in awarding exemplary damages by way of correction for the public good [85] in view of the finding of unfair competition where intent to deceive the public is essential. The award of attorneys fees and expenses of litigation is also in order.[86]

WHEREFORE, we GRANT the instant petition. We SET ASIDE the Decision dated 26 November 1999 of the Court of Appeals and its Resolution dated 11 July 2000 and REINSTATE the Decision dated 5 September 1994 of the Regional Trial Court of Makati, Branch 137,

finding respondent L.C. Big Mak Burger, Inc. liable for trademark infringement and unfair competition.

SO ORDERED. G.R. No. 101897. March 5, 1993. LYCEUM OF THE PHILIPPINES, INC., petitioner, vs. COURT OF APPEALS, LYCEUM OF APARRI, LYCEUM OF CABAGAN, LYCEUM OF CAMALANIUGAN, INC., LYCEUM OF LALLO, INC., LYCEUM OF TUAO, INC., BUHI LYCEUM, CENTRAL LYCEUM OF CATANDUANES, LYCEUM OF SOUTHERN PHILIPPINES, LYCEUM OF EASTERN MINDANAO, INC. and WESTERN PANGASINAN LYCEUM, INC., respondents. Quisumbing, Torres & Evangelista Law Offices and Ambrosio Padilla for petitioner. Antonio M. Nuyles and Purungan, Chato, Chato, Tarriela & Tan Law Offices for respondents. Froilan Siobal for Western Pangasinan Lyceum. SYLLABUS 1. CORPORATION LAW; CORPORATE NAMES; REGISTRATION OF PROPOSED NAME WHICH IS IDENTICAL OR CONFUSINGLY SIMILAR TO THAT OF ANY EXISTING CORPORATION, PROHIBITED; CONFUSION AND DECEPTION EFFECTIVELY PRECLUDED BY THE APPENDING OF GEOGRAPHIC NAMES TO THE WORD "LYCEUM". The Articles of Incorporation of a corporation must, among other things, set out the name of the corporation. Section 18 of the Corporation Code establishes a restrictive rule insofar as corporate names are concerned: "Section 18. Corporate name. No corporate name may be allowed by the Securities an Exchange Commission if the proposed name is identical or deceptively or confusingly similar to that of any existing corporation or to any other name already protected by law or is patently deceptive, confusing or contrary to existing laws. When a change in the corporate name is approved, the Commission shall issue an amended certificate of incorporation under the amended name." The policy underlying the prohibition in Section 18 against the registration of a corporate name which is "identical or deceptively or confusingly similar" to that of any existing corporation or which is "patently deceptive" or "patently confusing" or "contrary to existing laws," is the avoidance of fraud upon the public which would have occasion to deal with the entity concerned, the evasion of legal obligations and duties, and the reduction of difficulties of administration and supervision over corporations. We do not consider that the corporate names of private respondent institutions are "identical with, or deceptively or confusingly similar" to that of the petitioner institution. True enough, the corporate names of private respondent entities all carry the word "Lyceum" but confusion and deception are effectively precluded by the appending of geographic names to the word "Lyceum." Thus, we do not believe that the "Lyceum of Aparri" can be mistaken by the general public for the Lyceum of the Philippines, or that the "Lyceum of Camalaniugan" would be confused with the Lyceum of the Philippines. 2. ID.; ID.; DOCTRINE OF SECONDARY MEANING; USE OF WORD "LYCEUM," NOT ATTENDED WITH EXCLUSIVITY. It is claimed, however, by petitioner that the word "Lyceum" has acquired a secondary meaning in relation to petitioner with the result that word, although originally a generic, has become appropriable by petitioner to the exclusion of other institutions like private respondents herein. The doctrine of secondary meaning originated in the field of trademark law. Its application has, however, been extended to corporate names sine the right to use a corporate name to the exclusion of others is based upon the same principle which underlies the right to use a particular trademark or tradename. In Philippine Nut Industry, Inc. v. Standard Brands, Inc., the doctrine of secondary meaning was elaborated in the following terms: " . . . a word or phrase originally incapable of exclusive appropriation with reference to an article on the market, because geographically or otherwise descriptive, might nevertheless have been used so long and so exclusively by one producer with reference to his article that, in that trade and to that branch of the purchasing public, the word or phrase has come to mean that the article was his product." The question which arises, therefore, is whether or not the

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use by petitioner of "Lyceum" in its corporate name has been for such length of time and with such exclusivity as to have become associated or identified with the petitioner institution in the mind of the general public (or at least that portion of the general public which has to do with schools). The Court of Appeals recognized this issue and answered it in the negative: "Under the doctrine of secondary meaning, a word or phrase originally incapable of exclusive appropriation with reference to an article in the market, because geographical or otherwise descriptive might nevertheless have been used so long and so exclusively by one producer with reference to this article that, in that trade and to that group of the purchasing public, the word or phrase has come to mean that the article was his produce (Ana Ang vs. Toribio Teodoro, 74 Phil. 56). This circumstance has been referred to as the distinctiveness into which the name or phrase has evolved through the substantial and exclusive use of the same for a considerable period of time. . . . No evidence was ever presented in the hearing before the Commission which sufficiently proved that the word 'Lyceum' has indeed acquired secondary meaning in favor of the appellant. If there was any of this kind, the same tend to prove only that the appellant had been using the disputed word for a long period of time. . . . In other words, while the appellant may have proved that it had been using the word 'Lyceum' for a long period of time, this fact alone did not amount to mean that the said word had acquired secondary meaning in its favor because the appellant failed to prove that it had been using the same word all by itself to the exclusion of others. More so, there was no evidence presented to prove that confusion will surely arise if the same word were to be used by other educational institutions. Consequently, the allegations of the appellant in its first two assigned errors must necessarily fail." We agree with the Court of Appeals. The number alone of the private respondents in the case at bar suggests strongly that petitioner's use of the word "Lyceum" has not been attended with the exclusivity essential for applicability of the doctrine of secondary meaning. Petitioner's use of the word "Lyceum" was not exclusive but was in truth shared with the Western Pangasinan Lyceum and a little later with other private respondent institutions which registered with the SEC using "Lyceum" as part of their corporation names. There may well be other schools using Lyceum or Liceo in their names, but not registered with the SEC because they have not adopted the corporate form of organization. 3. ID.; ID.; MUST BE EVALUATED IN THEIR ENTIRETY TO DETERMINE WHETHER THEY ARE CONFUSINGLY OR DECEPTIVELY SIMILAR TO ANOTHER CORPORATE ENTITY'S NAME. petitioner institution is not entitled to a legally enforceable exclusive right to use the word "Lyceum" in its corporate name and that other institutions may use "Lyceum" as part of their corporate names. To determine whether a given corporate name is "identical" or "confusingly or deceptively similar" with another entity's corporate name, it is not enough to ascertain the presence of "Lyceum" or "Liceo" in both names. One must evaluate corporate names in their entirety and when the name of petitioner is juxtaposed with the names of private respondents, they are not reasonably regarded as "identical" or "confusingly or deceptively similar" with each other. DECISION FELICIANO, J p: Petitioner is an educational institution duly registered with the Securities and Exchange Commission ("SEC"). When it first registered with the SEC on 21 September 1950, it used the corporate name Lyceum of the Philippines, Inc. and has used that name ever since. On 24 February 1984, petitioner instituted proceedings before the SEC to compel the private respondents, which are also educational institutions, to delete the word "Lyceum" from their corporate names and permanently to enjoin them from using "Lyceum" as part of their respective names. Some of the private respondents actively participated in the proceedings before the SEC. These are the following, the dates of their original SEC registration being set out below opposite their respective names: Western Pangasinan Lyceum 27 October 1950 Lyceum of Cabagan 31 October 1962 Lyceum of Lallo, Inc. 26 March 1972 Lyceum of Aparri 28 March 1972 Lyceum of Tuao, Inc. 28 March 1972 Lyceum of Camalaniugan 28 March 1972 The following private respondents were declared in default for failure to file an answer despite service of summons: Buhi Lyceum; Central Lyceum of Catanduanes; Lyceum of Eastern Mindanao, Inc.; and

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Lyceum of Southern Philippines Petitioner's original complaint before the SEC had included three (3) other entities: 1. The Lyceum of Malacanay; 2. The Lyceum of Marbel; and 3. The Lyceum of Araullo The complaint was later withdrawn insofar as concerned the Lyceum of Malacanay and the Lyceum of Marbel, for failure to serve summons upon these two (2) entities. The case against the Liceum of Araullo was dismissed when that school motu proprio change its corporate name to "Pamantasan ng Araullo." The background of the case at bar needs some recounting. Petitioner had sometime before commenced in the SEC a proceeding (SEC-Case No. 1241) against the Lyceum of Baguio, Inc. to require it to change its corporate name and to adopt another name not "similar [to] or identical" with that of petitioner. In an Order dated 20 April 1977, Associate Commissioner Julio Sulit held that the corporate name of petitioner and that of the Lyceum of Baguio, Inc. were substantially identical because of the presence of a "dominant" word, i.e., "Lyceum," the name of the geographical location of the campus being the only word which distinguished one from the other corporate name. The SEC also noted that petitioner had registered as a corporation ahead of the Lyceum of Baguio, Inc. in point of time, 1 and ordered the latter to change its name to another name "not similar or identical [with]" the names of previously registered entities. The Lyceum of Baguio, Inc. assailed the Order of the SEC before the Supreme Court in a case docketed as G.R. No. L-46595. In a Minute Resolution dated 14 September 1977, the Court denied the Petition for Review for lack of merit. Entry of judgment in that case was made on 21 October 1977. 2 Armed with the Resolution of this Court in G.R. No. L-46595, petitioner then wrote all the educational institutions it could find using the word "Lyceum" as part of their corporate name, and advised them to discontinue such use of "Lyceum." When, with the passage of time, it became clear that this recourse had failed, petitioner instituted before the SEC SEC-Case No. 2579 to enforce what petitioner claims as its proprietary right to the word "Lyceum." The SEC hearing officer rendered a decision sustaining petitioner's claim to an exclusive right to use the word "Lyceum." The hearing officer relied upon the SEC ruling in the Lyceum of Baguio, Inc. case (SEC-Case No. 1241) and held that the word "Lyceum" was capable of appropriation and that petitioner had acquired an enforceable exclusive right to the use of that word. On appeal, however, by private respondents to the SEC En Banc, the decision of the hearing officer was reversed and set aside. The SEC En Banc did not consider the word "Lyceum" to have become so identified with petitioner as to render use thereof by other institutions as productive of confusion about the identity of the schools concerned in the mind of the general public. Unlike its hearing officer, the SEC En Banc held that the attaching of geographical names to the word "Lyceum" served sufficiently to distinguish the schools from one another, especially in view of the fact that the campuses of petitioner and those of the private respondents were physically quite remote from each other. 3 Petitioner then went on appeal to the Court of Appeals. In its Decision dated 28 June 1991, however, the Court of Appeals affirmed the questioned Orders of the SEC En Banc. 4 Petitioner filed a motion for reconsideration, without success. Before this Court, petitioner asserts that the Court of Appeals committed the following errors: 1. The Court of Appeals erred in holding that the Resolution of the Supreme Court in G.R. No. L-46595 did not constitute stare decisis as to apply to this case and in not holding that said Resolution bound subsequent determinations on the right to exclusive use of the word Lyceum. 2. The Court of Appeals erred in holding that respondent Western Pangasinan Lyceum, Inc. was incorporated earlier than petitioner. 3. The Court of Appeals erred in holding that the word Lyceum has not acquired a secondary meaning in favor of petitioner. 4. The Court of Appeals erred in holding that Lyceum as a generic word cannot be appropriated by the petitioner to the exclusion of others. 5 We will consider all the foregoing ascribed errors, though not necessarily seriatim. We begin by noting that the Resolution of the Court in G.R. No. L-46595 does not, of course, constitute res adjudicata in respect of the case at bar, since there is no identity of parties. Neither is stare decisis pertinent, if only because the SEC En Banc itself has re-examined Associate Commissioner Sulit's ruling in the Lyceum of Baguio case. The Minute Resolution of the Court in G.R. No. L-46595 was not a reasoned adoption of the Sulit ruling.

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The Articles of Incorporation of a corporation must, among other things, set out the name of the corporation. 6 Section 18 of the Corporation Code establishes a restrictive rule insofar as corporate names are concerned: "SECTION 18. Corporate name. No corporate name may be allowed by the Securities an Exchange Commission if the proposed name is identical or deceptively or confusingly similar to that of any existing corporation or to any other name already protected by law or is patently deceptive, confusing or contrary to existing laws. When a change in the corporate name is approved, the Commission shall issue an amended certificate of incorporation under the amended name." (Emphasis supplied) The policy underlying the prohibition in Section 18 against the registration of a corporate name which is "identical or deceptively or confusingly similar" to that of any existing corporation or which is "patently deceptive" or "patently confusing" or "contrary to existing laws," is the avoidance of fraud upon the public which would have occasion to deal with the entity concerned, the evasion of legal obligations and duties, and the reduction of difficulties of administration and supervision over corporations. 7 We do not consider that the corporate names of private respondent institutions are "identical with, or deceptively or confusingly similar" to that of the petitioner institution. True enough, the corporate names of private respondent entities all carry the word "Lyceum" but confusion and deception are effectively precluded by the appending of geographic names to the word "Lyceum." Thus, we do not believe that the "Lyceum of Aparri" can be mistaken by the general public for the Lyceum of the Philippines, or that the "Lyceum of Camalaniugan" would be confused with the Lyceum of the Philippines. Etymologically, the word "Lyceum" is the Latin word for the Greek lykeion which in turn referred to a locality on the river Ilissius in ancient Athens "comprising an enclosure dedicated to Apollo and adorned with fountains and buildings erected by Pisistratus, Pericles and Lycurgus frequented by the youth for exercise and by the philosopher Aristotle and his followers for teaching." 8 In time, the word "Lyceum" became associated with schools and other institutions providing public lectures and concerts and public discussions. Thus today, the word "Lyceum" generally refers to a school or an institution of learning. While the Latin word "lyceum" has been incorporated into the English language, the word is also found in Spanish (liceo) and in French (lycee). As the Court of Appeals noted in its Decision, Roman Catholic schools frequently use the term; e.g., "Liceo de Manila," "Liceo de Baleno" (in Baleno, Masbate), "Liceo de Masbate," "Liceo de Albay." 9 "Lyceum" is in fact as generic in character as the word "university." In the name of the petitioner, "Lyceum" appears to be a substitute for "university;" in other places, however, "Lyceum," or "Liceo" or "Lycee" frequently denotes a secondary school or a college. It may be (though this is a question of fact which we need not resolve) that the use of the word "Lyceum" may not yet be as widespread as the use of "university," but it is clear that a not inconsiderable number of educational institutions have adopted "Lyceum" or "Liceo" as part of their corporate names. Since "Lyceum" or "Liceo" denotes a school or institution of learning, it is not unnatural to use this word to designate an entity which is organized and operating as an educational institution. It is claimed, however, by petitioner that the word "Lyceum" has acquired a secondary meaning in relation to petitioner with the result that that word, although originally a generic, has become appropriable by petitioner to the exclusion of other institutions like private respondents herein. The doctrine of secondary meaning originated in the field of trademark law. Its application has, however, been extended to corporate names sine the right to use a corporate name to the exclusion of others is based upon the same principle which underlies the right to use a particular trademark or tradename. 10 In Philippine Nut Industry, Inc. v. Standard Brands, Inc., 11 the doctrine of secondary meaning was elaborated in the following terms: " . . . a word or phrase originally incapable of exclusive appropriation with reference to an article on the market, because geographically or otherwise descriptive, might nevertheless have been used so long and so exclusively by one producer with reference to his article that, in that trade and to that branch of the purchasing public, the word or phrase has come to mean that the article was his product." 12 The question which arises, therefore, is whether or not the use by petitioner of "Lyceum" in its corporate name has been for such length of time and with such exclusivity as to have become associated or identified with the petitioner institution in the mind of the general public (or at least that portion of the general public which has to do with schools). The Court of Appeals recognized this issue and answered it in the negative: "Under the doctrine of secondary meaning, a word or phrase originally incapable of exclusive appropriation with reference to an article in the market, because geographical or otherwise descriptive might nevertheless have been used so long and so exclusively by one producer with reference to this article that, in that trade and to that group of the purchasing public, the word or phrase has come to mean that the article was his produce (Ana Ang vs. Toribio Teodoro, 74 Phil. 56). This circumstance has been referred to as the distinctiveness into which the name or phrase has evolved through the substantial and exclusive use of the same for a considerable period of time. Consequently, the same doctrine or principle cannot be made to apply where the evidence did not prove that the business (of the plaintiff) has continued for so long a time that it has become of consequence and acquired a good will of considerable value such that its articles and produce have acquired a well-known reputation, and confusion will result by the use of the disputed name (by the defendant) (Ang Si Heng vs. Wellington Department Store, Inc., 92 Phil. 448). With the foregoing as a yardstick, [we] believe the appellant failed to satisfy the aforementioned requisites. No evidence was ever presented in the hearing before the Commission which sufficiently proved that the word 'Lyceum' has indeed acquired secondary meaning in favor of the appellant. If there was any of this kind, the same tend to prove only that the appellant had been using the disputed word for a long period of time. Nevertheless, its (appellant) exclusive use of the word (Lyceum) was never established or proven as in fact the evidence tend to convey that the cross-claimant was

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already using the word 'Lyceum' seventeen (17) years prior to the date the appellant started using the same word in its corporate name. Furthermore, educational institutions of the Roman Catholic Church had been using the same or similar word like 'Liceo de Manila,' 'Liceo de Baleno' (in Baleno, Masbate), 'Liceo de Masbate,' 'Liceo de Albay' long before appellant started using the word 'Lyceum'. The appellant also failed to prove that the word 'Lyceum' has become so identified with its educational institution that confusion will surely arise in the minds of the public if the same word were to be used by other educational institutions. In other words, while the appellant may have proved that it had been using the word 'Lyceum' for a long period of time, this fact alone did not amount to mean that the said word had acquired secondary meaning in its favor because the appellant failed to prove that it had been using the same word all by itself to the exclusion of others. More so, there was no evidence presented to prove that confusion will surely arise if the same word were to be used by other educational institutions. Consequently, the allegations of the appellant in its first two assigned errors must necessarily fail." 13 (Underscoring partly in the original and partly supplied) We agree with the Court of Appeals. The number alone of the private respondents in the case at bar suggests strongly that petitioner's use of the word "Lyceum" has not been attended with the exclusivity essential for applicability of the doctrine of secondary meaning. It may be noted also that at least one of the private respondents, i.e., the Western Pangasinan Lyceum, Inc., used the term "Lyceum" seventeen (17) years before the petitioner registered its own corporate name with the SEC and began using the word "Lyceum." It follows that if any institution had acquired an exclusive right to the word "Lyceum," that institution would have been the Western Pangasinan Lyceum, Inc. rather than the petitioner institution. In this connection, petitioner argues that because the Western Pangasinan Lyceum, Inc. failed to reconstruct its records before the SEC in accordance with the provisions of R.A. No. 62, which records had been destroyed during World War II, Western Pangasinan Lyceum should be deemed to have lost all rights it may have acquired by virtue of its past registration. It might be noted that the Western Pangasinan Lyceum, Inc. registered with the SEC soon after petitioner had filed its own registration on 21 September 1950. Whether or not Western Pangasinan Lyceum, Inc. must be deemed to have lost its rights under its original 1933 registration, appears to us to be quite secondary in importance; we refer to this earlier registration simply to underscore the fact that petitioner's use of the word "Lyceum" was neither the first use of that term in the Philippines nor an exclusive use thereof. Petitioner's use of the word "Lyceum" was not exclusive but was in truth shared with the Western Pangasinan Lyceum and a little later with other private respondent institutions which registered with the SEC using "Lyceum" as part of their corporation names. There may well be other schools using Lyceum or Liceo in their names, but not registered with the SEC because they have not adopted the corporate form of organization. We conclude and so hold that petitioner institution is not entitled to a legally enforceable exclusive right to use the word "Lyceum" in its corporate name and that other institutions may use "Lyceum" as part of their corporate names. To determine whether a given corporate name is "identical" or "confusingly or deceptively similar" with another entity's corporate name, it is not enough to ascertain the presence of "Lyceum" or "Liceo" in both names. One must evaluate corporate names in their entirety and when the name of petitioner is juxtaposed with the names of private respondents, they are not reasonably regarded as "identical" or "confusingly or deceptively similar" with each other. WHEREFORE, the petitioner having failed to show any reversible error on the part of the public respondent Court of Appeals, the Petition for Review is DENIED for lack of merit, and the Decision of the Court of Appeals dated 28 June 1991 is hereby AFFIRMED. No pronouncement as to costs. SO ORDERED. G.R. No. L-78325 January 25, 1990 DEL MONTE CORPORATION and PHILIPPINE PACKING CORPORATION, petitioners, vs. COURT OF APPEALS and SUNSHINE SAUCE MANUFACTURING INDUSTRIES, respondents. Bito, Misa & Lozada for petitioners. Reynaldo F. Singson for private respondent.

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

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Petitioner Del Monte Corporation is a foreign company organized under the laws of the United States and not engaged in business in the Philippines. Both the Philippines and the United States are signatories to the Convention of Paris of September 27, 1965, which grants to the nationals of the parties rights and advantages which their own nationals enjoy for the repression of acts of infringement and unfair competition. Petitioner Philippine Packing Corporation (Philpack) is a domestic corporation duly organized under the laws of the Philippines. On April 11, 1969, Del Monte granted Philpack the right to manufacture, distribute and sell in the Philippines various agricultural products, including catsup, under the Del Monte trademark and logo. On October 27,1965, Del Monte authorized Philpack to register with the Philippine Patent Office the Del Monte catsup bottle configuration, for which it was granted Certificate of Trademark Registration No. SR-913 by the Philippine Patent Office under the Supplemental Register. 1 On November 20, 1972, Del Monte also obtained two registration certificates for its trademark "DEL MONTE" and its logo. 2 Respondent Sunshine Sauce Manufacturing Industries was issued a Certificate of Registration by the Bureau of Domestic Trade on April 17,1980, to engage in the manufacture, packing, distribution and sale of various kinds of sauce, identified by the logo Sunshine Fruit Catsup. 3 This logo was registered in the Supplemental Register on September 20, 1983. 4 The product itself was contained in various kinds of bottles, including the Del Monte bottle, which the private respondent bought from the junk shops for recycling. Having received reports that the private respondent was using its exclusively designed bottles and a logo confusingly similar to Del Monte's, Philpack warned it to desist from doing so on pain of legal action. Thereafter, claiming that the demand had been ignored, Philpack and Del Monte filed a complaint against the private respondent for infringement of trademark and unfair competition, with a prayer for damages and the issuance of a writ of preliminary injunction. 5 In its answer, Sunshine alleged that it had long ceased to use the Del Monte bottle and that its logo was substantially different from the Del Monte logo and would not confuse the buying public to the detriment of the petitioners. 6 After trial, the Regional Trial Court of Makati dismissed the complaint. It held that there were substantial differences between the logos or trademarks of the parties; that the defendant had ceased using the petitioners' bottles; and that in any case the defendant became the owner of the said bottles upon its purchase thereof from the junk yards. Furthermore, the complainants had failed to establish the defendant's malice or bad faith, which was an essential element of infringement of trademark or unfair competition. 7 This decision was affirmed in toto by the respondent court, which is now faulted in this petition for certiorari under Rule 45 of the Rules of Court. Section 22 of R.A. No. 166, otherwise known as the Trademark Law, provides in part as follows: Sec. 22. Infringement, what constitutes. Any person who shall use, without the consent of the registrant, any reproduction, counterfeit, copy or colorable imitation of any registered mark or trade-name in connection with the sale, offering for sale, or advertising of any goods, business or services on or in connection with which such use is likely to cause confusion or mistake or to deceive purchasers or others as to the source or origin of such goods or services or identity of such business; or reproduce, counterfeit copy or colorably imitate any such mark or trade name and apply such reproduction, counterfeit copy or colorable imitation to labels, signs, prints, packages, wrappers, receptacles or advertisements intended to be used upon or in connection with such goods, business or services, shall be liable to a civil action by the registrant for any or all of the remedies herein provided. Sec. 29 of the same law states as follows: Sec. 29. Unfair competition, rights and remedies. A person who has identified in the mind of the public the goods he manufactures or deals in, his business or services from those of others, whether or not a mark or tradename is employed, has a property right in the goodwill of the said goods, business or services so identified, which will be protected in the same manner as other property rights. Such a person shall have the remedies provided in section twenty- three, Chapter V hereof. Any person who shall employ deception or any other means contrary to good faith by which he shall pass off the goods manufactured by him or in which he deals, or his business, or services for those of the one having established such goodwill, or who shall commit any acts calculated to produce said result, shall be guilty of unfair competition, and shall be subject to an action therefor. In particular, and without in any way limiting the scope of unfair competition, the following shall be deemed guilty of unfair competition:

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(a) Any person, who in selling his goods shall give them the general appearance of goods of another manufacturer or dealer, either as to the goods themselves or in the wrapping of the packages in which they are contained, or the devices or words thereon, or in any other feature of their appearance, which would likely influence purchasers to believe that the goods offered are those of a manufacturer or dealer other than the actual manufacturer or dealer, or who otherwise clothes the goods with such appearance as shall deceive the public and defraud another of his legitimate trade, or any subsequent vendor of such goods or any agent of any vendor engaged in selling such goods with a like purpose; (b) Any person who by any artifice, or device, or who employs ally other means calculated to induce the false belief that such person is offering the services of another who has identified such services in the mind of the public; or (c) Any person who shall make any false statement in the course of trade or who shall commit any other act contrary to good faith of a nature calculated to discredit the goods, business or services of another. To arrive at a proper resolution of this case, it is important to bear in mind the following distinctions between infringement of trademark and unfair competition. (1) Infringement of trademark is the unauthorized use of a trademark, whereas unfair competition is the passing off of one's goods as those of another. (2) In infringement of trademark fraudulent intent is unnecessary whereas in unfair competition fraudulent intent is essential. (3) In infringement of trademark the prior registration of the trademark is a prerequisite to the action, whereas in unfair competition registration is not necessary. 8 In the challenged decision, the respondent court cited the following test laid down by this Court in a number of cases: In determining whether two trademarks are confusingly similar, the two marks in their entirety as they appear in the respective labels must be considered in relation to the goods to which they are attached; the discerning eye of the observer must focus not only on the predorninant words but also on the other features appearing on both labels. 9 and applying the same, held that there was no colorable imitation of the petitioners' trademark and logo by the private respondent. The respondent court agreed with the findings of the trial court that: In order to resolve the said issue, the Court now attempts to make a comparison of the two products, to wit: 1. As to the shape of label or make: Del Monte: Semi-rectangular with a crown or tomato shape design on top of the rectangle. Sunshine: Regular rectangle. 2. As to brand printed on label: Del Monte: Tomato catsup mark. Sunshine: Fruit catsup. 3. As to the words or lettering on label or mark: Del Monte: Clearly indicated words packed by Sysu International, Inc., Q.C., Philippines. Sunshine: Sunshine fruit catsup is clearly indicated "made in the Philippines by Sunshine Sauce Manufacturing Industries" No. 1 Del Monte Avenue, Malabon, Metro Manila.

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4. As to color of logo: Del Monte: Combination of yellow and dark red, with words "Del Monte Quality" in white. Sunshine: White, light green and light red, with words "Sunshine Brand" in yellow. 5. As to shape of logo: Del Monte: In the shape of a tomato. Sunshine: Entirely different in shape. 6. As to label below the cap: Del Monte: Seal covering the cap down to the neck of the bottle, with picture of tomatoes with words "made from real tomatoes." Sunshine: There is a label below the cap which says "Sunshine Brand." 7. As to the color of the products: Del Monte: Darker red. Sunshine: Lighter than Del Monte. While the Court does recognize these distinctions, it does not agree with the conclusion that there was no infringement or unfair competition. It seems to us that the lower courts have been so pre-occupied with the details that they have not seen the total picture. It has been correctly held that side-by-side comparison is not the final test of similarity. 10 Such comparison requires a careful scrutiny to determine in what points the labels of the products differ, as was done by the trial judge. The ordinary buyer does not usually make such scrutiny nor does he usually have the time to do so. The average shopper is usually in a hurry and does not inspect every product on the shelf as if he were browsing in a library. Where the housewife has to return home as soon as possible to her baby or the working woman has to make quick purchases during her off hours, she is apt to be confused by similar labels even if they do have minute differences. The male shopper is worse as he usually does not bother about such distinctions. The question is not whether the two articles are distinguishable by their label when set side by side but whether the general confusion made by the article upon the eye of the casual purchaser who is unsuspicious and off his guard, is such as to likely result in his confounding it with the original. 11 As observed in several cases, the general impression of the ordinary purchaser, buying under the normally prevalent conditions in trade and giving the attention such purchasers usually give in buying that class of goods is the touchstone. 12 It has been held that in making purchases, the consumer must depend upon his recollection of the appearance of the product which he intends to purchase. 13 The buyer having in mind the mark/label of the respondent must rely upon his memory of the petitioner's mark. 14 Unlike the judge who has ample time to minutely examine the labels in question in the comfort of his sala, the ordinary shopper does not enjoy the same opportunity. A number of courts have held that to determine whether a trademark has been infringed, we must consider the mark as a whole and not as dissected. If the buyer is deceived, it is attributable to the marks as a totality, not usually to any part of it. 15 The court therefore should be guided by its first impression, 16 for a buyer acts quickly and is governed by a casual glance, the value of which may be dissipated as soon as the court assumes to analyze carefully the respective features of the mark. 17 It has also been held that it is not the function of the court in cases of infringement and unfair competition to educate purchasers but rather to take their carelessness for granted, and to be ever conscious of the fact that marks need not be identical. A confusing similarity will justify the intervention of equity. 18 The judge must also be aware of the fact that usually a defendant in cases of infringement does not normally copy but makes only colorable changes. 19 Well has it been said that the most successful form of copying is to employ enough points of similarity to confuse the public with enough points of difference to confuse the courts. 20 We also note that the respondent court failed to take into consideration several factors which should have affected its conclusion, to wit: age, training and education of the usual purchaser, the nature and cost of the article, whether the article is bought for immediate consumption and also the

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conditions under which it is usually purchased . 21 Among these, what essentially determines the attitude of the purchaser, specifically his inclination to be cautious, is the cost of the goods. To be sure, a person who buys a box of candies will not exercise as much care as one who buys an expensive watch. As a general rule, an ordinary buyer does not exercise as much prudence in buying an article for which he pays a few centavos as he does in purchasing a more valuable thing. 22 Expensive and valuable items are normally bought only after deliberate, comparative and analytical investigation. But mass products, low priced articles in wide use, and matters of everyday purchase requiring frequent replacement are bought by the casual consumer without great care. 23 In this latter category is catsup. At that, even if the labels were analyzed together it is not difficult to see that the Sunshine label is a colorable imitation of the Del Monte trademark. The predominant colors used in the Del Monte label are green and red-orange, the same with Sunshine. The word "catsup" in both bottles is printed in white and the style of the print/letter is the same. Although the logo of Sunshine is not a tomato, the figure nevertheless approximates that of a tomato. As previously stated, the person who infringes a trade mark does not normally copy out but only makes colorable changes, employing enough points of similarity to confuse the public with enough points of differences to confuse the courts. What is undeniable is the fact that when a manufacturer prepares to package his product, he has before him a boundless choice of words, phrases, colors and symbols sufficient to distinguish his product from the others. When as in this case, Sunshine chose, without a reasonable explanation, to use the same colors and letters as those used by Del Monte though the field of its selection was so broad, the inevitable conclusion is that it was done deliberately to deceive . 24 It has been aptly observed that the ultimate ratio in cases of grave doubt is the rule that as between a newcomer who by the confusion has nothing to lose and everything to gain and one who by honest dealing has already achieved favor with the public, any doubt should be resolved against the newcomer inasmuch as the field from which he can select a desirable trademark to indicate the origin of his product is obviously a large one. 25 Coming now to the second issue, we find that the private respondent is not guilty of infringement for having used the Del Monte bottle. The reason is that the configuration of the said bottle was merely registered in the Supplemental Register. In the case of Lorenzana v. Macagba, 26 we declared that: (1) Registration in the Principal Register gives rise to a presumption of the validity of the registration, the registrant's ownership of the mark and his right to the exclusive use thereof. There is no such presumption in the registration in the Supplemental Register. (2) Registration in the Principal Register is limited to the actual owner of the trademark and proceedings therein on the issue of ownership which may be contested through opposition or interference proceedings or, after registration, in a petition for cancellation. Registration in the Principal Register is constructive notice of the registrant's claim of ownership, while registration in the Supplemental Register is merely proof of actual use of the trademark and notice that the registrant has used or appropriated it. It is not subject to opposition although it may be cancelled after the issuance. Corollarily, registration in the Principal Register is a basis for an action for infringement while registration in the Supplemental Register is not. (3) In applications for registration in the Principal Register, publication of the application is necessary. This is not so in applications for registrations in the Supplemental Register. It can be inferred from the foregoing that although Del Monte has actual use of the bottle's configuration, the petitioners cannot claim exclusive use thereof because it has not been registered in the Principal Register. However, we find that Sunshine, despite the many choices available to it and notwithstanding that the caution "Del Monte Corporation, Not to be Refilled" was embossed on the bottle, still opted to use the petitioners' bottle to market a product which Philpack also produces. This clearly shows the private respondent's bad faith and its intention to capitalize on the latter's reputation and goodwill and pass off its own product as that of Del Monte. The Court observes that the reasons given by the respondent court in resolving the case in favor of Sunshine are untenable. First, it declared that the registration of the Sunshine label belied the company's malicious intent to imitate petitioner's product. Second, it held that the Sunshine label was not improper because the Bureau of Patent presumably considered other trademarks before approving it. Third, it cited the case of Shell Co. v. Insular Petroleum, 27 where this Court declared that selling oil in containers of another with markings erased, without intent to deceive, was not unfair competition. Regarding the fact of registration, it is to be noted that the Sunshine label was registered not in the Principal Register but only in the Supplemental Register where the presumption of the validity of the trademark, the registrant's ownership of the mark and his right to its exclusive use are all absent.

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Anent the assumption that the Bureau of Patent had considered other existing patents, it is reiterated that since registration was only in the Supplemental Register, this did not vest the registrant with the exclusive right to use the label nor did it give rise to the presumption of the validity of the registration. On the argument that no unfair competition was committed, the Shell Case is not on all fours with the case at bar because: (1) In Shell, the absence of intent to deceive was supported by the fact that the respondent therein, before marketing its product, totally obliterated and erased the brands/mark of the different companies stenciled on the containers thereof, except for a single isolated transaction. The respondent in the present case made no similar effort. (2) In Shell, what was involved was a single isolated transaction. Of the many drums used, there was only one container where the Shell label was not erased, while in the case at hand, the respondent admitted that it made use of several Del Monte bottles and without obliterating the embossed warning. (3) In Shell, the product of respondent was sold to dealers, not to ultimate consumers. As a general rule, dealers are well acquainted with the manufacturer from whom they make their purchases and since they are more experienced, they cannot be so easily deceived like the inexperienced public. There may well be similarities and imitations which deceive all, but generally the interests of the dealers are not regarded with the same solicitude as are the interests of the ordinary consumer. For it is the form in which the wares come to the final buyer that is of significance. 28 As Sunshine's label is an infringement of the Del Monte's trademark, law and equity call for the cancellation of the private respondent's registration and withdrawal of all its products bearing the questioned label from the market. With regard to the use of Del Monte's bottle, the same constitutes unfair competition; hence, the respondent should be permanently enjoined from the use of such bottles. The court must rule, however, that the damage prayed for cannot be granted because the petitioner has not presented evidence to prove the amount thereof. Section 23 of R.A. No. 166 provides: Sec. 23. Actions and damages and injunction for infringement. Any person entitled to the exclusive use of a registered mark or trade name may recover damages in a civil action from any person who infringes his rights, and the measure of the damages suffered shall be either the reasonable profit which the complaining party would have made, had the defendant not infringed his said rights or the profit which the defendant actually made out of the infringement, or in the event such measure of damages cannot be readily ascertained with reasonable certainty the court may award as damages reasonable percentage based upon the amount of gross sales of the defendant or the value of the services in connection with which the mark or trade name was used in the infringement of the rights of the complaining party. In cases where actual intent to mislead the public or to defraud the complaining party shall be shown, in the discretion of the court, the damages may be doubled. The complaining party, upon proper showing may also be granted injunction. Fortunately for the petitioners, they may still find some small comfort in Art. 2222 of the Civil Code, which provides: Art. 2222. The court may award nominal damages in every obligation arising from any source enumerated in Art. 1157, or in every case where any property right has been invaded. Accordingly, the Court can only award to the petitioners, as it hereby does award, nominal damages in the amount of Pl,000.00. WHEREFORE, the petition is GRANTED. The decision of the Court of Appeals dated December 24, 1986 and the Resolution dated April 27,1987, are REVERSED and SET ASIDE and a new judgment is hereby rendered: (1) Canceling the private respondent's Certificate of Register No. SR-6310 and permanently enjoining the private respondent from using a label similar to that of the petitioners. (2) Prohibiting the private respondent from using the empty bottles of the petitioners as containers for its own products. (3) Ordering the private respondent to pay the petitioners nominal damages in the amount of Pl,000.00, and the costs of the suit. SO ORDERED. Narvasa Gancayco, Grio-Aquino and Medialdea, JJ., concur.

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G.R. No. 103543 July 5, 1993 ASIA BREWERY, INC., petitioner, vs. THE HON. COURT OF APPEALS and SAN MIGUEL CORPORATION, respondents. Abad Santos & Associates and Sycip, Salazar, Hernandez & Gatmaitan for petitioner. Roco, Bunag, Kapunan Law Office for private respondent.

GRIO-AQUINO, J.: On September 15, 1988, San Miguel Corporation (SMC) filed a complaint against Asia Brewery Inc. (ABI) for infringement of trademark and unfair competition on account of the latter's BEER PALE PILSEN or BEER NA BEER product which has been competing with SMC's SAN MIGUEL PALE PILSEN for a share of the local beer market. (San Miguel Corporation vs. Asia Brewery Inc., Civ. Case. No. 56390, RTC Branch 166, Pasig, Metro Manila.). On August 27, 1990, a decision was rendered by the trial Court, presided over by Judge Jesus O. Bersamira, dismissing SMC's complaint because ABI "has not committed trademark infringement or unfair competition against" SMC (p. 189, Rollo). SMC appealed to the Court of Appeals (C.A.-G.R. CV No. 28104). On September 30, 1991, the Court of Appeals (Sixth Division composed of Justice Jose C. Campos, Jr., chairman and ponente, and Justices Venancio D. Aldecoa Jr. and Filemon H. Mendoza, as members) reversed the trial court. The dispositive part of the decision reads as follows: In the light of the foregoing analysis and under the plain language of the applicable rule and principle on the matter, We find the defendant Asia Brewery Incorporated GUILTY of infringement of trademark and unfair competition. The decision of the trial court is hereby REVERSED, and a new judgment entered in favor of the plaintiff and against the defendant as follows: (1) The defendant Asia Brewery Inc. its officers, agents, servants and employees are hereby permanently enjoined and restrained from manufacturing, putting up, selling, advertising, offering or announcing for sale, or supplying Beer Pale Pilsen, or any similar preparation, manufacture or beer in bottles and under labels substantially identical with or like the said bottles and labels of plaintiff San Miguel Corporation employed for that purpose, or substantially identical with or like the bottles and labels now employed by the defendant for that purpose, or in bottles or under labels which are calculated to deceive purchasers and consumers into the belief that the beer is the product of the plaintiff or which will enable others to substitute, sell or palm off the said beer of the defendant as and for the beer of the plaintiff-complainant. (2) The defendant Asia Brewery Inc. is hereby ordered to render an accounting and pay the San Miguel Corporation double any and all the payments derived by defendant from operations of its business and the sale of goods bearing the mark "Beer Pale Pilsen" estimated at approximately Five Million Pesos (P5,000,000.00); to recall all its products bearing the mark "Beer Pale Pilsen" from its retailers and deliver these as well as all labels, signs, prints, packages, wrappers, receptacles and advertisements bearing the infringing mark and all plates, molds, materials and other means of making the same to the Court authorized to execute this judgment for destruction. (3) The defendant is hereby ordered to pay plaintiff the sum of Two Million Pesos (P2,000,000.00) as moral damages and Half a Million Pesos (P5,000,000.00) by way of exemplary damages. (4) The defendant is further ordered to pay the plaintiff attorney's fees in the amount of P250,000.00 plus costs to this suit. (p. 90, Rollo.) Upon a motion for reconsideration filed by ABI, the above dispositive part of the decision, was modified by the separate opinions of the Special Sixth Division 1 so that it should read thus: In the light of the foregoing analysis and under the plain language of the applicable rule and principle on the matter, We find the defendant Asia Brewery Incorporated GUILTY of infringement of trademark and unfair competition . The decision of the trial court is hereby REVERSED, and a new judgment entered in favor of the plaintiff and against the defendant as follows:

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(1) The defendant Asia Brewery Inc., its officers, agents, servants and employees are hereby permanently enjoined and restrained from manufacturing, putting up, selling, advertising, offering or announcing for sale, or supplying Beer Pale Pilsen, or any similar preparation, manufacture or beer in bottles and under labels substantially identical with or like the said bottles and labels of plaintiff San Miguel Corporation employed for that purpose, or substantially identical with or like the bottles and labels now employed by the defendant for that purpose, or in bottles or under labels which are calculated to deceive purchasers and consumers into the belief that the beer if the product of the plaintiff or which will enable others to substitute, sell or palm off the said beer of the defendant as and for the beer of the plaintiff-complainant. (2) The defendant Asia Brewery Inc. is hereby ordered 2 to recall all its products bearing the mark Beer Pale Pilsen from its retailers and deliver these as well as all labels, signs, prints, packages, wrappers, receptacles and advertisements bearing the infringing mark and all plates, molds, materials and other means of making the same to the Court authorized to execute this judgment for destruction. (3) The defendant is hereby ordered to pay plaintiff the sum of Two Million Pesos (P2,000,000.00) as moral damages and Half a Million Pesos (P500,000.00) by way of exemplary damages. (4) The defendant is further ordered to pay the plaintiff attorney's fees in the amount of P250,000.00 plus costs of this suit. In due time, ABI appealed to this Court by a petition for certiorari under Rule 45 of the Rules of Court. The lone issue in this appeal is whether ABI infringes SMC's trademark: San Miguel Pale Pilsen with Rectangular Hops and Malt Design, and thereby commits unfair competition against the latter. It is a factual issue (Phil. Nut Industry Inc. v. Standard Brands Inc., 65 SCRA 575) and as a general rule, the findings of the Court of Appeals upon factual questions are conclusive and ought not to be disturbed by us. However, there are exceptions to this general rule, and they are: (1) When the conclusion is grounded entirely on speculation, surmises and conjectures; (2) When the inference of the Court of Appeals from its findings of fact is manifestly mistaken, absurd and impossible; (3) Where there is grave abuse of discretion; (4) When the judgment is based on a misapprehension of facts; (5) When the appellate court, in making its findings, went beyond the issues of the case, and the same are contrary to the admissions of both the appellant and the appellee; (6) When the findings of said court are contrary to those of the trial court; (7) When the findings are without citation of specific evidence on which they are based; (8) When the facts set forth in the petition as well as in the petitioner's main and reply briefs are not disputed by the respondents; and (9) When the findings of facts of the Court of Appeals are premised on the absence of evidence and are contradicted on record. (Reynolds Philippine Corporation vs. Court of Appeals, 169 SCRA 220, 223 citing, Mendoza vs. Court of Appeals, 156 SCRA 597; Manlapaz vs. Court of Appeals, 147 SCRA 238; Sacay vs. Sandiganbayan, 142 SCRA 593, 609; Guita vs. CA, 139 SCRA 576; Casanayan vs. Court of Appeals, 198 SCRA 333, 336; also Apex Investment and Financing Corp. vs. IAC, 166 SCRA 458 [citing Tolentino vs. De Jesus, 56 SCRA 167; Carolina Industries, Inc. vs. CMS Stock Brokerage, Inc., 97 SCRA 734; Manero vs. CA, 102 SCRA 817; and Moran, Jr. vs. CA, 133 SCRA 88].) Under any of these exceptions, the Court has to review the evidence in order to arrive at the correct findings based on the record (Roman Catholic Bishop of Malolos, Inc. vs. IAC, 191 SCRA 411, 420.) Where findings of the Court of Appeals and trial court are contrary to each other, the Supreme Court may scrutinize the evidence on record. (Cruz vs. CA, 129 SCRA 222, 227.) The present case is one of the exceptions because there is no concurrence between the trial court and the Court of Appeals on the lone factual issue of whether ABI, by manufacturing and selling its BEER PALE PILSEN in amber colored steinie bottles of 320 ml. capacity with a white painted rectangular label has committed trademark infringement and unfair competition against SMC. Infringement of trademark is a form of unfair competition (Clarke vs. Manila Candy Co., 36 Phil. 100, 106). Sec. 22 of Republic Act No. 166, otherwise known as the Trademark Law, defines what constitutes infringement:

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Sec. 22. Infringement, what constitutes. Any person who shall use, without the consent of the registrant, any reproduction, counterfeit, copy or colorable imitation of any registered mark or trade-name in connection with the sale, offering for sale, or advertising of any goods, business or services on or in connection with which such use is likely to cause confusion or mistake or to deceive purchasers or others as to the source or origin of such goods or services, or identity of such business; or reproduce, counterfeit, copy or colorably imitate any such mark or trade-name and apply such reproduction, counterfeit, copy, or colorable imitation to labels, signs, prints, packages, wrappers, receptacles or advertisements intended to be used upon or in connection with such goods, business or services, shall be liable to a civil action by the registrant for any or all of the remedies herein provided. (Emphasis supplied.) This definition implies that only registered trade marks, trade names and service marks are protected against infringement or unauthorized use by another or others. The use of someone else's registered trademark, trade name or service mark is unauthorized, hence, actionable, if it is done "without the consent of the registrant." (Ibid.) The registered trademark of SMC for its pale pilsen beer is: San Miguel Pale Pilsen With Rectangular Hops and Malt Design. (Philippine Bureau of Patents, Trademarks and Technology Transfer Trademark Certificate of Registration No. 36103, dated 23 Oct. 1986, (p. 174, Rollo.) As described by the trial court in its decision (Page 177, Rollo): . . . . a rectangular design [is] bordered by what appears to be minute grains arranged in rows of three in which there appear in each corner hop designs. At the top is a phrase written in small print "Reg. Phil. Pat. Off." and at the bottom "Net Contents: 320 Ml." The dominant feature is the phrase "San Miguel" written horizontally at the upper portion. Below are the words "Pale Pilsen" written diagonally across the middle of the rectangular design. In between is a coat of arms and the phrase "Expertly Brewed." The "S" in "San" and the "M" of "Miguel," "P" of "Pale" and "Pilsen" are written in Gothic letters with fine strokes of serifs, the kind that first appeared in the 1780s in England and used for printing German as distinguished from Roman and Italic. Below "Pale Pilsen" is the statement "And Bottled by" (first line, "San Miguel Brewery" (second line), and "Philippines" (third line). (p. 177, Rollo; Emphasis supplied.) On the other hand, ABI's trademark, as described by the trial court, consists of: . . . a rectangular design bordered by what appear to be buds of flowers with leaves. The dominant feature is "Beer" written across the upper portion of the rectangular design. The phrase "Pale Pilsen" appears immediately below in smaller block letters. To the left is a hop design and to the right, written in small prints, is the phrase "Net Contents 320 ml." Immediately below "Pale Pilsen" is the statement written in three lines "Especially brewed and bottled by" (first line), "Asia Brewery Incorporated" (second line), and "Philippines" (third line), (p. 177, Rollo; Emphasis supplied.) Does ABI's BEER PALE PILSEN label or "design" infringe upon SMC's SAN MIGUEL PALE PILSEN WITH RECTANGULAR MALT AND HOPS DESIGN? The answer is "No." Infringement is determined by the "test of dominancy" rather than by differences or variations in the details of one trademark and of another. The rule was formulated in Co Tiong Sa vs. Director of Patents, 95 Phil. 1, 4 (1954); reiterated in Lim Hoa vs. Director of Patents, 100 Phil. 214, 216-217 (1956), thus: It has been consistently held that the question of infringement of a trademark is to be determined by the test of dominancy. Similarity in size, form and color, while relevant, is not conclusive. If the competing trademark contains the main or essential or dominant features of another, and confusion and deception is likely to result, infringement takes place. Duplication or imitation is not necessary; nor it is necessary that the infringing label should suggest an effort to imitate. [C. Neilman Brewing Co. vs. Independent Brewing Co., 191 F., 489, 495, citing Eagle White Lead Co., vs. Pflugh (CC) 180 Fed. 579]. The question at issue in cases of infringement of trademarks is whether the use of the marks involved would be likely to cause confusion or mistakes in the mind of the public or deceive purchasers. (Auburn Rubber Corporation vs. Honover Rubber Co., 107 F. 2d 588; . . . .) (Emphasis supplied.) In Forbes, Munn & Co. (Ltd.) vs. Ang San To , 40 Phil. 272, 275, the test was similarity or "resemblance between the two (trademarks) such as would be likely to cause the one mark to be mistaken for the other. . . . [But] this is not such similitude as amounts to identity." In Phil. Nut Industry Inc. vs. Standard Brands Inc. , 65 SCRA 575, the court was more specific: the test is "similarity in the dominant features of the trademarks."

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What are the dominant features of the competing trademarks before us? There is hardly any dispute that the dominant feature of SMC's trademark is the name of the product: SAN MIGUEL PALE PILSEN, written in white Gothic letters with elaborate serifs at the beginning and end of the letters "S" and "M" on an amber background across the upper portion of the rectangular design. On the other hand, the dominant feature of ABI's trademark is the name: BEER PALE PILSEN, with the word "Beer" written in large amber letters, larger than any of the letters found in the SMC label. The trial court perceptively observed that the word "BEER" does not appear in SMC's trademark, just as the words "SAN MIGUEL" do not appear in ABI's trademark. Hence, there is absolutely no similarity in the dominant features of both trademarks. Neither in sound, spelling or appearance can BEER PALE PILSEN be said to be confusingly similar to SAN MIGUEL PALE PILSEN. No one who purchases BEER PALE PILSEN can possibly be deceived that it is SAN MIGUEL PALE PILSEN. No evidence whatsoever was presented by SMC proving otherwise. Besides the dissimilarity in their names, the following other dissimilarities in the trade dress or appearance of the competing products abound: (1) The SAN MIGUEL PALE PILSEN bottle has a slender tapered neck. The BEER PALE PILSEN bottle has a fat, bulging neck. (2) The words "pale pilsen" on SMC's label are printed in bold and laced letters along a diagonal band, whereas the words "pale pilsen" on ABI's bottle are half the size and printed in slender block letters on a straight horizontalband. (See Exhibit "8-a".). (3) The names of the manufacturers are prominently printed on their respective bottles. SAN MIGUEL PALE PILSEN is "Bottled by the San Miguel Brewery, Philippines," whereas BEER PALE PILSEN is "Especially brewed and bottled by Asia Brewery Incorporated, Philippines." (4) On the back of ABI's bottle is printed in big, bold letters, under a row of flower buds and leaves, its copyrighted slogan: "BEER NA BEER!" Whereas SMC's bottle carries no slogan. (5) The back of the SAN MIGUEL PALE PILSEN bottle carries the SMC logo, whereas the BEER PALE PILSEN bottle has no logo. (6) The SAN MIGUEL PALE PILSEN bottle cap is stamped with a coat of arms and the words "San Miguel Brewery Philippines" encircling the same. The BEER PALE PILSEN bottle cap is stamped with the name "BEER" in the center, surrounded by the words "Asia Brewery Incorporated Philippines." (7) Finally, there is a substantial price difference between BEER PALE PILSEN (currently at P4.25 per bottle) and SAN MIGUEL PALE PILSEN (currently at P7.00 per bottle). One who pays only P4.25 for a bottle of beer cannot expect to receive San Miguel Pale Pilsen from the storekeeper or bartender. The fact that the words pale pilsen are part of ABI's trademark does not constitute an infringement of SMC's trademark: SAN MIGUEL PALE PILSEN, for "pale pilsen" are generic words descriptive of the color ("pale"), of a type of beer ("pilsen"), which is a light bohemian beer with a strong hops flavor that originated in the City of Pilsen in Czechoslovakia and became famous in the Middle Ages. (Webster's Third New International Dictionary of the English Language, Unabridged. Edited by Philip Babcock Gove. Springfield, Mass.: G & C Merriam Co., [c] 1976, page 1716.) "Pilsen" is a "primarily geographically descriptive word," (Sec. 4, subpar. [e] Republic Act No. 166, as inserted by Sec. 2 of R.A. No. 638) hence, non-registerable and not appropriable by any beer manufacturer. The Trademark Law provides: Sec. 4. . . .. The owner of trade-mark, trade-name or service-mark used to distinguish his goods, business or services from the goods, business or services of others shall have the right to register the same [on the principal register], unless it:

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xxx xxx xxx (e) Consists of a mark or trade-name which, when applied to or used in connection with the goods, business or services of the applicant is merely descriptive or deceptively misdescriptive of them, or when applied to or used in connection with the goods, business or services of the applicant isprimarily geographically descriptive or deceptively misdescriptive of them, or is primarily merely a surname." (Emphasis supplied.) The words "pale pilsen" may not be appropriated by SMC for its exclusive use even if they are part of its registered trademark: SAN MIGUEL PALE PILSEN, any more than such descriptive words as "evaporated milk," "tomato ketchup," "cheddar cheese," "corn flakes" and "cooking oil" may be appropriated by any single manufacturer of these food products, for no other reason than that he was the first to use them in his registered trademark. InMasso Hermanos, S.A. vs. Director of Patents, 94 Phil. 136, 139 (1953), it was held that a dealer in shoes cannot register "Leather Shoes" as his trademark because that would be merely descriptive and it would be unjust to deprive other dealers in leather shoes of the right to use the same words with reference to their merchandise. No one may appropriate generic or descriptive words. They belong to the public domain (Ong Ai Gui vs. Director of Patents, 96 Phil. 673, 676 [1955]): A word or a combination of words which is merely descriptive of an article of trade, or of its composition, characteristics, or qualities, cannot be appropriated and protected as a trademark to the exclusion of its use by others. . . . inasmuch as all persons have an equal right to produce and vend similar articles, they also have the right to describe them properly and to use any appropriate language or words for that purpose, and no person can appropriate to himself exclusively any word or expression, properly descriptive of the article, its qualities, ingredients or characteristics, and thus limit other persons in the use of language appropriate to the description of their manufactures, the right to the use of such language being common to all . This rule excluding descriptive terms has also been held to apply to trade-names. As to whether words employed fall within this prohibition, it is said that the true test is not whether they are exhaustively descriptive of the article designated, but whether in themselves, and as they are commonly used by those who understand their meaning, they are reasonably indicative and descriptive of the thing intended. If they are thus descriptive, and not arbitrary, they cannot be appropriated from general use and become the exclusive property of anyone. (52 Am. Jur. 542-543.) . . . . Others may use the same or similar descriptive word in connection with their own wares, provided they take proper steps to prevent the public being deceived. (Richmond Remedies Co. vs. Dr. Miles Medical Co., 16 E. [2d] 598.) . . . . A descriptive word may be admittedly distinctive, especially if the user is the first creator of the article. It will, however, be denied protection, not because it lacks distinctiveness, but rather because others are equally entitled to its use. (2 Callman. Unfair Competition and Trademarks, pp. 869-870.)" (Emphasis supplied.) The circumstance that the manufacturer of BEER PALE PILSEN, Asia Brewery Incorporated, has printed its name all over the bottle of its beer product: on the label, on the back of the bottle, as well as on the bottle cap, disproves SMC's charge that ABI dishonestly and fraudulently intends to palm off its BEER PALE PILSEN as SMC's product. In view of the visible differences between the two products, the Court believes it is quite unlikely that a customer of average intelligence would mistake a bottle of BEER PALE PILSEN for SAN MIGUEL PALE PILSEN. The fact that BEER PALE PILSEN like SAN MIGUEL PALE PILSEN is bottled in amber-colored steinie bottles of 320 ml. capacity and is also advertised in print, broadcast, and television media, does not necessarily constitute unfair competition. Unfair competition is the employment of deception or any other means contrary to good faith by which a person shall pass off the goods manufactured by him or in which he deals, or his business, or services, for those of another who has already established goodwill for his similar goods, business or services, or any acts calculated to produce the same result. (Sec. 29, Republic Act No. 166, as amended.) The law further enumerates the more common ways of committing unfair competition, thus: Sec. 29. . . . In particular, and without in any way limiting the scope of unfair competition, the following shall be deemed guilty of unfair competition: (a) Any person, who in selling his goods shall give them the general appearance of goods of another manufacturer or dealer, either as to the goods themselves or in the wrapping of the packages in which they are contained, or the devices or words thereon, or in any other feature of their appearance, which would be likely to influence purchasers 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.

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(b) Any person who by any artifice, or device, or who employs any other means calculated to induce the false belief that such person is offering the services of another who has identified such services in the mind of the public; or (c) Any person who shall make any false statement in the course of trade or who shall commit any other act contrary to good faith of a nature calculated to discredit the goods, business or services of another. In this case, the question to be determined is whether ABI is using a name or mark for its beer that has previously come to designate SMC's beer, or whether ABI is passing off its BEER PALE PILSEN as SMC's SAN MIGUEL PALE PILSEN. . . ..The universal test question is whether the public is likely to be deceived. Nothing less than conduct tending to pass off one man's goods or business as that of another will constitute unfair competition. Actual or probable deception and confusion on the part of the customers by reason of defendant's practices must always appear. (Shell Co., of the Philippines, Ltd. vs. Insular Petroleum Refining Co. Ltd. et al., 120 Phil. 434, 439.) The use of ABI of the steinie bottle, similar but not identical to the SAN MIGUEL PALE PILSEN bottle, is not unlawful. As pointed out by ABI's counsel, SMC did not invent but merely borrowed the steinie bottle from abroad and it claims neither patent nor trademark protection for that bottle shape and design. (See rollo, page 55.) The Cerveza Especial and the Efes Pale Pilsen use the "steinie" bottle. (See Exhibits 57-D, 57-E.) The trial court found no infringement of SMC's bottle The court agrees with defendant that there is no infringement of plaintiff's bottle, firstly, because according to plaintiff's witness Deogracias Villadolid, it is a standard type of bottle called steinie, and to witness Jose Antonio Garcia, it is not a San Miguel Corporation design but a design originally developed in the United States by the Glass Container Manufacturer's Institute and therefore lacks exclusivity. Secondly, the shape was never registered as a trademark. Exhibit "C" is not a registration of a beer bottle design required under Rep. Act 165 but the registration of the name and other marks of ownership stamped on containers as required by Rep. Act 623. Thirdly, the neck of defendant's bottle is much larger and has a distinct bulge in its uppermost part. (p. 186, Rollo.) The petitioner's contention that bottle size, shape and color may not be the exclusive property of any one beer manufacturer is well taken. SMC's being the first to use the steinie bottle does not give SMC a vested right to use it to the exclusion of everyone else. Being of functional or common use, and not the exclusive invention of any one, it is available to all who might need to use it within the industry. Nobody can acquire any exclusive right to market articles supplying simple human needs in containers or wrappers of the general form, size and character commonly and immediately used in marketing such articles (Dy Buncio vs. Tan Tiao Bok, 42 Phil. 190, 194-195.) . . . protection against imitation should be properly confined to nonfunctional features. Even if purely functional elements are slavishly copied, the resemblance will not support an action for unfair competition, and the first user cannot claim secondary meaning protection. Nor can the first user predicate his claim to protection on the argument that his business was established in reliance on any such unpatented nonfunctional feature, even "at large expenditure of money." (Callman Unfair Competition, Trademarks and Monopolies, Sec. 19.33 [4th Ed.].) (Petition for Review, p. 28.) ABI does not use SMC's steinie bottle. Neither did ABI copy it. ABI makes its own steinie bottle which has a fat bulging neck to differentiate it from SMC's bottle. The amber color is a functional feature of the beer bottle. As pointed out by ABI, all bottled beer produced in the Philippines is contained and sold in amber-colored bottles because amber is the most effective color in preventing transmission of light and provides the maximum protection to beer. As was ruled in California Crushed Fruit Corporation vs. Taylor B. and Candy Co ., 38 F2d 885, a merchant cannot be enjoined from using a type or color of bottle where the same has the useful purpose of protecting the contents from the deleterious effects of light rays. Moreover, no one may have a monopoly of any color. Not only beer, but most medicines, whether in liquid or tablet form, are sold in amber-colored bottles. That the ABI bottle has a 320 ml. capacity is not due to a desire to imitate SMC's bottle because that bottle capacity is the standard prescribed under Metrication Circular No. 778, dated 4 December 1979, of the Department of Trade, Metric System Board. With regard to the white label of both beer bottles, ABI explained that it used the color white for its label because white presents the strongest contrast to the amber color of ABI's bottle; it is also the most economical to use on labels, and the easiest to "bake" in the furnace (p. 16, TSN of September 20, 1988). No one can have a monopoly of the color amber for bottles, nor of white for labels, nor of the rectangular shape which is the usual configuration of labels. Needless to say, the shape of the bottle and of the label is unimportant. What is all important is the name of the product written on the label of the bottle for that is how one beer may be distinguished form the others. In Dy Buncio v. Tan Tiao Bok, 42 Phil. 190, 196-197, where two competing tea products were both labelled as Formosan tea, both sold in 5-ounce packages made of ordinary wrapping paper of conventional color, both with labels containing designs drawn in green ink and Chinese characters written in red ink, one label showing a double-decked jar in the center, the other, a flower pot, this court found that the resemblances between the designs were not sufficient to mislead the ordinary intelligent buyer, hence, there was no unfair competition. The Court held:

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. . . . In order that there may be deception of the buying public in the sense necessary to constitute unfair competition, it is necessary to suppose a public accustomed to buy, and therefore to some extent familiar with, the goods in question. The test of fraudulent simulation is to be found in the likelihood of the deception of persons in some measure acquainted with an established design and desirous of purchasing the commodity with which that design has been associated. The test is not found in the deception, or possibility of the deception, of the person who knows nothing about the design which has been counterfeited, and who must be indifferent as between that and the other. The simulation, in order to be objectionable, must be such as appears likely to mislead the ordinarily intelligent buyer who has a need to supply and is familiar with the article that he seeks to purchase. The main thrust of SMC's complaint if not infringement of its trademark, but unfair competition arising form the allegedly "confusing similarity" in the general appearance or trade dress of ABI's BEER PALE PILSEN beside SMC's SAN MIGUEL PALE PILSEN (p. 209, Rollo) SMC claims that the "trade dress" of BEER PALE PILSEN is "confusingly similar" to its SAN MIGUEL PALE PILSEN because both are bottled in 320 ml. steinie type, amber-colored bottles with white rectangular labels. However, when as in this case, the names of the competing products are clearly different and their respective sources are prominently printed on the label and on other parts of the bottle, mere similarity in the shape and size of the container and label, does not constitute unfair competition. The steinie bottle is a standard bottle for beer and is universally used. SMC did not invent it nor patent it. The fact that SMC's bottle is registered under R.A. No. 623 (as amended by RA 5700, An Act to Regulate the Use of Duly Stamped or Marked Bottles, Boxes, Casks, Kegs, Barrels and Other Similar Containers) simply prohibits manufacturers of other foodstuffs from the unauthorized use of SMC's bottles by refilling these with their products. It was not uncommon then for products such as patis (fish sauce) and toyo (soy sauce) to be sold in recycled SAN MIGUEL PALE PILSEN bottles. Registration of SMC's beer bottles did not give SMC a patent on the steinie or on bottles of similar size, shape or color. Most containers are standardized because they are usually made by the same manufacturer. Milk, whether in powdered or liquid form, is sold in uniform tin cans. The same can be said of the standard ketchup or vinegar bottle with its familiar elongated neck. Many other grocery items such as coffee, mayonnaise, pickles and peanut butter are sold in standard glass jars. The manufacturers of these foodstuffs have equal right to use these standards tins, bottles and jars for their products. Only their respective labels distinguish them from each other. Just as no milk producer may sue the others for unfair competition because they sell their milk in the same size and shape of milk can which he uses, neither may SMC claim unfair competition arising from the fact that ABI's BEER PALE PILSEN is sold, like SMC's SAN MIGUEL PALE PILSEN in amber steinie bottles. The record does not bear out SMC's apprehension that BEER PALE PILSEN is being passed off as SAN MIGUEL PALE PILSEN. This is unlikely to happen for consumers or buyers of beer generally order their beer by brand. As pointed out by ABI's counsel, in supermarkets and tiendas, beer is ordered by brand, and the customer surrenders his empty replacement bottles or pays a deposit to guarantee the return of the empties. If his empties are SAN MIGUEL PALE PILSEN, he will get SAN MIGUEL PALE PILSEN as replacement. In sari-sari stores, beer is also ordered from the tindera by brand. The same is true in restaurants, pubs and beer gardens beer is ordered from the waiters by brand. (Op. cit. page 50.) Considering further that SAN MIGUEL PALE PILSEN has virtually monopolized the domestic beer market for the past hundred years, those who have been drinking no other beer but SAN MIGUEL PALE PILSEN these many years certainly know their beer too well to be deceived by a newcomer in the market. If they gravitate to ABI's cheaper beer, it will not be because they are confused or deceived, but because they find the competing product to their taste. Our decision in this case will not diminish our ruling in "Del Monte Corporation vs. Court of Appeals and Sunshine Sauce Manufacturing Industries," 181 SCRA 410, 419, 3 that: . . . to determine whether a trademark has been infringed, we must consider the mark as a whole and not as dissected. If the buyer is deceived, it is attributable to the marks as a totality, not usually to any part of it. That ruling may not apply to all kinds of products. The Court itself cautioned that in resolving cases of infringement and unfair competition, the courts should "take into consideration several factors which would affect its conclusion, to wit: the age, training and education of the usual purchaser, the nature and cost of the article, whether the article is bought for immediate consumption and also the conditions under which it is usually purchased" (181 SCRA 410, 418-419). The Del Monte case involved catsup, a common household item which is bought off the store shelves by housewives and house help who, if they are illiterate and cannot identify the product by name or brand, would very likely identify it by mere recollection of its appearance. Since the competitor, Sunshine Sauce Mfg. Industries, not only used recycled Del Monte bottles for its catsup (despite the warning embossed on the bottles: "Del Monte Corporation. Not to be refilled.") but also used labels which were "a colorable imitation" of Del Monte's label, we held that there was infringement of Del Monte's trademark and unfair competition by Sunshine. Our ruling in Del Monte would not apply to beer which is not usually picked from a store shelf but ordered by brand by the beer drinker himself from the storekeeper or waiter in a pub or restaurant.

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Moreover, SMC's brand or trademark: "SAN MIGUEL PALE PILSEN" is not infringed by ABI's mark: "BEER NA BEER" or "BEER PALE PILSEN." ABI makes its own bottle with a bulging neck to differentiate it from SMC's bottle, and prints ABI's name in three (3) places on said bottle (front, back and bottle cap) to prove that it has no intention to pass of its "BEER" as "SAN MIGUEL." There is no confusing similarity between the competing beers for the name of one is "SAN MIGUEL" while the competitor is plain "BEER" and the points of dissimilarity between the two outnumber their points of similarity. Petitioner ABI has neither infringed SMC's trademark nor committed unfair competition with the latter's SAN MIGUEL PALE PILSEN product. While its BEER PALE PILSEN admittedly competes with the latter in the open market, that competition is neither unfair nor fraudulent. Hence, we must deny SMC's prayer to suppress it. WHEREFORE, finding the petition for review meritorious, the same is hereby granted. The decision and resolution of the Court of Appeals in CAG.R. CV No. 28104 are hereby set aside and that of the trial court is REINSTATED and AFFIRMED. Costs against the private respondent. SO ORDERED. Narvasa, C.J., Bidin, Regalado, Romero, Nocon, Bellosillo and Melo, JJ., concur. Feliciano, J., took no part.

Separate Opinions

CRUZ, J., dissenting: The present ponencia stresses the specific similarities and differences of the two products to support the conclusion that there is no infringement of trade marks or unfair competition. That test was rejected in my ownponencia in Del Monte Corporation vs. Court of Appeals, 181 SCRA 410, concurred in by Justices Narvasa, Gancayco, Grio-Aquino and Medialdea, where we declared: While the Court does recognize these distinctions, it does not agree with the conclusion that there was no infringement or unfair competition. It seems to us that the lower courts have been so preoccupied with the details that they have not seen the total picture. It has been correctly held that side-by-side comparison is not the final test of similarity. Such comparison requires a careful scrutiny to determine in what points the labels of the products differ, as was done by the trial judge. The ordinary buyer does not usually make such scrutiny nor does he usually have the time to do so. The average shopper is usually in a hurry and does not inspect every product on the shelf as if he were browsing in a library. Where the housewife has to return home as soon as possible to her baby or the working woman has to make quick purchases during her off hours, she is apt to be confused by similar labels even if they do have minute differences. The male shopper is worse as he usually does not bother about such distinctions. The question is not whether the two articles are distinguishable by their labels when set aside by side but whether the general confusion made by the article upon the eye of the casual purchaser who is unsuspicious and off his guard, is such as to likely result in his confounding it with the original. As observed in several cases, the general impression of the ordinary purchaser, buying under the normally prevalent conditions in trade and giving the attention such purchasers usually give in buying that class of goods, is the touchstone. It has been held that in making purchases, the consumer must depend upon his recollection of the appearance of the product which he intends to purchase. The buyer having in mind the mark/label of the respondent must rely upon his memory of the petitioner's mark. Unlike the judge who has ample time to minutely examine the labels in question in the comfort of his sala, the ordinary shopper does not enjoy the same opportunity.

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A number of courts have held that to determine whether a trademark has been infringed, we must consider the mark as a whole and not as dissected. If the buyer is deceived, it is attributable to the marks as a totality, not usually to any part of it. The court therefore should be guided by its first impression, for a buyer acts quickly and is governed by a casual glance, the value of which may be dissipated as soon as the court assumes to analyze carefully the respective features of the mark. It has also been held that it is not the function of the court in cases of infringement and unfair competition to educate purchasers but rather to take their carelessness for granted, and to be ever conscious of the fact that marks need not be identical. A confusing similarity will justify the intervention of equity. The judge must also be aware of the fact that usually a defendant in cases of infringement does not normally copy but makes only colorable changes. Well has it been said that the most successful form of copying is to employ enough points of similarity to confuse the public with enough points of difference to confuse the courts. For the above reasons, and the other arguments stated in Del Monte, I dissent.

# Separate Opinions CRUZ, J., dissenting: The present ponencia stresses the specific similarities and differences of the two products to support the conclusion that there is no infringement of trade marks or unfair competition. That test was rejected in my own ponencia in Del Monte Corporation vs. Court of Appeals, 181 SCRA 410, concurred in by Justices Narvasa, Gancayco, Grio-Aquino and Medialdea, where we declared: While the Court does recognize these distinctions, it does not agree with the conclusion that there was no infringement or unfair competition. It seems to us that the lower courts have been so preoccupied with the details that they have not seen the total picture. It has been correctly held that side-by-side comparison is not the final test of similarity. Such comparison requires a careful scrutiny to determine in what points the labels of the products differ, as was done by the trial judge. The ordinary buyer does not usually make such scrutiny nor does he usually have the time to do so. The average shopper is usually in a hurry and does not inspect every product on the shelf as if he were browsing in a library. Where the housewife has to return home as soon as possible to her baby or the working woman has to make quick purchases during her off hours, she is apt to be confused by similar labels even if they do have minute differences. The male shopper is worse as he usually does not bother about such distinctions. The question is not whether the two articles are distinguishable by their labels when set aside by side but whether the general confusion made by the article upon the eye of the casual purchaser who is unsuspicious and off his guard, is such as to likely result in his confounding it with the original. As observed in several cases, the general impression of the ordinary purchaser, buying under the normally prevalent conditions in trade and giving the attention such purchasers usually give in buying that class of goods, is the touchstone. It has been held that in making purchases, the consumer must depend upon his recollection of the appearance of the product which he intends to purchase. The buyer having in mind the mark/label of the respondent must rely upon his memory of the petitioner's mark. Unlike the judge who has ample time to minutely examine the labels in question in the comfort of his sala, the ordinary shopper does not enjoy the same opportunity. A number of courts have held that to determine whether a trademark has been infringed, we must consider the mark as a whole and not as dissected. If the buyer is deceived, it is attributable to the marks as a totality, not usually to any part of it. The court therefore should be guided by its first impression, for a buyer acts quickly and is governed by a casual glance, the value of which may be dissipated as soon as the court assumes to analyze carefully the respective features of the mark. It has also been held that it is not the function of the court in cases of infringement and unfair competition to educate purchasers but rather to take their carelessness for granted, and to be ever conscious of the fact that marks need not be identical. A confusing similarity will justify the intervention of equity. The judge must also be aware of the fact that usually a defendant in cases of infringement does not normally copy but makes only colorable changes. Well has it been said that the most successful form of copying is to employ enough points of similarity to confuse the public with enough points of difference to confuse the courts. For the above reasons, and the other arguments stated in Del Monte, I dissent.

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Republic of the Philippines Supreme Court Manila

SECOND DIVISION BERRIS AGRICULTURAL CO., INC., Petitioner, G.R. No. 183404 Present: VELASCO, JR., J.,* NACHURA,** Acting Chairperson, LEONARDO-DE CASTRO,*** BRION,**** and MENDOZA, JJ. Promulgated: Respondent. October 13, 2010 x------------------------------------------------------------------------------------x

- versus -

NORVY ABYADANG,

DECISION

NACHURA, J.:

This petition for review[1] on certiorari under Rule 45 of the Rules of Court seeks the reversal of the Decision dated April 14, 2008[2] and the Resolution dated June 18, 2008[3] of the Court of Appeals (CA) in CA-G.R. SP No. 99928.

The antecedents

On January 16, 2004, respondent Norvy A. Abyadang (Abyadang), proprietor of NS Northern Organic Fertilizer, with address at No. 43 Lower QM, Baguio City, filed with the Intellectual Property Office (IPO) a trademark application for the mark NS D -10 PLUS for use in connection with Fungicide (Class 5) with active ingredient 80% Mancozeb. The application, under Application Serial No. 4-2004-00450, was given due course and was published in the IPO e-Gazette for opposition on July 28, 2005.

On August 17, 2005, petitioner Berris Agricultural Co., Inc. (Berris), with business address in Barangay Masiit, Calauan, Laguna, filed with the IPO Bureau of Legal Affairs (IPO-BLA) a Verified Notice of Opposition[4] against the mark under application allegedly because NS D-10 PLUS is similar and/or confusingly similar to its registered trademark D-10 80 WP, also used for Fungicide (Class 5) with active ingredient 80% Mancozeb. The opposition was docketed as IPC No. 14-2005-00099.

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After an exchange of pleadings, on April 28, 2006, Director Estrellita Beltran-Abelardo (Director Abelardo) of the IPO-BLA issued Decision No. 2006-24[5](BLA decision), the dispositive portion of which reads WHEREFORE, viewed in the light of all the foregoing, this Bureau finds and so holds that Respondent-Applicants mark NS D-10 PLUS is confusingly similar to the Opposers mark and as such, the opposition is hereby SUSTAINED. Consequently, trademark application bearing Serial No. 4-2004-00450 for the mark NS D-10 PLUS filed on January 16, 2004 by Norvy A. Ab[yada]ng covering the goods fungicide under Class 5 of the International Classification of goods is, as it is hereby, REJECTED. Let the filewrapper of the trademark NS D-10 PLUS subject matter under consideration be forwarded to the Administrative, Financial and Human Resources Development Services Bureau (AFHRDSB) for appropriate action in accordance with this Order with a copy to be furnished the Bureau of Trademark (BOT) for information and to update its records. SO ORDERED.[6]

Abyadang filed a motion for reconsideration, and Berris, in turn, filed its opposition to the motion.

On August 2, 2006, Director Abelardo issued Resolution No. 2006-09(D)[7] (BLA resolution), denying the motion for reconsideration and disposing as follows IN VIEW OF THE FOREGOING, the Motion for Reconsideration filed by the Respondent-Applicant is hereby DENIED FOR LACK OF MERIT. Consequently, Decision No. 2006-24 dated April 28, 2006 STANDS. Let the filewrapper of the trademark NS D-10 PLUS subject matter under consideration be forwarded to the Bureau of Trademarks for appropriate action in accordance with this Resolution. SO ORDERED.[8]

Aggrieved, Abyadang filed an appeal on August 22, 2006 with the Office of the Director General, Intellectual Property Philippines (IPPDG), docketed as Appeal No. 14-06-13.

With the filing of the parties respective memoranda, Director General Adrian S. Cristobal, Jr. of the IPPDG rendered a decis ion dated July 20, 2007,[9] ruling as follows Wherefore, premises considered[,] the appeal is hereby DENIED. Accordingly, the appealed Decision of the Director is hereby AFFIRMED. Let a copy of this Decision as well as the trademark application and records be furnished and returned to the Director of Bureau of Legal Affairs for appropriate action. Further, let also the Directors of the Bureau of Trademarks, the Administrative, Financial and Human Resources Development Services Bureau, and the library of the Documentation, Information and Technology Transfer Bureau be furnished a copy of this Decision for information, guidance, and records purposes. SO ORDERED.[10]

Undeterred, Abyadang filed a petition for review[11] before the CA.

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In its Decision dated April 14, 2008, the CA reversed the IPPDG decision. It held In sum, the petition should be granted due to the following reasons: 1) petitioners mark NS D-10 PLUS is not confusingly similar with respondents trademark D-10 80 WP; 2) respondent failed to establish its ownership of the mark D10 80 WP and 3) respondents trademark registration for D-10 80 WP may be cancelled in the present case to avoid multiplicity of suits. WHEREFORE, the petition is GRANTED. The decision dated July 20, 2007 of the IPO Director General in Appeal No. 14-06-13 (IPC No. 14-2005-00099) is REVERSEDand SET ASIDE, and a new one is entered giving due course to petitioners application for registration of the mark NS D-10 PLUS, and canceling respondents trademark registration for D10 80 WP. SO ORDERED.[12]

Berris filed a Motion for Reconsideration, but in its June 18, 2008 Resolution, the CA denied the motion for lack of merit. Hence, this petition anchored on the following arguments I. The Honorable Court of Appeals finding that there exists no confusing similarity between Petitioners and respondents marks is based on misapprehension of facts, surmise and conjecture and not in accord with the Intellectual Property Code and applicable Decisions of this Honorable Court [Supreme Court]. The Honorable Court of Appeals Decision reversing and setting aside the technical findings of the Intellectual Property Office even without a finding or, at the very least, an allegation of grave abuse of discretion on the part of said agency is not in accord with law and earlier pronouncements of this Honorable Court [Supreme Court]. The Honorable Court of Appeals Decision ordering the cancellation of herein Petitioners duly registered and validly existing trademark in the absence of a properly filed Petition for Cancellation before the Intellectual Property Office is not in accord with the Intellectual Property Code and applicable Decisions of this Honorable Court [Supreme Court]. [13]

II.

III.

The basic law on trademark, infringement, and unfair competition is Republic Act (R.A.) No. 8293 [14] (Intellectual Property Code of the Philippines), specifically Sections 121 to 170 thereof. It took effect on January 1, 1998. Prior to its effectivity, the applicable law was R.A. No. 166,[15] as amended.

Interestingly, R.A. No. 8293 did not expressly repeal in its entirety R.A. No. 166, but merely provided in Section 239.1 [16] that Acts and parts of Acts inconsistent with it were repealed. In other words, only in the instances where a substantial and irreconcilable conflict is found between the provisions of R.A. No. 8293 and of R.A. No. 166 would the provisions of the latter be deemed repealed.

R.A. No. 8293 defines a mark as any visible sign capable of distinguishing the goods (trademark) or services (service mark) of an enterprise and shall include a stamped or marked container of goods. [17] It also defines a collective mark as any visible sign designated as such in the application for registration and capable of distinguishing the origin or any other common characteristic, including the quality of goods or services of different enterprises which use the sign under the control of the registered owner of the collective mark. [18]

On the other hand, R.A. No. 166 defines a trademark as 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,

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or dealt by another.[19] A trademark, being a special property, is afforded protection by law. But for one to enjoy this legal protection, legal protection ownership of the trademark should rightly be established.

The ownership of a trademark is acquired by its registration and its actual use by the manufacturer or distributor of the goods made available to the purchasing public. Section 122[20] of R.A. No. 8293 provides that the rights in a mark shall be acquired by means of its valid registration with the IPO. A certificate of registration of a mark, once issued, constitutes prima facie evidence of the validity of the registration, of the registrants ownership of the mark, and of the registrants exclusive right to use the same in connection with the goods or services and those that are related thereto specified in the certificate.[21] R.A. No. 8293, however, requires the applicant for registration or the registrant to file a declaration of actual use (DAU) of the mark, with evidence to that effect, within three (3) years from the filing of the application for registration; otherwise, the application shall be refused or the mark shall be removed from the register. [22] In other words, the prima faciepresumption brought about by the registration of a mark may be challenged and overcome, in an appropriate action, by proof of the nullity of the registration or of non-use of the mark, except when excused.[23] Moreover, the presumption may likewise be defeated by evidence of prior use by another person, i.e., it will controvert a claim of legal appropriation or of ownership based on registration by a subsequent user. This is because a trademark is a creation of use and belongs to one who first used it in trade or commerce.[24]

The determination of priority of use of a mark is a question of fact. Adoption of the mark alone does not suffice. One may make advertisements, issue circulars, distribute price lists on certain goods, but these alone will not inure to the claim of ownership of the mark until the goods bearing the mark are sold to the public in the market. Accordingly, receipts, sales invoices, and testimonies of witnesses as customers, or orders of buyers, best prove the actual use of a mark in trade and commerce during a certain period of time. [25] In the instant case, both parties have submitted proof to support their claim of ownership of their respective trademarks.

Culled from the records, Berris, as oppositor to Abyadangs application for registration of his trademark, presented the foll owing evidence: (1) its trademark application dated November 29, 2002 [26] with Application No. 4-2002-0010272; (2) its IPO certificate of registration dated October 25, 2004,[27] with Registration No. 4-2002-010272 and July 8, 2004 as the date of registration; (3) a photocopy of its packaging [28] bearing the mark D-10 80 WP; (4) photocopies of its sales invoices and official receipts;[29] and (5) its notarized DAU dated April 23, 2003,[30] stating that the mark was first used on June 20, 2002, and indicating that, as proof of actual use, copies of official receipts or sales invoices of goods using the mark were attached as Annex B.

On the other hand, Abyadangs proofs consisted of the following: (1) a photocopy of the packaging [31] for his marketed fungicide bearing mark NS D-10 PLUS; (2) Abyadangs Affidavit dated February 14, 2006, [32] stating among others that the mark NS D-10 PLUS was his own creation derived from: N for Norvy, his name; S for Soledad, his wifes name; D the first letter for December, his birth month; 10 for October, the 10th month of the year, the month of his business name registration; and PLUS to connote superior quality; that when he applied for registration, there was nobody applying for a mark similar to NS D-10 PLUS; that he did not know of the existence of Berris or any of its products; that D -10 could not have been associated with Berris because the latter never engaged in any commercial activity to sell D-10 80 WP fungicide in the local market; and that he could not have copied Berris mark because he registered his packaging with the Fertilizer and Pesticide Authority (FPA) ahead of Berris; (3) Certification dated December 19, 2005[33] issued by the FPA, stating that NS D-10 PLUS is owned and distributed by NS Northern

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Organic Fertilizer, registered with the FPA since May 26, 2003, and had been in the market since July 30, 2003; (4) Certification dated October 11, 2005[34] issued by the FPA, stating that, per monitoring among dealers in Region I and in the Cordillera Administrative Region registered with its office, the Regional Officer neither encountered the fungicide with mark D -10 80 WP nor did the FPA provincial officers from the same area receive any report as to the presence or sale of Berris product; (5) Certification dated March 14, 2006 [35] issued by the FPA, certifying that all pesticides must be registered with the said office pursuant to Section 9[36] of Presidential Decree (P.D.) No. 1144[37] and Section 1, Article II of FPA Rules and Regulations No. 1, Series of 1977; (6) Certification dated March 16, 2006 [38] issued by the FPA, certifying that the pesticide D-10 80 WP was registered by Berris on November 12, 2004; and (7) receipts from Sunrise Farm Supply [39] in La Trinidad, Benguet of the sale of Abyadangs goods referred to as D-10 and D-10+.

Based on their proffered pieces of evidence, both Berris and Abyadang claim to be the prior user of their respective marks.

We rule in favor of Berris.

Berris was able to establish that it was using its mark D-10 80 WP since June 20, 2002, even before it filed for its registration with the IPO on November 29, 2002, as shown by its DAU which was under oath and notarized, bearing the stamp of the Bureau of Trademarks of the IPO on April 25, 2003,[40] and which stated that it had an attachment as Annex B sales invoices and official receipts of goods bearing the mark. Indeed, the DAU, being a notarized document, especially when received in due course by the IPO, is evidence of the facts it stated and has the presumption of regularity, entitled to full faith and credit upon its face. Thus, the burden of proof to overcome the presumption of authenticity and due execution lies on the party contesting it, and the rebutting evidence should be clear, strong, and convincing as to preclude all controversy as to the falsity of the certificate.[41] What is more, the DAU is buttressed by the Certification dated April 21, 2006 [42]issued by the Bureau of Trademarks that Berris mark is still valid and existing.

Hence, we cannot subscribe to the contention of Abyadang that Berris DAU is fraudulent based only on his assumption that Ber ris could not have legally used the mark in the sale of its goods way back in June 2002 because it registered the product with the FPA only on November 12, 2004. As correctly held by the IPPDG in its decision on Abyadangs appeal, the question of whether or not Berris violated P.D. No. 1144, because it sold its product without prior registration with the FPA, is a distinct and separate matter from the jurisdiction and concern of the IPO. Thus, even a determination of violation by Berris of P.D. No. 1144 would not controvert the fact that it did submit evidence that it had used the mark D-10 80 WP earlier than its FPA registration in 2004.

Furthermore, even the FPA Certification dated October 11, 2005, stating that the office had neither encountered nor received reports about the sale of the fungicide D-10 80 WP within Region I and the Cordillera Administrative Region, could not negate the fact that Berris was selling its product using that mark in 2002, especially considering that it first traded its goods in Calauan, Laguna, where its business office is located, as stated in the DAU.

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Therefore, Berris, as prior user and prior registrant, is the owner of the mark D -10 80 WP. As such, Berris has in its favor the rights conferred by Section 147 of R.A. No. 8293, which provides Sec. 147. Rights Conferred. 147.1. The owner of a registered mark shall have the exclusive right to prevent all third parties not having the owners consent from using in the course of trade identical or similar signs or containers for goods or services which are identical or similar to those in respect of which the trademark is registered where such use would result in a likelihood of confusion. In case of the use of an identical sign for identical goods or services, a likelihood of confusion shall be presumed. 147.2. The exclusive right of the owner of a well-known mark defined in Subsection 123.1(e) which is registered in the Philippines, shall extend to goods and services which are not similar to those in respect of which the mark is registered: Provided, That use of that mark in relation to those goods or services would indicate a connection between those goods or services and the owner of the registered mark: Provided, further, That the interests of the owner of the registered mark are likely to be damaged by such use.

Now, we confront the question, Is Abyadangs mark NS D-10 PLUS confusingly similar to that of Berris D-10 80 WP such that the latter can rightfully prevent the IPO registration of the former? We answer in the affirmative.

According to Section 123.1(d) of R.A. No. 8293, a mark cannot be registered if it is identical with a registered mark belonging to a different proprietor with an earlier filing or priority date, with respect to: (1) the same goods or services; (2) closely related goods or services; or (3) near resemblance of such mark as to likely deceive or 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. [43]

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.[44]

Comparing Berris mark D-10 80 WP with Abyadangs mark NS D-10 PLUS, as appearing on their respective packages, one cannot but notice that both have a common component which is D-10. On Berris package, the D-10 is written with a bigger font than the 80 WP. Admittedly, the D-10 is the dominant feature of the mark. The D-10, being at the beginning of the mark, is what is most remembere d of it. Although, it appears in Berris certificate of registration in the same font size as the 80 WP, its dominancy in the D -10 80 WP mark stands since the difference in the form does not alter its distinctive character. [45]

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Applying the Dominancy Test, it cannot be gainsaid that Abyadangs NS D-10 PLUS is similar to Berris D-10 80 WP, that confusion or mistake is more likely to occur. Undeniably, both marks pertain to the same type of goods fungicide with 80% Mancozeb as an active ingredient and used for the same group of fruits, crops, vegetables, and ornamental plants, using the same dosage and manner of application. They also belong to the same classification of goods under R.A. No. 8293. Both depictions of D-10, as found in both marks, are similar in size, such that this portion is what catches the eye of the purchaser. Undeniably, the likelihood of confusion is present.

This likelihood of confusion and mistake is made more manifest when the Holistic Test is applied, taking into consideration the packaging, for both use the same type of material (foil type) and have identical color schemes (red, green, and white); and the marks are both predominantly red in color, with the same phrase BROAD SPECTRUM FUNGICIDE written underneath.

Considering these striking similarities, predominantly the D-10, the buyers of both products, mainly farmers, may be misled into thinking that NS D-10 PLUS could be an upgraded formulation of the D-10 80 WP.

Moreover, notwithstanding the finding of the IPPDG that the D-10 is a fanciful component of the trademark, created for the sole purpose of functioning as a trademark, and does not give the name, quality, or description of the product for which it is used, nor does it describe the place of origin, such that the degree of exclusiveness given to the mark is closely restricted, [46] and considering its challenge by Abyadang with respect to the meaning he has given to it, what remains is the fact that Berris is the owner of the mark D -10 80 WP, inclusive of its dominant feature D-10, as established by its prior use, and prior registration with the IPO. Therefore, Berris properly opposed and the IPO correctly rejected Abyadangs application for registration of the mark NS D-10 PLUS.

Verily, 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.[47] On this matter of particular concern, administrative agencies, such as the IPO, by reason of their special knowledge and expertise over matters falling under their jurisdiction, are in a better position to pass judgment thereon. Thus, their findings of fact in that regard are generally accorded great respect, if not finality by the courts, as long as they are supported by substantial evidence, even if such evidence might not be overwhelming or even preponderant. It is not the task of the appellate court to weigh once more the evidence submitted before the administrative body and to substitute its own judgment for that of the administrative agency in respect to sufficiency of evidence.[48]

Inasmuch as the ownership of the mark D-10 80 WP fittingly belongs to Berris, and because the same should not have bee n cancelled by the CA, we consider it proper not to belabor anymore the issue of whether cancellation of a registered mark may be done absent a petition for cancellation.

WHEREFORE, the petition is GRANTED. The assailed Decision dated April 14, 2008 and Resolution dated June 18, 2008 of the Court of Appeals in CA-G.R. SP No. 99928 are REVERSED and SET ASIDE. Accordingly, the Decision No. 2006-24 dated April 28, 2006 and the Resolution No. 2006-09(D) dated August 2, 2006 in IPC No. 14-2005-00099, and the Decision dated July 20, 2007 in Appeal No. 14-06-13 are REINSTATED. Costs against respondent.

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SO ORDERED. PROSOURCE INTERNATIONAL, INC., Petitioner,

G.R. No. 180073 Present: CORONA, J., Chairperson, CHICO-NAZARIO, VELASCO, JR., NACHURA, and PERALTA, JJ. Promulgated: November 25, 2009

- versus -

HORPHAG RESEARCH MANAGEMENT SA, Respondent.

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

DECISION NACHURA, J.:

This is a petition for review on certiorari under Rule 45 of the Rules of Court seeking to reverse and set aside the Court of Appeals (CA) Decision[1] dated July 27, 2007 and Resolution[2] dated October 15, 2007 in CA-G.R. CV No. 87556. The assailed decision affirmed the Regional Trial Court (RTC)[3] Decision[4] dated January 16, 2006 and Order[5] dated May 3, 2006 in Civil Case No. 68048; while the assailed resolution denied petitioners motion for reconsideration.

The facts are as follows:

Respondent Horphag Research Management SA is a corporation duly organized and existing under the laws of Switzerland and the owner[6] of trademark PYCNOGENOL, a food supplement sold and distributed by Zuellig Pharma Corporation. Respondent later discovered that petitioner Prosource International, Inc. was also distributing a similar food supplement using the mark PCO-GENOLS since 1996.[7] This prompted respondent to demand that petitioner cease and desist from using the aforesaid mark. [8]

Without notifying respondent, petitioner discontinued the use of, and withdrew from the market, the products under the name PCO-GENOLS as of June 19, 2000. It, likewise, changed its mark from PCO-GENOLS to PCO-PLUS.[9]

On August 22, 2000, respondent filed a Complaint[10] for Infringement of Trademark with Prayer for Preliminary Injunction against petitioner, praying that the latter cease and desist from using the brand PCO-GENOLS for being confusingly similar with respondents trademark PYCNOGENOL. It, likewise, prayed for actual and nominal damages, as well as attorneys fees. [11]

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In its Answer,[12] petitioner contended that respondent could not file the infringement case considering that the latter is not the registered owner of the trademark PYCNOGENOL, but one Horphag Research Limited. It, likewise, claimed that the two marks were not confusingly similar. Finally, it denied liability, since it discontinued the use of the mark prior to the institution of the infringement case. Petitioner thus prayed for the dismissal of the complaint. By way of counterclaim, petitioner prayed that respondent be directed to pay exemplary damages and attorneys fees.[13]

During the pre-trial, the parties admitted the following: 1. Defendant [petitioner] is a corporation duly organized and existing under the laws of the Republic of the Philippines with business address at No. 7 Annapolis Street, Greenhills, San Juan, Metro Manila; 2. The trademark PYCNOGENOL of the plaintiff is duly registered with the Intellectual Property Office but not with the Bureau of Food and Drug (BFAD). 3. The defendants product PCO-GENOLS is duly registered with the BFAD but not with the Intellectual Property Office (IPO). 4. The defendant corporation discontinued the use of and had withdrawn from the market the products under the name of PCO-GENOLS as of June 19, 2000, with its trademark changed from PCO-GENOLS to PCO-PLUS. 5. Plaintiff corporation sent a demand letter to the defendant dated 02 June 2000.[14]

On January 16, 2006, the RTC decided in favor of respondent. It observed that PYCNOGENOL and PCO-GENOLS have the same suffix GENOL which appears to be merely descriptive and thus open for trademark registration by combining it with other words. The trial court, likewise, concluded that the marks, when read, sound similar, and thus confusingly similar especially since they both refer to food supplements. The court added that petitioners liability was not negated by its act of pulling out of the market the products bearing t he questioned mark since the fact remains that from 1996 until June 2000, petitioner had infringed respondents product by using the trademark PCO -GENOLS. As respondent manifested that it was no longer interested in recovering actual damages, petitioner wa s made to answer only for attorneys fees amounting to P50,000.00.[15] For lack of sufficient factual and legal basis, the court dismissed petitioners count erclaim. Petitioners motion for reconsideration was likewise denied.

On appeal to the CA, petitioner failed to obtain a favorable decision. The appellate court explained that under the Dominancy or the Holistic Test, PCO-GENOLS is deceptively similar to PYCNOGENOL. It also found just and equitable the award of attorneys fees especially since respondent was compelled to litigate.[16]

Hence, this petition, assigning the following errors: I. THAT THE COURT OF APPEALS ERRED IN AFFRIMING THE RULING OF THE LOWER [COURT] THAT RESPONDENTS TRADEMARK P[YC]NOGENOLS (SIC) WAS INFRINGED BY PETITIONERS PCO GENOLS. THAT THE COURT OF APPEALS ERRED IN AFFIRMING THE AWARD OF ATTORNEYS FEES IN FAVOR OF RESPONDENT HORPHAG RESEARCH MANAGEMENT S.A. IN THE AMOUNT OF Php50,000.00. [17]

II.

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The petition is without merit.

It must be recalled that respondent filed a complaint for trademark infringement against petitioner for the latters use of t he mark PCOGENOLS which the former claimed to be confusingly similar to its trademark PYCNOGENOL. Petitioners use of the questioned mark started in 1996 and ended in June 2000. The instant case should thus be decided in light of the provisions of Republic Act (R.A.) No. 166 [18] for the acts committed until December 31, 1997, and R.A. No. 8293 [19] for those committed from January 1, 1998 until June 19, 2000.

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. Inarguably, a trademark deserves protection.[20]

Section 22 of R.A. No. 166, as amended, and Section 155 of R.A. No. 8293 define what constitutes trademark infringement, as follows: Sec. 22. Infringement, what constitutes. Any person who shall use, without the consent of the registrant, any reproduction, counterfeit, copy or colorable imitation of any registered mark or tradename in connection with the sale, offering for sale, or advertising of any goods, business or services on or in connection with which such use is likely to cause confusion or mistake or to deceive purchasers or others as to the source or origin of such goods or services, or identity of such business; or reproduce, counterfeit, copy of colorably imitate any such mark or tradename and apply such reproduction, counterfeit, copy or colorable imitation to labels, signs, prints, packages, wrappers, receptacles or advertisements intended to be used upon or in connection with such goods, business, or services, shall be liable to a civil action by the registrant for any or all of the remedies herein provided. Sec. 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 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 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[;]

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(c) (d)

[T]he trademark is used for identical or similar goods[;] and [S]uch act is done without the consent of the trademark registrant or assignee.[21]

On the other hand, the elements of infringement under R.A. No. 8293 are as follows: (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. [22]

In the foregoing enumeration, it is the element of likelihood of confusion that is the gravamen of trademark infringement. But likelihood of confusion is a relative concept. The particular, and sometimes peculiar, circumstances of each case are determinative of its existence. Thus, in trademark infringement cases, precedents must be evaluated in the light of each particular case. [23]

In determining similarity and likelihood of confusion, jurisprudence has developed two 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 and deception, thus constituting infringement.[24] If the competing trademark contains the main, essential and dominant features of another, and confusion or 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. 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 purchasers.[25] 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. [26]

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.[27] The discerning eye of the observer must focus not only on the predominant words but also on the other features appearing on both labels in order that the observer may draw his conclusion whether one is confusingly similar to the other. [28]

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 thru 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 [petitioners] 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

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packages/bottles, still the close relationship of the competing products name in 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.[29]

We find no cogent reason to depart from such conclusion.

This is not the first time that 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.,[30] cited in McDonalds Corporation v. L.C. Big Mak Burger, Inc.,[31] the Court held: The following random list of confusingly similar sounds in the matter of trademarks, culled from Nims, Unfair Competition and Trade Marks, 1947, Vol. 1, will reinforce our view that SALONPAS and LIONPAS are confusingly similar in sound: Gold Dust and Gold Drop; Jantzen and Jass -Sea; Silver Flash and Supper Flash; Cascarete and Celborite; Celluloid and Cellonite; Chartreuse and Charseurs; Cutex and Cuticlean; Hebe and Meje; Kotex and Femetex; Zuso and Hoo Hoo. Leon Amdur, in his book Trade -Mark Law and Practice, pp. 419-421, cities, as coming within the purview of the idem sonans rule, Yusea and U-C-A, Steinway Pianos and Steinberg Pianos, and Seven-Up and Lemon-Up. In Co Tiong vs. Director of Patents, this Court unequivocally said that Celdura and Cordura are confusingly similar in sound; this Court held in Sapolin Co. vs. Balmaceda, 67 Phil. 795 that the name Lusolin is an infringement of the trademark Sapolin, as the sound of the two names is almost the same. [32]

Finally, we reiterate that the issue of trademark infringement is factual, with both the trial and appellate courts finding the allegations of infringement to be meritorious. As we have consistently held, factual determinations of the trial court, concurred in by the CA, are final and binding on this Court.[33] Hence, petitioner is liable for trademark infringement.

We, likewise, sustain the award of attorneys fees in favor of respondent. Article 2208 of the Civil Code enumerates the instances when attorneys fees are awarded, viz.: Art. 2208. In the absence of stipulation, attorneys fees and expenses of litigation, other than judicial costs, cannot be recovered, except: 1. 2. When exemplary damages are awarded; When the defendants act or omission has compelled the plaintiff to litigate with third persons or to incur expenses to protect his interest; In criminal cases of malicious prosecution against the plaintiff; In case of a clearly unfounded civil action or proceeding against the plaintiff; Where the defendant acted in gross and evident bad faith in refusing to satisfy the plaintiffs plainly valid, just and demandable claim; In actions for legal support; In actions for the recovery of wages of household helpers, laborers and skilled workers; In actions for indemnity under workmens compensation and employers liability laws; In a separate civil action to recover civil liability arising from a crime;

3. 4. 5.

6. 7. 8. 9.

10. When at least double judicial costs are awarded;

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11. In any other case where the court deems it just and equitable that attorneys fees and expenses of litigation should be recovered. In all cases, the attorneys fees and expenses of litigation must be reasonable.

As a rule, an award of attorneys fees should be deleted where the award of moral and exemplary damages is not granted. [34] Nonetheless, attorneys fees may be awarded where the court deems it just and equitable even if moral and exemplary damages are unavailing.[35] In the instant case, we find no reversible error in the grant of attorneys fees by the CA.

WHEREFORE, premises considered, the petition is DENIED for lack of merit. The Court of Appeals Decision dated July 27, 2007 and its Resolution dated October 15, 2007 in CA-G.R. CV No. 87556 are AFFIRMED.

SO ORDERED. G.R. No. 157216 November 20, 2003

246 CORPORATION, doing business under the name and style of ROLEX MUSIC LOUNGE, petitioner, vs. HON. REYNALDO B. DAWAY, in his capacity as Presiding Judge of Branch 90 of the Regional Trial Court of Quezon City, MONTRES ROLEX S.A. and ROLEX CENTRE PHIL. LIMITED, respondents. YNARES-SANTIAGO, J.: This is a petition for review on certiorari under Rule 45 of the 1997 Rules of Civil Procedure assailing the November 28, 2002 Decision1 of the Court of Appeals in CA-G.R. SP No. 64660 which dismissed the petition for certiorari filed by petitioner, as well as the Resolution 2 dated February 13, 2003 denying its motion for reconsideration. The undisputed facts show that on November 26, 1998, respondents Montres Rolex S.A. and Rolex Centre Phil., Limited, owners/proprietors of Rolex and Crown Device, filed against petitioner 246 Corporation the instant suit for trademark infringement and damages with prayer for the issuance of a restraining order or writ of preliminary injunction 3 before the Regional Trial Court of Quezon City, Branch 90. Respondents alleged that sometime in July 1996, petitioner adopted and, since then, has been using without authority the mark "Rolex" in its business name "Rolex Music Lounge" as well as in its newspaper advertisements as "Rolex Music Lounge, KTV, Disco & Party Club." In its answer raising special affirmative defenses, petitioner argued that respondents have no cause of action because no trademark infringement exist; that no confusion would arise from the use by petitioner of the mark "Rolex" considering that its entertainment business is totally unrelated to the items catered by respondents such as watches, clocks, bracelets and parts thereof. It also contended that the complaint was not properly verified and certified against forum shopping considering that Atty. Alonzo Ancheta, the counsel of record of respondents who signed the verification and certification, was not authorized to represent respondents.4 On July 21, 2000, petitioner filed a motion for preliminary hearing on its affirmative defenses.5 Subsequently, on motion of petitioner, the trial court issued a subpoena ad testificandum requiring Atty. Alonzo Ancheta to appear at the preliminary hearing. 6 Respondents, in the meantime, filed a Comment and Opposition7 to the motion for preliminary hearing and a motion to quash the subpoena ad testificandum. In an Order dated October 27, 2000, the trial court quashed the subpoena ad testificandum and denied petitioners motion for preliminary hearing on affirmative defenses with motion to dismiss.8 With the denial of the motion for reconsideration on March 16, 2001, petitioner filed a petition for certiorari with the Court of Appeals contending that the trial court gravely abused its discretion in issuing the October 27, 2000 and March 16, 2001 orders. On November 28, 2002, the Court of Appeals dismissed the petition. The motion for reconsideration filed by petitioner was denied. Hence, the instant petition anchored on the following grounds: I

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IN ISSUING THE ASSAILED DECISIONS, THE HONORABLE COURT OF APPEALS PERFUNCTORILY BRUSHED ASIDE THE CONTROLLING PRECEDENTS LAID DOWN BY THIS HONORABLE COURT IN ESSO STANDARD EASTERN, INC. VS. COURT OF APPEALS AND UNITED CIGARETTE CORPORATION AND OTHER COMPANION CASES HOLDING THAT NO TRADEMARK INFRINGEMENT CAN POSSIBLY OCCUR WHERE THE CONTENDING PARTIES DEAL WITH GOODS AND SERVICES THAT ARE TOTALLY UNRELATED AND NON-COMPETING WITH EACH OTHER. II IN ARBITRARILY AND CAPRICIOUSLY RULING THAT THE ISSUES RAISED IN PETITIONERS CERTIORARI PETITION ARE QUESTIONS OF FACT, THE HONORABLE COURT OF APPEALS VIOLATED NOT ONLY PETITIONERS SUBSTANTIVE DUE PROCESS RIGHTS BUT ALSO THE WELL-SETTLED RULE THAT THE ALLEGATIONS OF THE COMPLAINT IS HYPOTHETICALLY ADMITTED WHEN THE MOTION TO DISMISS IS GROUNDED UPON LACK OF CAUSE OF ACTION. MOREOVER, INDEPENDENT OF THE HYPOTHETICALLY ADMITTED FACTS EMBODIED IN THE COMPLAINT A QUO, THERE ARE SELF-EVIDENT FACTS AND IMPLIEDLY ADMITTED FACTS CONTAINED IN PRIVATE RESPONDENTS PLEADINGS THAT WOULD CLEARLY AND UNMISTAKABLY SHOW PRIVATE RESPONDENTS LACK OF CAUSE OF ACTION AGAINST HEREIN PETITIONER. III THE HONORABLE COURT OF APPEALS VIOLATED PETITIONERS RIGHT TO SUBSTANTIVE DUE PROCESS WHEN IT ARBITRARILY AND CAPRICIOUSLY RULED THAT WHAT WAS SPECIFICALLY DENIED IN THE ASSAILED OCTOBER 20, 2000 ORDER IS PETITIONERS MOTION FOR PRELIMINARY HEARING ON DEFENDANTS AFFIRMATIVE DEFENSES AND NOT PETITIONERS MOTION TO DISMISS PER SE CONSIDERING THAT: A. THERE IS ABSOLUTELY NOTHING IN THE ORDER DATED OCTOBER 20, 2000 OF RESPONDENT JUDGE WHICH SUGGESTS THAT THE RESOLUTION OF PETITIONERS MOTION TO DISMISS PER SE WAS HELD IN ABEYANCE BY THE RESPONDENT JUDGE. HENCE THE SAID ORDER DATED OCTOBER 20, 2000 ALSO CONSTITUTES A DENIAL ON THE MERITS OF PETITIONERS MOTION TO DISMISS PER SE AND NOT MERELY OF PETITIONERS MOTION FOR PRELIMINARY HEARING THEREON. B. PRIVATE RESPONDENTS COMMENT AND OPPOSITION DATED 11 AUGUST 2000, WHICH WAS CITED AND SUSTAINED BY RESPONDENT JUDGE, CLEARLY TRAVERSED THE MERITS OF THE GROUNDS FOR PETITIONERS MOTION TO DISMISS PER SE. HENCE, THE SAID 20 OCTOBER 2000 ORDERS DENIAL OF PETITIONERS MOTION IS NOT LIMITED TO THE MOTION FOR PRELIMINARY HEARING BUT ALSO CONSTITUTES A DENIAL OF PETITIONERS MOTION TO DISMISS PER SE. IV IN ARBITRARILY AND CAPRICIOUSLY RULING THAT ATTY. ALONZO ANCHETA PROPERLY VERIFIED AND CERTIFIED PRIVATE RESPONDENTS COMPLAINT A QUO, THE HONORABLE COURT OF APPEALS VIOLATED NOT ONLY PETITIONERS SUBSTANTIVE DUE PROCESS RIGHTS, BUT ALSO THE DOCTRINE OF SEPARATE CORPORATE PERSONALITY; CONSIDERING THAT THE RECORDS OF THIS CASE IS (sic) COMPLETELY BEREFT AND DEVOID OF ANY DULY EXECUTED SPECIAL POWER OF ATTORNEY, EMANATING FROM PRIVATE RESPONDENTS, WHICH EXPLICITLY AND SPECIFICALLY AUTHORIZES ATTY. ALONZO ANCHETA TO REPRESENT PRIVATE RESPONDENTS MONTRES ROLEX S.A. IN THE FILING OF THE COMPLAINT A QUO. BY REASON THEREOF, PRIVATE RESPONDENTS COULD NOT BE DEEMED TO HAVE VOLUNTARILY APPEARED BEFORE THE RESPONDENT JUDGE; CONSEQUENTLY, THE TRIAL COURT COULD NOT HAVE VALIDLY ACQUIRED JURISDICTION OVER THE PERSON OF PRIVATE RESPONDENTS. V IN ARBITRARILY AND CAPRICIOUSLY AFFIRMING RESPONDENT JUDGES QUASHAL OF THE SUBPOENA DATED 14 AUGUST 2000 DIRECTED AGAINST ATTY. ALONZO ANCHETA, THE HONORABLE COURT OF APPEALS VIOLATED NOT ONLY PETITIONERS SUBSTANTIVE DUE PROCESS RIGHTS, BUT ALSO SECTION 9, RULE 132 AND SECTION 7 RULE 133 OF THE 1989 REVISED RULES ON EVIDENCE, AND THE RULING OF THIS HONORABLE COURT IN THE CASE OF PEOPLE VS. RIVERA.9 Simply put, the issues are as follows (1) whether the trial court denied not only petitioners motion for preliminary hearing on its affirmative defenses but its motion to dismiss as well; (2) if the answer is in the affirmative, whether or not the trial court gravely abused its discretion in denying said motions; and (3) whether the trial court gravely abused its discretion in quashing the subpoena ad testificandum issued against Atty. Ancheta.

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Anent the first issue, we find that what was denied in the order dated October 27, 2000 was not only the motion for preliminary hearing but the motion to dismiss as well. A reading of the dispositive portion of said order shows that the trial court neither qualified its denial nor held in abeyance the ruling on petitioners motion to dismiss thus IN VIEW OF THE FOREGOING, the aforecited Motion To Quash Subpoena Ad Testificandum is granted; and the aforecited Motion For Preliminary Hearing On Defendants Affirmative Defenses With Motion To dismiss The Instant Complaint Based On Said Affirmative Defenses is denied.10 (Emphasis supplied) In issuing the assailed order, the trial court ruled on the merits of petitioners Motion to Dismiss vis--visrespondents Comment and Opposition which clearly traversed the affirmative defenses raised by petitioner, to wit: After carefully going over the pleadings, this Court finds, on the first motion that the arguments raised in the said motion and the reply filed in connection thereto appear to be meritorious; and on the second motion, that the arguments raised in the comments and opposition and the rejoinder filed by the plaintiffs likewise appear to be meritorious.11 Moreover, it is presumed that all matters within an issue raised in a case were passed upon by the court. In the absence of evidence to the contrary, the presumption is that the court a quo discharged its task properly.12 In Municipality of Bian Laguna v. Court of Appeals,13 decided under the old Rules of Civil Procedure, it was held that a preliminary hearing permitted under Rule 16, Section 5, is not mandatory even when the same is prayed for. It rests largely on the sound discretion of the trial court, thus SEC. 5. Pleading grounds as affirmative defenses. Any of the grounds for dismissal provided for in this Rule, except improper venue, may be pleaded as an affirmative defense, and a preliminary hearing may be had thereon as if a motion to dismiss had been filed . (Emphasis supplied) The use of the word "may" in the aforequoted provision shows that such a hearing is not a matter of right demandable from the trial court; it is not mandatory but discretionary. "May" is an auxiliary verb indicating liberty, opportunity, permission and possibility. 14 Such interpretation is specifically stated under the 1997 Rules of Civil Procedure. Rule 16, Section 6, now provides that a grant of a preliminary hearing rests on the sound discretion of the court, to wit SEC. 6. Pleading grounds as affirmative defenses. If no motion to dismiss has been filed, any of the grounds for dismissal provided for in this Rule may be pleaded as an affirmative defense in the answer and,in the discretion of the court, a preliminary hearing may be had thereon as if a motion to dismiss had been filed. (Emphasis supplied) In the case at bar, the Court of Appeals did not err in finding that no abuse of discretion could be ascribed to th e trial courts denial of petitioners motion for preliminary hearing on its affirmative defenses with motion to dismiss. The issue of whether or not a trademark infringement exists, is a question of fact that could best be determined by the trial court. Under the old Trademark Law15 where the goods for which the identical marks are used are unrelated, there can be no likelihood of confusion and there is therefore no infringement in the use by the junior user of the registered mark on the entirely different goods.16 This ruling, however, has been to some extent, modified by Section 123.1(f) of the Intellectual Property Code (Republic Act No. 8293), which took effect on January 1, 1998. The said section reads: Sec. 123. Registrability. 123.1. A mark cannot be registered if it: xxx xxx xxx

(f) Is identical with, or confusingly similar to, or constitutes a translation of a mark considered well-known in accordance with the preceding paragraph, which is registered in the Philippines with respect to goods or services which are not similar to those with respect to which registration is applied for: Provided, That use of the mark in relation to those goods or services would indicate a connection between those goods or services, and the owner of the registered mark: Provided, further, That the interest of the owner of the registered mark are likely to be damaged by such use; (Emphasis supplied) A junior user of a well-known mark on goods or services which are not similar to the goods or services, and are therefore unrelated, to those specified in the certificate of registration of the well-known mark is precluded from using the same on the entirely unrelated goods or services, subject to the following requisites, to wit:

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1. The mark is well-known internationally and in the Philippines. Under Rule 102 of the Rules and Regulations on Trademarks, Service Marks, Trade Names and Marked or Stamped Containers,17 in determining whether a mark is well known, the following criteria or any combination thereof may be taken into account: (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 advertising or publicity and presentation, at fairs or exhibitions, of the goods and/or services to which the mark applies; (b) the market share in the Philippines and in other countries, of the goods and/or services to which the mark applies; (c) the degree of the inherent or acquired distinction of the mark; (d) the quality-image or reputation acquired by the mark; (e) the extent to which the mark has been registered in the world; (f) the exclusivity of the registration attained by the mark in the world; (g) the extent to which the mark has been used in the world; (h) the exclusivity of use attained by the mark in the world; (i) the commercial value attributed to the mark in the world; (j) the record of successful protection of the rights in the mark; (k) the outcome of litigations dealing with the issue of whether the mark is a well-known mark; and (l) the presence of absence of identical or similar marks validly registered for or used on identical or similar goods or services and owned by persons other than the person claiming that his mark is a well-known mark. 2. The use of the well-known mark on the entirely unrelated goods or services would indicate a connection between such unrelated goods or services and those goods or services specified in the certificate of registration in the well known mark. This requirement refers to the likelihood of confusion of origin or business or some business connection or relationship between the registrant and the user of the mark. 3. The interests of the owner of the well-known mark are likely to be damaged. For instance, if the registrant will be precluded from expanding its business to those unrelated good or services, or if the interests of the registrant of the well-known mark will be damaged because of the inferior quality of the good or services of the user. 18 Section 123.1(f) is clearly in point because the Music Lounge of petitioner is entirely unrelated to respondents business inv olving watches, clocks, bracelets, etc. However, the Court cannot yet resolve the merits of the present controversy considering that the requisites for the application of Section 123.1(f), which constitute the kernel issue at bar, clearly require determination facts of which need to be resolved at the trial court. The existence or absence of these requisites should be addressed in a full blown hearing and not on a mere preliminary hearing. The respondent must be given ample opportunity to prove its claim, and the petitioner to debunk the same. The same is true with respect to the issue of whether Atty. Alonzo Ancheta was properly authorized to sign the verification and certification against forum shopping in behalf of respondents. This could be properly resolved during the trial together with the substantive issues raised by petitioner. Considering that the trial court correctly denied petitioners motion for preliminary hearing on its affirmative defenses with motion to dismiss, there exists no reason to compel Atty. Ancheta to testify. Hence, no abuse of discretion was committed by the trial court in quashing the subpoena ad testificandum issued against Atty. Ancheta. Grave abuse of discretion implies such capricious and whimsical exercise of judgment as equivalent to lack of jurisdiction, or, in other words, where the power is exercised in an arbitrary or despotic manner by reason of passion or personal hostility, and it must be so patent and gross as to amount to an evasion of positive duty or to a virtual refusal to perform the duty enjoined or to act at all in contemplation of law. None of these was committed by the trial court; hence, the Court of Appeals correctly dismissed the petition.

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WHEREFORE, in view of all the foregoing, the petition for review on certiorari filed by petitioner is DENIED. The November 28, 2002 Decision and the February 13, 2003 Resolution of the Court of Appeals in CA-G.R. SP No. 64660 which dismissed the petition for certiorari filed by petitioner are AFFIRMED. SO ORDERED. PROSOURCE INTERNATIONAL, INC., Petitioner, G.R. No. 180073 Present: CORONA, J., Chairperson, CHICO-NAZARIO, VELASCO, JR., NACHURA, and PERALTA, JJ. Promulgated: November 25, 2009 x------------------------------------------------------------------------------------x

- versus -

HORPHAG RESEARCH MANAGEMENT SA, Respondent.

DECISION NACHURA, J.:

This is a petition for review on certiorari under Rule 45 of the Rules of Court seeking to reverse and set aside the Court of Appeals (CA) Decision[1] dated July 27, 2007 and Resolution[2] dated October 15, 2007 in CA-G.R. CV No. 87556. The assailed decision affirmed the Regional Trial Court (RTC)[3] Decision[4] dated January 16, 2006 and Order[5] dated May 3, 2006 in Civil Case No. 68048; while the assailed resolution denied petitioners motion for reconsideration.

The facts are as follows:

Respondent Horphag Research Management SA is a corporation duly organized and existing under the laws of Switzerland and the owner[6] of trademark PYCNOGENOL, a food supplement sold and distributed by Zuellig Pharma Corporation. Respondent later discovered that petitioner Prosource International, Inc. was also distributing a similar food supplement using the mark PCO-GENOLS since 1996.[7] This prompted respondent to demand that petitioner cease and desist from using the aforesaid mark.[8]

Without notifying respondent, petitioner discontinued the use of, and withdrew from the market, the products under the name PCO-GENOLS as of June 19, 2000. It, likewise, changed its mark from PCO-GENOLS to PCO-PLUS.[9]

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On August 22, 2000, respondent filed a Complaint[10] for Infringement of Trademark with Prayer for Preliminary Injunction against petitioner, praying that the latter cease and desist from using the brand PCO-GENOLS for being confusingly similar with respondents trademark PYCNOGENOL. It, likewise, prayed for actual and nominal damages, as well as attorneys fees. [11]

In its Answer,[12] petitioner contended that respondent could not file the infringement case considering that the latter is not the registered owner of the trademark PYCNOGENOL, but one Horphag Research Limited. It, likewise, claimed that the two marks were not confusingly similar. Finally, it denied liability, since it discontinued the use of the mark prior to the institution of the infringement case. Petitioner thus prayed for the dismissal of the complaint. By way of counterclaim, petitioner prayed that respondent be directed to pay exemplary damages and attorneys fees.[13]

During the pre-trial, the parties admitted the following: 1. Defendant [petitioner] is a corporation duly organized and existing under the laws of the Republic of the Philippines with business address at No. 7 Annapolis Street, Greenhills, San Juan, Metro Manila; 2. The trademark PYCNOGENOL of the plaintiff is duly registered with the Intellectual Property Office but not with the Bureau of Food and Drug (BFAD). 3. The defendants product PCO-GENOLS is duly registered with the BFAD but not with the Intellectual Property Office (IPO). 4. The defendant corporation discontinued the use of and had withdrawn from the market the products under the name of PCO-GENOLS as of June 19, 2000, with its trademark changed from PCO-GENOLS to PCO-PLUS. 5. Plaintiff corporation sent a demand letter to the defendant dated 02 June 2000.[14]

On January 16, 2006, the RTC decided in favor of respondent. It observed that PYCNOGENOL and PCO-GENOLS have the same suffix GENOL which appears to be merely descriptive and thus open for trademark registration by combining it with other words. The trial court, likewise, concluded that the marks, when read, sound similar, and thus confusingly similar especially since they both refer to food supplements. The court added that petitioners liability was not negated by its act of pulling out of the market the products bearing the questioned mark since the fact remains that from 1996 until June 2000, petitioner had infringed respondents product by using the trademark PCO -GENOLS. As respondent manifested that it was no longer interested in recovering actual damages, petitioner was made to answer only for attorneys f ees amounting to P50,000.00.[15] For lack of sufficient factual and legal basis, the court dismissed petitioners counterclaim. Petitioners motion for reconsideration was likewise denied.

On appeal to the CA, petitioner failed to obtain a favorable decision. The appellate court explained that under the Dominancy or the Holistic Test, PCO-GENOLS is deceptively similar to PYCNOGENOL. It also found just and equitable the award of attorneys fees especially since respondent was compelled to litigate.[16]

Hence, this petition, assigning the following errors:

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I.

THAT THE COURT OF APPEALS ERRED IN AFFRIMING THE RULING OF THE LOWER [COURT] THAT RESPONDENTS TRADEMARK P[YC]NOGENOLS (SIC) WAS INFRINGED BY PETITIONERS PCO GENOLS. THAT THE COURT OF APPEALS ERRED IN AFFIRMING THE AWARD OF ATTORNEYS FEES IN FAVOR OF RESPONDENT HORPHAG RESEARCH MANAGEMENT S.A. IN THE AMOUNT OF Php50,000.00.[17]

II.

The petition is without merit.

It must be recalled that respondent filed a complaint for trademark infringement against petitioner for th e latters use of the mark PCOGENOLS which the former claimed to be confusingly similar to its trademark PYCNOGENOL. Petitioners use of the questioned mark started in 1996 and ended in June 2000. The instant case should thus be decided in light of the provisions of Republic Act (R.A.) No. 166[18] for the acts committed until December 31, 1997, and R.A. No. 8293 [19] for those committed from January 1, 1998 until June 19, 2000.

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. Inarguably, a trademark deserves protection.[20]

Section 22 of R.A. No. 166, as amended, and Section 155 of R.A. No. 8293 define what constitutes trademark infringement, as follows: Sec. 22. Infringement, what constitutes. Any person who shall use, without the consent of the registrant, any reproduction, counterfeit, copy or colorable imitation of any registered mark or tradename in connection with the sale, offering for sale, or advertising of any goods, business or services on or in connection with which such use is likely to cause confusion or mistake or to deceive purchasers or others as to the source or origin of such goods or services, or identity of such business; or reproduce, counterfeit, copy of colorably imitate any such mark or tradename and apply such reproduction, counterfeit, copy or colorable imitation to labels, signs, prints, packages, wrappers, receptacles or advertisements intended to be used upon or in connection with such goods, business, or services, shall be liable to a civil action by the registrant for any or all of the remedies herein provided. Sec. 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 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 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[;]

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(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) (d) [T]he trademark is used for identical or similar goods[;] and [S]uch act is done without the consent of the trademark registrant or assignee. [21]

On the other hand, the elements of infringement under R.A. No. 8293 are as follows: (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. [22]

In the foregoing enumeration, it is the element of likelihood of confusion that is the gravamen of trademark infringement. But likelihood of confusion is a relative concept. The particular, and sometimes peculiar, circumstances of each case are determinative of its existence. Thus, in trademark infringement cases, precedents must be evaluated in the light of each particular case.[23]

In determining similarity and likelihood of confusion, jurisprudence has developed two 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 and deception, thus constituting infringement.[24] If the competing trademark contains the main, essential and dominant features of another, and confusion or 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. 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 purchasers.[25] 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.[26]

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.[27] The discerning eye of the observer must focus not only on the predominant words but also on the other features appearing on both labels in order that the observer may draw his conclusion whether one is confusingly similar to the other.[28]

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:

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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 thru 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 [petitioners] 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 products name in 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.[29]

We find no cogent reason to depart from such conclusion.

This is not the first time that 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.,[30] cited in McDonalds Corporation v. L.C. Big Mak Burger, Inc.,[31] 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 simila r in sound: Gold Dust and Gold Drop; Jantzen and Jass -Sea; Silver Flash and Supper Flash; Cascarete and Celborite; Celluloid and Cellonite; Chartreuse and Charseurs; Cutex and Cuticlean; Hebe and Meje; Kotex and Femetex; Zuso and Hoo Hoo. Leon Amdur, in his book Trade-Mark Law and Practice, pp. 419-421, cities, as coming within the purview of the idem sonans rule, Yusea and U-C-A, Steinway Pianos and Steinberg Pianos, and Seven-Up and Lemon-Up. In Co Tiong vs. Director of Patents, this Court unequivocally said that Celdura and Cordura are confusingly similar in sound; this Court held in Sapolin Co. vs. Balmaceda, 67 Phil. 795 that the name Lusolin is an infringement of the trademark Sapolin, as th e sound of the two names is almost the same.[32]

Finally, we reiterate that the issue of trademark infringement is factual, with both the trial and appellate courts finding the allegations of infringement to be meritorious. As we have consistently held, factual determinations of the trial court, concurred in by the CA, are final and binding on this Court.[33] Hence, petitioner is liable for trademark infringement.

We, likewise, sustain the award of attorneys fees in favor of respondent. Article 2208 of the Civil Code enumerates the instances when attorneys fees are awarded, viz.: Art. 2208. In the absence of stipulation, attorneys fees and expenses of litigation, other than judicial costs, cannot be recovered, except: 1. 2. When exemplary damages are awarded; When the defendants act or omission has compelled the plaintiff to litigate with third persons or to incur expenses to protect his interest; In criminal cases of malicious prosecution against the plaintiff; In case of a clearly unfounded civil action or proceeding against the plaintiff; Where the defendant acted in gross and evident bad faith in refusing to satisfy the plaintiffs plainly valid, just and demandable claim; In actions for legal support; In actions for the recovery of wages of household helpers, laborers and skilled workers;

3. 4. 5.

6. 7.

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8. 9.

In actions for indemnity under workmens compensation and employers liability laws; In a separate civil action to recover civil liability arising from a crime;

10. When at least double judicial costs are awarded; 11. In any other case where the court deems it just and equitable that attorneys fees and expenses of litigation should be recovered. In all cases, the attorneys fees and expenses of litigation must be reasonable.

As a rule, an award of attorneys fees should be deleted where the award of moral and exemplary damages is not granted. [34] Nonetheless, attorneys fees may be awarded where the court deems it just and equitable even if moral and exemplary damages are unavailing. [35] In the instant case, we find no reversible error in the grant of attorneys fees by the CA.

WHEREFORE, premises considered, the petition is DENIED for lack of merit. The Court of Appeals Decision dated July 27, 2007 and its Resolution dated October 15, 2007 in CA-G.R. CV No. 87556 are AFFIRMED.

SO ORDERED. DERMALINE, INC., Petitioner,

G.R. No. 190065

Present: CARPIO, J., Chairperson, NACHURA, PERALTA, ABAD, and MENDOZA, JJ. Promulgated: August 16, 2010 x------------------------------------------------------------------------------------x

- versus -

MYRA PHARMACEUTICALS, INC., Respondent.

DECISION NACHURA, J.:

This is a petition for review on certiorari[1] seeking to reverse and set aside the Decision dated August 7, 2009 [2] and the Resolution dated October 28, 2009[3]of the Court of Appeals (CA) in CA-G.R. SP No. 108627.

The antecedent facts and proceedings

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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 Opposition [4] 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 p urchasing public. Myra said that the registration of Dermalines trademark will violate Section 123[5] of Republic Act (R.A.) No. 8293 (Intellectual Property Code of the Philippines). It further alleged that Dermalines use and registration of its ap plied trademark will diminish the distinctiveness and dilute the goodwill of Myras 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 Dermalines attempt to differentiate its applied mark, the dominant feature is the term DERMALINE, wh ich 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, 20 03 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 147[6] 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 Dermalines applied mark will enable it to obtain benefit from Myras reputation, goodwill and advertising and will lead the public into believing that Dermaline is, in any way, connected toMyra. Myra added that even if the subject application was under Classification 44[7] for various skin treatments, it could still be connected to the DERMALIN mark under Classification 5 [8] 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 -vis Myras 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 Myras trademark classified under medicinal goods against skin disorders.

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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. 2008-70[11] sustaining Myras 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. 4-2006011536 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 Order[14] 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 Derma lines application for registration of trademark. The CA likewise denied Dermalines motion for reconsideration; hence, this petition raising the issue of whether the CA erred in upholding the IPOs rejection of Dermalines 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

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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 Myras 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 registrants ownership of the mark, and of the registrants exclusive right to use the same in connection with the goods and those that are related thereto specified in the certifi cate.

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]

Dermalines insistence that its applied trademark DERMALINE DERMALINE, INC. had differences too striking to be mistaken from Myras DERMALIN cannot, therefore, be sustained. While it is true that the two marks are presented differently Dermalines 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 Myras mark DERMALIN is written in an upright font, with a capital D and followed by lower case letters the likelihood of confusion is still

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apparent. This is because they are almost spelled in the same way, except for Dermalines 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 Dermalines mark pronounced si lently. Thus, when an ordinary purchaser, for example, hears an advertisement of Dermalines applied trademark over the radio, chances are he will associate it withMyras registered mark.

Further, Dermalines stance that its product belongs to a separate and different classification from Myras 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.

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.

SO ORDERED. ECOND DIVISION LEVI STRAUSS & CO., & LEVI STRAUSS (PHILS.), INC., G.R. No. 138900 Present:

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Petitioners, PUNO, Chairman, - versus AUSTRIA-MARTINEZ, CALLEJO, TINGA, and CLINTON APPARELLE, INC., NAZARIO, JJ. Respondent. Promulgated: September 20, 2005 x----------------------------------------------------------------------x

DECISION TINGA, J.:

Before us is a petition for review on certiorari[1] under Rule 45 of the 1997 Rules of Civil Procedure filed by Levi Strauss & Co. (LS & Co.) and Levi Strauss (Philippines), Inc. (LSPI) assailing the Court of Appeals Decision[2] and Resolution[3] respectively dated 21 December 1998 and 10 May 1999. The questioned Decision granted respondents prayer for a writ of preliminary injunction in itsPetition[4] and set aside the trial courts orders dated 15 May 1998[5] and 4 June 1998[6] which respectively granted petitioners prayer for the issuance of a temporary restraining order (TRO) and application for the issuance of a writ of preliminary injunction.

This case stemmed from the Complaint[7] for Trademark Infringement, Injunction and Damages filed by petitioners LS & Co. and LSPI against respondent Clinton Apparelle, Inc.* (Clinton Aparelle) together with an alternative defendant, Olympian Garments, Inc. (Olympian Garments), before the Regional Trial Court of Quezon City, Branch 90.[8] The Complaint was docketed as Civil Case No. Q-98-34252, entitled Levi Strauss & Co. and Levi Strauss (Phils.), Inc. v. Clinton Aparelle, Inc. and/or Olympian Garments, Inc.

The Complaint alleged that LS & Co., a foreign corporation duly organized and existing under the laws of the State of Delaware, U.S.A., and engaged in the apparel business, is the owner by prior adoption and use since 1986 of the internationally famous Dockers and Design trademark. This ownership is evidenced by its valid and existing registrations in various member countries of the Paris Convention. In the Philippines, it has a Certificate of Registration No. 46619 in the Principal Register for use of said trademark on pants, shirts, blouses, skirts, shorts, sweatshirts and jackets under Class 25.[9]

The Dockers and Design trademark was first used in the Philippines in or about May 1988, by LSPI, a domestic corporation en gaged in the manufacture, sale and distribution of various products bearing trademarks owned by LS & Co. To date, LSPI continues to manufacture and sell Dockers Pants with the Dockers and Design trademark.[10]

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LS & Co. and LSPI further alleged that they discovered the presence in the local market of jeans under the brand name Paddocks using a device which is substantially, if not exactly, similar to the Dockers and Design trademark owned by and registered in the name of LS & Co., without its consent. Based on their information and belief, they added, Clinton Apparelle manufactured and continues to manufacture such Paddocks jeans and other apparel.

However, since LS & Co. and LSPI are unsure if both, or just one of impleaded defendants are behind the manufacture and sale of the Paddocks jeans complained of, they brought this suit under Section 13, Rule 3 [11] of the 1997 Rules of Civil Procedure.[12]

The Complaint contained a prayer that reads as follows: 1. That upon the filing of this complaint, a temporary restraining order be immediately issued restraining defendants, their officers, employees, agents, representatives, dealers, retailers or assigns from committing the acts herein complained of, and, specifically, for the defendants, their officers, employees, agents, representatives, dealers and retailers or assigns, to cease and desist from manufacturing, distributing, selling, offering for sale, advertising, or otherwise using denims, jeans or pants with the design herein complained of as substantially, if not exactly similar, to plaintiffs Dockers and Design trademark. 2. That after notice and hearing, and pending trial on the merits, a writ of preliminary injunction be issued enjoining defendants, their officers, employees, agents, dealers, retailers, or assigns from manufacturing, distributing, selling, offering for sale, advertising, jeans the design herein complained of as substantially, if not exactly similar, to plaintiffs Dockers and Design trademark. 3. That after trial on the merits, judgment be rendered as follows: a. Affirming and making permanent the writ of preliminary injunction; b. Ordering that all infringing jeans in the possession of either or both defendants as the evidence may warrant, their officers, employees, agents, retailers, dealers or assigns, be delivered to the Honorable Court of plaintiffs, and be accordingly destroyed;[13]

Acting on the prayer for the issuance of a TRO, the trial court issued an Order[14] setting it for hearing on 5 May 1998. On said date, as respondent failed to appear despite notice and the other defendant, Olympian Garments, had yet to be notified, the hearing was re-scheduled on 14 May 1998.[15]

On 14 May 1998, neither Clinton Apparelle nor Olympian Garments appeared. Clinton Apparelle claimed that it was not notified of such hearing. Only Olympian Garments allegedly had been issued with summons. Despite the absence of the defendants, the hearing on the application for the issuance of a TRO continued.[16]

The following day, the trial court issued an Order[17] granting the TRO applied for, the pertinent portions of which state: Considering the absence of counsel/s for the defendant/s during the summary hearing scheduled on May 5, 1998 and also during the re-scheduled summary hearing held on May 14, 1998 set for the purpose of determining whether or not a Temporary Restraining Order shall be issued, this Court allowed the counsel for the plaintiffs to present on May 14, 1998 their

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arguments/evidences in support of their application. After hearing the arguments presented by the counsel for the plaintiffs during the summary hearing, this Court is of the considered and humble view that grave injustice and irreparable injury to the plaintiffs would arise before the matter of whether or not the application for the issuance of a Writ of Preliminary Injunction can be heard, and that, in the interest of justice, and in the meantime, a Temporary Restraining Order be issued. WHEREFORE, let this Temporary Restraining Order be issued restraining the defendants, their officers, employees, agents, representatives, dealers, retailers or assigns from committing the acts complained of in the verified Complaint, and specifically, for the defendants, their officers, employees, agents, representatives, dealers and retailers or assigns, to cease and desist from manufacturing, distributing, selling, offering for sale, advertising or otherwise using denims, jeans or pants with the design complained of in the verified Complaint as substantially, if not exactly similar, to plaintiffs Dockers and Design trademark; until after the application/prayer for the issuance of a Writ of Preliminary Injunction is heard/resolved, or until further orders from this Court. The hearing on the application for the issuance of a Writ of Preliminary Injunction as embodied in the verified Complaint is set on May 26, 1998 (Tuesday) at 2:00 P.M. which setting is intransferable in character considering that the lifetime of this Temporary Restraining Order is twenty (20) days from date hereof. [18]

On 4 June 1998, the trial court issued another Order[19] granting the writ of preliminary injunction, to wit: ORDER This resolves the plaintiffs application or prayer for the issuance of a writ of preliminary injunction as embodied in the verified complaint in this case. Parenthetically, this Court earlier issued a temporary restraining order. (see Order dated May 15, 1998; see also Order dated May 26, 1998) After a careful perusal of the contents of the pleadings and documents on record insofar as they are pertinent to the issue under consideration, this Court finds that at this point in time, the plaintiffs appear to be entitled to the relief prayed for and this Court is of the considered belief and humble view that, without necessarily delving on the merits, the paramount interest of justice will be better served if thestatus quo shall be maintained and that an injunction bond of P2,500,000.00 appears to be in order. (see Sections 3 and 4, Rule 58, 1997 Rules of Civil Procedure) IN VIEW OF THE FOREGOING, the plaintiffs prayer for the issuance of a writ of prelimin ary injunction is GRANTED. Accordingly, upon the plaintiffs filing, within ten (10) days from their receipt hereof, an injunction bond of P2,500,000.00 executed to the defendants to the effect that the plaintiffs will pay all damages the defendants may sustain by reason of this injunction in case the Court should finally decide that the plaintiffs are not entitled thereto, let a writ of preliminary injunction issue enjoining or restraining the commission of the acts complained of in the verified Complaint in this case, and specifically, for the defendants, their officers, employees, agents, representatives, dealers and retailers or assigns or persons acting in their behalf to cease and desist from manufacturing, distributing, selling, offering for sale, advertising, or otherwise using, denims, jeans or pants with the design complained of in the verified Complaint in this case, which is substantially, if not exactly, similar to plaintiffs DOCKERS and DESIGN trademark or logo as covered by the Bureau of Pat ents, Trademarks and Technology Transfer Certificate of Registration No. 46619, until after this case shall have been decided on the merits and/or until further orders from this Court.[20]

The evidence considered by the trial court in granting injunctive relief were as follows: (1) a certified true copy of the certificate of trademark registration for Dockers and Design; (2) a pair of DOCKERS pants bearing the Dockers and Design trademark; (3) a pair of Paddocks pants bearing respondents assailed logo; (4) the Trends MBL Survey Report purportedly proving that there was conf using similarity between two marks; (5) the affidavit of one Bernabe Alajar which recounted petitioners prior adoption, use and registration of the Dockers and Design trademark; and (6) the affidavit of one Mercedes Abad of Trends MBL, Inc. which detailed the methodology and procedur e used in their survey and the results thereof.[21]

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Clinton Apparelle thereafter filed a Motion to Dismiss[22] and a Motion for Reconsideration[23] of the Order granting the writ of preliminary injunction. Meantime, the trial court issued an Order[24] approving the bond filed by petitioners.

On 22 June 1998, the trial court required[25] the parties to file their respective citation of authorities/ jurisprudence/Supreme Court decisions on whether or not the trial court may issue the writ of preliminary injunction pending the resolution of the Motion for Reconsideration and the Motion to Dismiss filed by respondent.

On 2 October 1998, the trial court denied Clinton Apparelles Motion to Dismiss and Motion for Reconsideration in an Omnibus Order,[26] the pertinent portions of which provide:

After carefully going over the contents of the pleadings in relation to pertinent portions of the records, this Court is of the considered and humble view that:

On the first motion, the arguments raised in the plaintiffs aforecited Consolidated Opposition appears to be meritorious. Be that as it may, this Court would like to emphasize, among other things, that the complaint states a cause of action as provided under paragraphs 1 to 18 thereof. On the second motion, the arguments raised in the plaintiffs aforecited Consolidated Opposition likewise appear to be impressed with merit. Besides, there appears to be no strong and cogent reason to reconsider and se t aside this Courts Order dated June 4, 1998 as it has been shown so far that the trademark or logo of defendants is substantially, if not exactly, similar to plaintiffs DOCKERS and DESIGN trademark or logo as covered by BPTTT Certificate of Registrati on No. 46619 even as the BPTTT Certificate of Registration No. 49579 of Clinton Apparelle, Inc. is only for the mark or word PADDOCKS (see Records, p. 377) In any event, this Court had issued an Order dated June 18, 1998 for the issuance of the writ of preliminary injunction after the plaintiffs filed the required bond of P2,500,000.00. IN VIEW OF THE FOREGOING, the aforecited Motion To Dismiss and Motion For Reconsideration are both DENIED for lack of merit, and accordingly, this Courts Order dated June 18, 1998 for the issuance of the writ of preliminary injunction is REITERATED so the writ of preliminary injunction could be implemented unless the implementation thereof is restrained by the Honorable Court of Appeals or Supreme Court.

The writ of preliminary injunction was thereafter issued on 8 October 1998. [27]

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Thus, Clinton Apparelle filed with the Court of Appeals a Petition[28] for certiorari, prohibition and mandamus with prayer for the issuance of a temporary restraining order and/or writ of preliminary injunction, assailing the orders of the trial court dated 15 May 1998, 4 June 1998 and 2 October 1998.

On 20 October 1998, the Court of Appeals issued a Resolution[29] requiring herein petitioners to file their comment on thePetition and at the same time issued the prayed-for temporary restraining order.

The appellate court rendered on 21 December 1998 its now assailed Decision granting Clinton Apparelles petition. The Court of Appeals held that the trial court did not follow the procedure required by law for the issuance of a temporary restraining order as Clinton Apparelle was not duly notified of the date of the summary hearing for its issuance. Thus, the Court of Appeals ruled that the TRO had been improperly issued.[30]

The Court of Appeals also held that the issuance of the writ of preliminary injunction is questionable. In its opinion, herein petitioners failed to sufficiently establish its material and substantial right to have the writ issued. Secondly, the Court of Appeals observed that the survey presented by petitioners to support their contentions was commissioned by petitioners. The Court of Appeals remarked that affidavits taken ex-parte are generally considered to be inferior to testimony given in open court. The appellate court also considered that the injury petitioners have suffered or are currently suffering may be compensated in terms of monetary consideration, if after trial, a final judgment shall be rendered in their favor.[31]

In addition, the Court of Appeals strongly believed that the implementation of the questioned writ would effectively shut down respondent s business, which in its opinion should not be sanctioned. The Court of Appeals thus set aside the orders of the trial court dated 15 May 1998 and 4 June 1998, respectively issuing a temporary restraining order and granting the issuance of a writ of preliminary injunction.

With the denial of their Motion for Reconsideration,[32] petitioners are now before this Court seeking a review of the appellate courts Decision and Resolution. LS & Co. and LSPI claim that the Court of Appeals committed serious error in: (1) disregarding the well-defined limits of the writ of certiorari that questions on the sufficiency of evidence are not to be resolved in such a petition; (2) in holding that there was no confusion between the two marks; (3) in ruling that the erosion of petitioners trademark is not protectable by injunction; (4) in ignoring the

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procedure previously agreed on by the parties and which was adopted by the trial court; and (5) in declaring that the preliminary injunction issued by the trial court will lead to the closure of respondents business.

In its Comment,[33] Clinton Apparelle maintains that only questions of law may be raised in an appeal by certiorari under Rule 45 of the Rules of Court. It asserts that the question of whether the Court of Appeals erred in: (1) disregarding the survey evidence; (2) ruling that there was no confusion between the two marks; and (c) finding that the erosion of petitioners trademark may not b e protected by injunction, are issues not within the ambit of a petition for review on certiorari under Rule 45. Clinton Apparelle also contends that the Court of Appeals acted correctly when it overturned the writ of preliminary injunction issued by the trial court. It believes that the issued writ in effect disturbed the status quo and disposed of the main case without trial.

There is no merit in the petition.

At issue is whether the issuance of the writ of preliminary injunction by the trial court was proper and whether the Court of Appeals erred in setting aside the orders of the trial court.

Section 1, Rule 58 of the Rules of Court defines a preliminary injunction as an order granted at any stage of an action 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. Injunction is accepted as the strong arm of equity or a transcendent remedy to be used cautiously as it affects the respective rights of the parties, and only upon full conviction on the part of the court of its extreme necessity. An extraordinary remedy, injunction is designed to preserve or maintain the status quo of things and is generally availed of to prevent actual or threatened acts until the merits of the case can be heard.[34] It may be resorted to only by a litigant for the preservation or protection of his rights or interests and for no other purpose during the pendency of the principal action.[35] It is resorted to only when there is a pressing necessity to avoid injurious consequences, which cannot be remedied under any standard compensation. The resolution of an application for a writ of preliminary injunction rests upon the existence of an emergency or of a special recourse before the main case can be heard in due course of proceedings.[36]

Section 3, Rule 58, of the Rules of Court enumerates the grounds for the issuance of a preliminary injunction: SEC. 3. Grounds for issuance 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

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(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.

Under the cited provision, a clear and positive right especially calling for judicial protection must be shown. Injunction is not a remedy to protect or enforce contingent, abstract, or future rights; it will not issue to protect a right not in esse and which may never arise, or to restrain an act which does not give rise to a cause of action. There must exist an actual right. [37] There must be a patent showing by the complaint that there exists a right to be protected and that the acts against which the writ is to be directed are violative of said right.[38]

There are generally two kinds of preliminary injunction: (1) a prohibitory injunction which commands a party to refrain from doing a particular act; and (2) a mandatory injunction which commands the performance of some positive act to correct a wrong in the past. [39]

The Court of Appeals did not err in reviewing proof adduced by petitioners to support its application for the issuance of the writ. 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.[40] And to determine whether there was 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. [41]

In the present case, we find that there was scant justification for the issuance of the writ of preliminary injunction.

Petitioners anchor their legal right to Dockers and Design trademark on the Certificate of Registration issued in their favor by the Bureau of Patents, Trademarks and Technology Transfer.* According to Section 138 of Republic Act No. 8293,[42] this Certificate of Registration is prima facie evidence of the validity of the registration, the registrants ownership of the mark and of the exclusive right to use the sa me in connection with the goods or services and those that are related thereto specified in the certificate. Section 147.1 of said law likewise grants the owner of the registered mark the exclusive right to prevent all third parties not having the owners consent from using in the co urse of trade identical or similar signs for goods or services which are identical or similar to those in respect of which the trademark is registered if such use results in a likelihood of confusion.

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However, attention should be given to the fact that petitioners registered trademark consists of two elements: (1) the word mark Dockers and (2) the wing-shaped design or logo. Notably, there is only one registration for both features of the trademark giving the impression that the two should be considered as a single unit. Clinton Apparelles trademark, on the other hand, uses the Paddocks word mark on top of a logo which according to petitioners is a slavish imitation of the Dockers design. The two trademarks apparently differ in their word marks (Dockers and Paddocks), but again according to petitioners, they employ similar or identical logos. It could thus be said that respondent only appropriates petitioners logo and not the word mark Dockers; it uses only a portion of the register ed trademark and not the whole. Given the single registration of the trademark Dockers and Design and considering that respondent only uses the assailed de vice but a different word mark, the right to prevent the latter from using the challenged Paddocks device is far from clear. Stated otherwise, it is not evident whether the single registration of the trademark Dockers and Design confers on the owner the right to prevent the use of a fraction thereof in the course of trade. It is also unclear whether the use without the owners consent of a portion of a trademark registered in its entirety constitutes material or substantial invasion of the owners right.

It is likewise not settled whether the wing-shaped logo, as opposed to the word mark, is the dominant or central feature of petitioners trademarkthe feature that prevails or is retained in the minds of the publican imitation of which creates the likelihood of deceiving the public and constitutes trademark infringement.[43] In sum, there are vital matters which have yet and may only be established through a full-blown trial.

From the above discussion, we find that petitioners right to injunctive relief has not been clearly and unmistakably demonstrated. The right has yet to be determined. Petitioners also failed to show proof that there is material and substantial invasion of their right to warrant the issuance of an injunctive writ. Neither were petitioners able to show any urgent and permanent necessity for the writ to prevent serious damage.

Petitioners wish to impress upon the Court the urgent necessity for injunctive relief, urging that the erosion or dilution of their trademark is protectable. They assert that a trademark owner does not have to wait until the mark loses its distinctiveness to obtain injunctive relief, and that the mere use by an infringer of a registered mark is already actionable even if he has not yet profited thereby or has damaged the trademark owner.

Trademark dilution is the lessening of the capacity of a famous mark to identify and distinguish goods or services, regardless of the presence or absence of: (1) competition between the owner of the famous mark and other parties; or (2) likelihood of confusion, mistake or deception. Subject to the principles of equity, the owner of a famous mark is entitled to an injunction against another persons commercial use in commerce of a mark or trade name, if such use begins after the mark has become famous and causes dilution of the distinctive quality of the mark. T his is intended to protect famous marks from subsequent uses that blur distinctiveness of the mark or tarnish or disparage it. [44]

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Based on the foregoing, to be eligible for protection from dilution, there has to be a finding that: (1) the trademark sought to be protected is famous and distinctive; (2) the use by respondent of Paddocks and Design began after the petitioners mark became famous; and (3) such subsequent use defames petitioners mark. In the case at bar, petitioners have yet to establish whether Dockers and Design has acquired a strong degree of distinctiveness and whether the other two elements are present for their cause to fall within the ambit of the invoked protection. The Trends MBL Survey Report which petitioners presented in a bid to establish that there was confusing similarity between two marks is not sufficient proof of any dilution that the trial court must enjoin.

The Court also finds that the trial courts order granting the writ did not adequately detail the reasons for the grant, cont rary to our ruling in University of the Philippines v. Hon. Catungal Jr., [45] wherein we held that:

The trial court must state its own findings of fact and cite particular law to justify grant of preliminary injunction. Utmost care in this regard is demanded.[46]

The trial court in granting the injunctive relief tersely ratiocinated that the plaintiffs appear to be entitled to the relief prayed for and this Court is of the considered belief and humble view that, without necessarily delving on the merits, the paramount interest of justice will be better served if the status quo shall be maintained. Clearly, this statement falls short of the requirement laid down by the above -quoted case. Similarly, in Developers Group of Companies, Inc. v. Court of Appeals,[47] we held that it was not enough for the trial court, in its order granting the writ, to simply say that it appeared after hearing that plaintiff is entitled to the relief prayed for.

In addition, we agree with the Court of Appeals in its holding that the damages the petitioners had suffered or continue to suffer may be compensated in terms of monetary consideration. As held in Government Service Insurance System v. Florendo:[48] a writ of injunction should never have been issued when an action for damages would adequately compensate the injurie s caused. The very foundation of the jurisdiction to issue the writ of injunction rests in the probability of irreparable injury, inadequacy of pecuniary estimation 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. [49]

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We also believe that the issued injunctive writ, if allowed, would dispose of the case on the merits as it would effectively enjoin the use of the Paddocks device without proof that there is basis for such action. The prevailing rule is that courts should avoid issuing a writ of preliminary injunction that would in effect dispose of the main case without trial.[50] There would be a prejudgment of the main case and a reversal of the rule on the burden of proof since it would assume the proposition which petitioners are inceptively bound to prove. [51]

Parenthetically, we find no flaw in the Court of Appeals disquisition on the co nsequences of the issued injunction. An exercise of caution, we believe that such reflection is necessary to weigh the alleged entitlement to the writ vis--vis its possible effects. The injunction issued in the instant case is of a serious nature as it tends to do more than to maintain the status quo. In fact, the assailed injunction if sustained would bring about the result desired by petitioners without a trial on the merits.

Then again, we believe the Court of Appeals overstepped its authori ty when it declared that the alleged similarity as to the two logos is hardly confusing to the public. The only issue brought before the Court of Appeals through respondents Petition under Rule 65 of the Rules of Court involved the grave abuse of discretion allegedly committed by the trial court in granting the TRO and the writ of preliminary injunction. The appellate court in making such a statement went beyond that issue and touched on the merits of the infringement case, which remains to be decided by the trial court. In our view, it was premature for the Court of Appeals to declare that there is no confusion between the two devices or logos. That matter remains to be decided on by the trial court.

Finally, we have no contention against the procedure adopted by the trial court in resolving the application for an injunctive writ and we believe that respondent was accorded due process. Due process, in essence, is simply an opportunity to be heard. And in applications for preliminary injunction, the requirement of hearing and prior notice before injunction may issue has been relaxed to the point that not all petitions for preliminary injunction must undergo a trial-type hearing, it being a hornbook doctrine that a formal or trial-type hearing is not at all times and in all instances essential to due process. Due process simply means giving every contending party the opportunity to be heard and the court to consider every piece of evidence presented in their favor. Accordingly, this Court has in the case of Co v. Calimag, Jr.,[52] rejected a claim of denial of due process where such claimant was given the opportunity to be heard, having submitted his counter-affidavit and memorandum in support of his position. [53]

After a careful consideration of the facts and arguments of the parties, the Court finds that petitioners did not adequately prove their entitlement to the injunctive writ. In the absence of proof of a legal right and the injury sustained by the applicant, an order of the trial court granting the issuance

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of an injunctive writ will be set aside for having been issued with grave abuse of discretion. [54]Conformably, the Court of Appeals was correct in setting aside the assailed orders of the trial court.

WHEREFORE, the instant petition is DENIED. The Decision of the Court of Appeals dated 21 December 1998 and its Resolutiondated 10 May 1999 are AFFIRMED. Costs against petitioners.

SO ORDERED.

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

MENDOZA, J.: This is a petition for certiorari. Petitioners seek to annul the resolution of the Department of Justice, dated August 12, 1992, in Criminal Case No. Q92-27854, entitled "Gabriel Zosa, et al. v. City Prosecutor of Quezon City and Francisco Joaquin, Jr.," and its resolution, dated December 3, 1992, denying petitioner Joaquin's motion for reconsideration. Petitioner BJ Productions, Inc. (BJPI) is the holder/grantee of Certificate of Copyright No. M922, dated January 28, 1971, of Rhoda and Me, a dating game show aired from 1970 to 1977. On June 28, 1973, petitioner BJPI submitted to the National Library an addendum to its certificate of copyright specifying the show's format and style of presentation. On July 14, 1991, while watching television, petitioner Francisco Joaquin, Jr., president of BJPI, saw on RPN Channel 9 an episode of It's a Date, which was produced by IXL Productions, Inc. (IXL). On July 18, 1991, he wrote a letter to private respondent Gabriel M. Zosa, president and general manager of IXL, informing Zosa that BJPI had a copyright to Rhoda and Me and demanding that IXL discontinue airing It's a Date. In a letter, dated July 19, 1991, private respondent Zosa apologized to petitioner Joaquin and requested a meeting to discuss a possible settlement. IXL, however, continued airing It's a Date, prompting petitioner Joaquin to send a second letter on July 25, 1991 in which he reiterated his demand and warned that, if IXL did not comply, he would endorse the matter to his attorneys for proper legal action. Meanwhile, private respondent Zosa sought to register IXL's copyright to the first episode of It's a Date for which it was issued by the National Library a certificate of copyright August 14, 1991. Upon complaint of petitioners, an information for violation of P.D. No. 49 was filed against private respondent Zosa together with certain officers of RPN Channel 9, namely, William Esposo, Felipe Medina, and Casey Francisco, in the Regional Trial Court of Quezon City where it was docketed as Criminal Case No. 92-27854 and assigned to Branch 104 thereof. However, private respondent Zosa sought a review of the resolution of the Assistant City Prosecutor before the Department of Justice. On August 12, 1992, respondent Secretary of Justice Franklin M. Drilon reversed the Assistant City Prosecutor's findings and directed him to move for the dismissal of the case against private respondents. 1 Petitioner Joaquin filed a motion for reconsideration, but his motion denied by respondent Secretary of Justice on December 3, 1992. Hence, this petition. Petitioners contend that:

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1. The public respondent gravely abused his discretion amounting to lack of jurisdiction when he invoked non-presentation of the master tape as being fatal to the existence of probable cause to prove infringement, despite the fact that private respondents never raised the same as a controverted issue. 2. The public respondent gravely abused his discretion amounting to lack of jurisdiction when he arrogated unto himself the determination of what is copyrightable an issue which is exclusively within the jurisdiction of the regional trial court to assess in a proper proceeding. Both public and private respondents maintain that petitioners failed to establish the existence of probable cause due to their failure to present the copyrighted master videotape of Rhoda and Me. They contend that petitioner BJPI's copyright covers only a specific episode of Rhoda and Me and that the formats or concepts of dating game shows are not covered by copyright protection under P.D. No. 49. Non-Assignment of Error. Petitioners claim that their failure to submit the copyrighted master videotape of the television show Rhoda and Me was not raised in issue by private respondents during the preliminary investigation and, therefore, it was error for the Secretary of Justice to reverse the investigating prosecutor's finding of probable cause on this ground. A preliminary investigation falls under the authority of the state prosecutor who is given by law the power to direct and control criminal actions. 2 He is, however, subject to the control of the Secretary of Justice. Thus, Rule 112, 4 of the Revised Rules of Criminal Procedure, provides: Sec. 4. Duty of investigating fiscal. If the investigating fiscal finds cause to hold the respondent for trial, he shall prepare the resolution and corresponding information. He shall certify under oath that he, or as shown by the record, an authorized officer, has personally examined the complainant and his witnesses, that there is reasonable ground to believe that a crime has been committed and that the accused is probably guilty thereof, that the accused was informed of the complaint and of the evidence submitted against him and that he was given an opportunity to submit controverting evidence. Otherwise, he shall recommend dismissal of the complaint. In either case, he shall forward the records of the case to the provincial or city fiscal or chief state prosecutor within five (5) days from his resolution. The latter shall take appropriate action thereon ten (10) days from receipt thereof, immediately informing the parties of said action. No complaint or information may be filed or dismissed by an investigating fiscal without the prior written authority or approval of the provincial or city fiscal or chief state prosecutor. Where the investigating assistant fiscal recommends the dismissal of the case but his findings are reversed by the provincial or city fiscal or chief state prosecutor on the ground that a probable cause exists, the latter may, by himself, file the corresponding information against the respondent or direct any other assistant fiscal or state prosecutor to do so, without conducting another preliminary investigation. If upon petition by a proper party, the Secretary of Justice reverses the resolution of the provincial or city fiscal or chief state prosecutor, he shall direct the fiscal concerned to file the corresponding information without conducting another preliminary investigation or to dismiss or move for dismissal of the complaint or information. In reviewing resolutions of prosecutors, the Secretary of Justice is not precluded from considering errors, although unassigned, for the purpose of determining whether there is probable cause for filing cases in court. He must make his own finding, of probable cause and is not confined to the issues raised by the parties during preliminary investigation. Moreover, his findings are not subject to review unless shown to have been made with grave abuse. Opinion of the Secretary of Justice Petitioners contend, however, that the determination of the question whether the format or mechanics of a show is entitled to copyright protection is for the court, and not the Secretary of Justice, to make. They assail the following portion of the resolution of the respondent Secretary of Justice: [T]he essence of copyright infringement is the copying, in whole or in part, of copyrightable materials as defined and enumerated in Section 2 of PD. No. 49. Apart from the manner in which it is actually expressed, however, the idea of a dating game show is, in the opinion of this Office, a non-copyrightable material. Ideas, concepts, formats, or schemes in their abstract form clearly do not fall within the class of works or materials susceptible of copyright registration as provided in PD. No. 49. 3(Emphasis added.)

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It is indeed true that the question whether the format or mechanics of petitioners television show is entitled to copyright protection is a legal question for the court to make. This does not, however, preclude respondent Secretary of Justice from making a preliminary determination of this question in resolving whether there is probable cause for filing the case in court. In doing so in this case, he did not commit any grave error. Presentation of Master Tape Petitioners claim that respondent Secretary of Justice gravely abused his discretion in ruling that the master videotape should have been predented in order to determine whether there was probable cause for copyright infringement. They contend that 20th Century Fox Film Corporation v. Court of Appeals, 4 on which respondent Secretary of Justice relied in reversing the resolution of the investigating prosecutor, is inapplicable to the case at bar because in the present case, the parties presented sufficient evidence which clearly establish "linkage between the copyright show "Rhoda and Me" and the infringing TV show "It's a Date." 5 The case of 20th Century Fox Film Corporation involved raids conducted on various videotape outlets allegedlly selling or renting out "pirated" videotapes. The trial court found that the affidavits of NBI agents, given in support of the application for the search warrant, were insufficient without the master tape. Accordingly, the trial court lifted the search warrants it had previously issued against the defendants. On petition for review, this Court sustained the action of the trial court and ruled: 6 The presentation of the master tapes of the copyrighted films from which the pirated films were allegedly copied, was necessary for the validity of search warrants against those who have in their possession the pirated films. The petitioner's argument to the effect that the presentation of the master tapes at the time of application may not be necessary as these would be merely evidentiary in nature and not determinative of whether or not a probable cause exists to justify the issuance of the search warrants is not meritorious. The court cannot presume that duplicate or copied tapes were necessarily reproduced from master tapes that it owns. The application for search warrants was directed against video tape outlets which allegedly were engaged in the unauthorized sale and renting out of copyrighted films belonging to the petitioner pursuant to P.D. 49. The essence of a copyright infringement is the similarity or at least substantial similarity of the purported pirated works to the copyrighted work. Hence, the applicant must present to the court the copyrighted films to compare them with the purchased evidence of the video tapes allegedly pirated to determine whether the latter is an unauthorized reproduction of the former. This linkage of the copyrighted films to the pirated films must be established to satisfy the requirements of probable cause. Mere allegations as to the existence of the copyrighted films cannot serve as basis for the issuance of a search warrant. This ruling was qualified in the later case of Columbia Pictures, Inc. v. Court of Appeals 7 in which it was held: In fine, the supposed pronunciamento in said case regarding the necessity for the presentation of the master tapes of the copyrighted films for the validity of search warrants should at most be understood to merely serve as a guidepost in determining the existence of probable cause in copyright infringement cases where there is doubt as to the true nexus between the master tape and the printed copies. An objective and careful reading of the decision in said case could lead to no other conclusion than that said directive was hardly intended to be a sweeping and inflexible requirement in all or similar copyright infringement cases. . . 8 In the case at bar during the preliminary investigation, petitioners and private respondents presented written descriptions of the formats of their respective televisions shows, on the basis of which the investigating prosecutor ruled: As may [be] gleaned from the evidence on record, the substance of the television productions complainant's "RHODA AND ME" and Zosa's "IT'S A DATE" is that two matches are made between a male and a female, both single, and the two couples are treated to a night or two of dining and/or dancing at the expense of the show. The major concepts of both shows is the same. Any difference appear mere variations of the major concepts. That there is an infringement on the copyright of the show "RHODA AND ME" both in content and in the execution of the video presentation are established because respondent's "IT'S A DATE" is practically an exact copy of complainant's "RHODA AND ME" because of substantial similarities as follows, to wit: RHODA AND ME Set 1 "IT'S A DATE" Set 1

a. Unmarried participant of one gender (searcher) appears on one a. same side of a divider, while three (3) unmarried participants of the other gender are on the other side of the divider. This arrangement is done

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to ensure that the searcher does not see the searchees. b. Searcher asks a question to be answered by each of the searchees. b. same The purpose is to determine who among the searchees is the most compatible with the searcher. c. Searcher speculates on the match to the searchee. c. same d. Selection is made by the use of compute (sic) methods, or by the d. Selection is based on the answer of the Searchees. way questions are answered, or similar methods. Set 2 Set 2 Same as above with the genders of the searcher and searchees interchanged. 9 same

Petitioners assert that the format of Rhoda and Me is a product of ingenuity and skill and is thus entitled to copyright protection. It is their position that the presentation of a point-by-point comparison of the formats of the two shows clearly demonstrates the nexus between the shows and hence establishes the existence of probable cause for copyright infringement. Such being the case, they did not have to produce the master tape. To begin with the format of a show is not copyrightable. Section 2 of P.D. No. 49, 10 otherwise known as the DECREE ON INTELLECTUAL PROPERTY, enumerates the classes of work entitled to copyright protection, to wit: Sec. 2. The rights granted by this Decree shall, from the moment of creation, subsist with respect to any of the following classes of works: (A) Books, including composite and cyclopedic works, manuscripts, directories, and gazetteers: (B) Periodicals, including pamphlets and newspapers; (C) Lectures, sermons, addresses, dissertations prepared for oral delivery; (D) Letters; (E) Dramatic or dramatico-musical compositions; choreographic works and entertainments in dumb shows, the acting form of which is fixed in writing or otherwise; (F) Musical compositions, with or without words; (G) Works of drawing, painting, architecture, sculpture, engraving, lithography, and other works of art; models or designs for works of art; (H) Reproductions of a work of art; (I) Original ornamental designs or models for articles of manufacture, whether or not patentable, and other works of applied art; (J) Maps, plans, sketches, and charts; (K) Drawings or plastic works of a scientific or technical character; (I) Photographic works and works produced by a process analogous to photography lantern slides; (M) Cinematographic works and works produced by a process analogous to cinematography or any process for making audiovisual recordings; (N) Computer programs; (O) Prints, pictorial illustrations advertising copies, labels tags, and box wraps;

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(P) Dramatizations, translations, adaptations, abridgements, arrangements and other alterations of literary, musical or artistic works or of works of the Philippine government as herein defined, which shall be protected as provided in Section 8 of this Decree. (Q) Collections of literary, scholarly, or artistic works or of works referred to in Section 9 of this Decree which by reason of the selection and arrangement of their contents constitute intellectual creations, the same to be protected as such in accordance with Section 8 of this Decree. (R) Other literary, scholarly, scientific and artistic works. This provision is substantially the same as 172 of the INTELLECTUAL PROPERTY CODE OF PHILIPPINES (R.A. No. 8293). 11 The format or mechanics of a television show is not included in the list of protected works in 2 of P.D. No. 49. For this reason, the protection afforded by the law cannot be extended to cover them. Copyright, in the strict sense of the term, is purely a statutory right. It is a new or independent right granted by the statute, and not simply a pre-existing right regulated by the statute. Being a statutory grant, the rights are only such as the statute confers, and may be obtained and enjoyed only with respect to the subjects and by the persons and on terms and conditions specified in the statute. 12 Since . . . copyright in published works is purely a statutory creation, a copyright may be obtained only for a work falling within the statutory enumeration or description. 13 Regardless of the historical viewpoint, it is authoritatively settled in the United States that there is no copyright except that which is both created and secured by act of Congress . . . . . 14 P.D. No. 49, 2, in enumerating what are subject to copyright, refers to finished works and not to concepts. The copyright does not extend to an idea, procedure, process, system, method of operation, concept, principle, or discovery, regardless of the form in which it is described, explained, illustrated, or embodied in such work. 15 Thus, the new INTELLECTUAL PROPERTY CODE OF THE PHILIPPINES provides: Sec. 175. Unprotected Subject Matter. Notwithstanding the provisions of Sections 172 and 173, no protection shall extend, under this law, to any idea, procedure, system, method or operation, concept, principle, discovery or mere data as such, even if they are expressed, explained, illustrated or embodied in a work; news of the day and other miscellaneous facts having the character of mere items of press information; or any official text of a legislative, administrative or legal nature, as well as any official translation thereof. What then is the subject matter of petitioners' copyright? This Court is of the opinion that petitioner BJPI's copyright covers audio-visual recordings of each episode of Rhoda and Me, as falling within the class of works mentioned in P.D. 49, 2(M), to wit: Cinematographic works and works produced by a process analogous to cinematography or any process for making audio-visual recordings; The copyright does not extend to the general concept or format of its dating game show. Accordingly, by the very nature of the subject of petitioner BJPI's copyright, the investigating prosecutor should have the opportunity to compare the videotapes of the two shows. Mere description by words of the general format of the two dating game shows is insufficient; the presentation of the master videotape in evidence was indispensable to the determination of the existence of probable cause. As aptly observed by respondent Secretary of Justice: A television show includes more than mere words can describe because it involves a whole spectrum of visuals and effects, video and audio, such that no similarity or dissimilarity may be found by merely describing the general copyright/format of both dating game shows. WHEREFORE, the petition is hereby DISMISSED SO ORDERED.1wphi1.nt

[G.R. No. 131522. July 19, 1999]

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PACITA I. HABANA, ALICIA L. CINCO and JOVITA N. FERNANDO, petitioners, vs. FELICIDAD C. ROBLES and GOODWILL TRADING CO., INC., respondents. DECISION PARDO, J.: The case before us is a petition for review on certiorari[1] to set aside the (a) decision of the Court of Appeals[2], and (b) the resolution denying petitioners motion for reconsideration,[3] in which the appellate court affirmed the trial courts dismissal of the complaint for infringement and/or unfair competition and damages but deleted the award for attorneys fees. The facts are as follows: Petitioners are authors and copyright owners of duly issued certificates of copyright registration covering their published works, produced through their combined resources and efforts, entitled COLLEGE ENGLISH FOR TODAY (CET for brevity), Books 1 and 2, and WORKBOOK FOR COLLEGE FRESHMAN ENGLISH, Series 1. Respondent Felicidad Robles and Goodwill Trading Co., Inc. are the author/publisher and distributor/seller of another published work entitled DEVELOPING ENGLISH PROFICIENCY (DEP for brevity), Books 1 and 2 (1985 edition) which book was covered by copyrights issued to them. In the course of revising their published works, petitioners scouted and looked around various bookstores to check on other textbooks dealing with the same subject matter. By chance they came upon the book of respondent Robles and upon perusal of said book they were surprised to see that the book was strikingly similar to the contents, scheme of presentation, illustrations and illustrative examples in their own book, CET. After an itemized examination and comparison of the two books (CET and DEP), petitioners found that several pages of the respondents book are similar, if not all together a copy of petitioners book, which is a case of plagiarism and copyright infringement. Petitioners then made demands for damages against respondents and also demanded that they cease and desist from further selling and distributing to the general public the infringed copies of respondent Robles works. However, respondents ignored the demands, hence, on July 7, 1988, petitioners filed with the Regional Trial Court, Makati, a complaint for Infringement and/or unfair competition with damages[4]against private respondents.[5] In the complaint, petitioners alleged that in 1985, respondent Felicidad C. Robles being substantially familiar with the cont ents of petitioners works, and without securing their permission, lifted, copied, plagiarized and/or transposed certain portions of their book CET. The textual contents and illustrations of CET were literally reproduced in the book DEP. The plagiarism, incorporation and reproduction of particular portions of the book CET in the book DEP, without the authority or consent of petitioners, and the misrepresentations of respondent Robles that the same was her original work and concept adversely affected and substantially diminished the sale of the petitione rs book and caused them actual damages by way of unrealized income. Despite the demands of the petitioners for respondents to desist from committing further acts of infringement and for respondent to recall DEP from the market, respondents refused. Petitioners asked the court to order the submission of all copies of the book DEP, together with the molds, plates and films and other materials used in its printing destroyed, and for respondents to render an accounting of the proceeds of all sales and profits since the time of its publication and sale. Respondent Robles was impleaded in the suit because she authored and directly committed the acts of infringement complained of, while respondent Goodwill Trading Co., Inc. was impleaded as the publisher and joint co-owner of the copyright certificates of registration covering the two books authored and caused to be published by respondent Robles with obvious connivance with one another. On July 27, 1988, respondent Robles filed a motion for a bill of particulars [6] which the trial court approved on August 17, 1988. Petitioners complied with the desired particularization, and furnished respondent Robles the specific portions, inclusive of pages and lines, of the published and copyrighted books of the petitioners which were transposed, lifted, copied and plagiarized and/or otherwise found their way i nto respondents book. On August 1, 1988, respondent Goodwill Trading Co., Inc. filed its answer to the complaint[7] and alleged that petitioners had no cause of action against Goodwill Trading Co., Inc. since it was not privy to the misrepresentation, plagiarism, incorporation and reproduction of the portions of the book of petitioners; that there was an agreement between Goodwill and the respondent Robles that Robles guaranteed Goodwill that the materials utilized in the manuscript were her own or that she had secured the necessary permission from contributors and sources; that the author assumed sole responsibility and held the publisher without any liability. On November 28, 1988, respondent Robles filed her answer [8], and denied the allegations of plagiarism and copying that petitioners claimed. Respondent stressed that (1) the book DEP is the product of her independent researches, studies and experiences, and was not a copy of any existing valid copyrighted book; (2) DEP followed the scope and sequence or syllabus which are common to all English grammar writers as recommended by the Association of Philippine Colleges of Arts and Sciences (APCAS), so any similarity between the respondents book and that of the petitioners was due to the orientation of the authors to both works and standards and syllabus; and (3) the similarities may be due to the authors exercise of the right to fair use of copyrigthed materials, as guides.

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Respondent interposed a counterclaim for damages on the ground that bad faith and malice attended the filing of the complaint, because petitioner Habana was professionally jealous and the book DEP replaced CET as the official textbook of the graduate studies department of the Far Eastern University.[9] During the pre-trial conference, the parties agreed to a stipulation of facts[10] and for the trial court to first resolve the issue of infringement before disposing of the claim for damages. After the trial on the merits, on April 23, 1993, the trial court rendered its judgment finding thus: WHEREFORE, premises considered, the court hereby orders that the complaint filed against defendants Felicidad Robles and Goodwill Trading Co., Inc. shall be DISMISSED; that said plaintiffs solidarily reimburse defendant Robles for P20,000.00 attorneys fees and defendant Goodwill for P5,000.00 attorneys fees. Plaintiffs are liable for cost of suit. IT IS SO ORDERED. Done in the City of Manila this 23rd day of April, 1993. (s/t) MARVIE R. ABRAHAM SINGSON Assisting Judge S. C. Adm. Order No. 124-92[11] On May 14, 1993, petitioners filed their notice of appeal with the trial court[12], and on July 19, 1993, the court directed its branch clerk of court to forward all the records of the case to the Court of Appeals.[13] In the appeal, petitioners argued that the trial court completely disregarded their evidence and fully subscribed to the arguments of respondent Robles that the books in issue were purely the product of her researches and studies and that the copied portions were inspired by foreign authors and as such not subject to copyright. Petitioners also assailed the findings of the trial court that they were animated by bad faith in instituting the complaint.[14] On June 27, 1997, the Court of Appeals rendered judgment in favor of respondents Robles and Goodwill Trading Co., Inc. The relevant portions of the decision state: It must be noted, however, that similarity of the allegedly infringed work to the authors or proprietors copyrighted work does not of itself establish copyright infringement, especially if the similarity results from the fact that both works deal with the same subject or have the same common source, as in this case. Appellee Robles has fully explained that the portion or material of the book claimed by appellants to have been copied or lifted from foreign books. She has duly proven that most of the topics or materials contained in her book, with particular reference to those matters claimed by appellants to have been plagiarized were topics or matters appearing not only in appellants and her books but also in earlier books on College English, including foreign books, e.i. Edmund Burkes Speech on Conciliation, Boerigs Competence in English and Broughtons, Edmund Burkes Collection. xxx Appellants reliance on the last paragraph on Section 11 is misplaced. It must be emphasized that they failed to prove that their books were made sources by appellee.[15] The Court of Appeals was of the view that the award of attorneys fees was not proper, since there was no bad faith on the part of petition ers Habana et al. in instituting the action against respondents. On July 12, 1997, petitioners filed a motion for reconsideration,[16] however, the Court of Appeals denied the same in a Resolution[17] dated November 25, 1997. Hence, this petition. In this appeal, petitioners submit that the appellate court erred in affirming the trial courts decision. Petitioners raised the following issues: (1) whether or not, despite the apparent textual, thematic and sequential similarity between DEP and CET, respondents committed no copyright infringement; (2) whether or not there was animus furandi on the part of respondent when they refused to withdraw the copies of CET from the market despite notice to withdraw the same; and (3) whether or not respondent Robles abused a writers right to fair use, in violation of Section 11 of Presidential Decree No. 49.[18] We find the petition impressed with merit.

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The complaint for copyright infringement was filed at the time that Presidential Decree No. 49 was in force. At present, all laws dealing with the protection of intellectual property rights have been consolidated and as the law now stands, the protection of copyrights is governed by Republic Act No. 8293. Notwithstanding the change in the law, the same principles are reiterated in the new law under Section 177. It provides for the copy or economic rights of an owner of a copyright as follows: Sec.177. Copy or Economic rights.Subject to the provisions of chapter VIII, copyright or economic rights shall consist of the exclusive right to carry out, authorize or prevent the following acts: 177.1 Reproduction of the work or substantial portion of the work; 177.2 Dramatization, translation, adaptation, abridgement, arrangement or other transformation of the work; 177.3 The first public distribution of the original and each copy of the work by sale or other forms of transfer of ownership; 177.4 Rental of the original or a copy of an audiovisual or cinematographic work, a work embodied in a sound recording, a computer program, a compilation of data and other materials or a musical work in graphic form, irrespective of the ownership of the original or the copy which is the subject of the rental; (n) 177.5 Public display of the original or copy of the work; 177.6 Public performance of the work; and 177.7 Other communication to the public of the work[19] The law also provided for the limitations on copyright, thus: Sec. 184.1 Limitations on copyright.-- Notwithstanding the provisions of Chapter V, the following acts shall not constitute infringement of copyright: (a) the recitation or performance of a work, once it has been lawfully made accessible to the public, if done privately and free of charge or if made strictly for a charitable or religious institution or society; [Sec. 10(1), P.D. No. 49] (b) The making of quotations from a published work if they are compatible with fair use and only to the extent justified for the purpose, including quotations from newspaper articles and periodicals in the form of press summaries; Provided, that the source and the name of the author, if appearing on the work are mentioned; (Sec. 11 third par. P.D.49) xxxx xxxx xxxx

(e) The inclusion of a work in a publication, broadcast, or other communication to the public, sound recording of film, if such inclusion is made by way of illustration for teaching purposes and is compatible with fair use: Provided, That the source and the name of the author, if appearing in the work is mentioned;[20] In the above quoted provisions, work has reference to literary and artistic creations and this includes books and other lit erary, scholarly and scientific works.[21] A perusal of the records yields several pages of the book DEP that are similar if not identical with the text of CET. On page 404 of petitioners Book 1 of College English for Today, the authors wrote: Items in dates and addresses: He died on Monday, April 15, 1975. Miss Reyes lives in 214 Taft Avenue, Manila[22] On page 73 of respondents Book 1 Developing English Today, they wrote: He died on Monday, April 25, 1975. Miss Reyes address is 214 Taft Avenue Manila[23] On Page 250 of CET, there is this example on parallelism or repetition of sentence structures, thus:

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The proposition is peace. Not peace through the medium of war; not peace to be hunted through the labyrinth of intricate and endless negotiations; not peace to arise out of universal discord, fomented from principle, in all parts of the empire; not peace to depend on the juridical determination of perplexing questions, or the precise marking of the boundary of a complex government. It is simple peace; sought in its natural course, and in its ordinary haunts. It is peace sought in the spirit of peace, and laid in principles purely pacific. --- Edmund Burke, Speech on Criticism.[24] On page 100 of the book DEP [25], also in the topic of parallel structure and repetition, the same example is found in toto. The only difference is that petitioners acknowledged the author Edmund Burke, and respondents did not. In several other pages[26] the treatment and manner of presentation of the topics of DEP are similar if not a rehash of that contained in CET. We believe that respondent Robles act of lifting from the book of petitioners s ubstantial portions of discussions and examples, and her failure to acknowledge the same in her book is an infringement of petitioners copyrights. When is there a substantial reproduction of a book? It does not necessarily require that the entire copyrighted work, or even a large portion of it, be copied. If so much is taken that the value of the original work is substantially diminished, there is an infringement of copyright and to an injurious extent, the work is appropriated.[27] In determining the question of infringement, the amount of matter copied from the copyrighted work is an important consideration. To constitute infringement, it is not necessary that the whole or even a large portion of the work shall have been copied. If so much is taken that the value of the original is sensibly diminished, or the labors of the original author are substantially and to an injurious extent appropriated by another, that is sufficient in point of law to constitute piracy.[28] The essence of intellectual piracy should be essayed in conceptual terms in order to underscore its gravity by an appropriate understanding thereof. Infringement of a copyright is a trespass on a private domain owned and occupied by the owner of the copyright, and, therefore, protected by law, and infringement of copyright, or piracy, which is a synonymous term in this connection, consists in the doing by any person, without the consent of the owner of the copyright, of anything the sole right to do which is conferred by statute on the owner of the copyright.[29] The respondents claim that the copied portions of the book CET are also found in foreign books and other grammar books, and that the similarity between her style and that of petitioners can not be avoided since they come from the same background and orientation may be true. However, in this jurisdiction under Sec 184 of Republic Act 8293 it is provided that: Limitations on Copyright. Notwithstanding the provisions of Chapter V, the following shall not constitute infringement of copyright: xxxx xxxx xxxx

(c) The making of quotations from a published work if they are compatible with fair use and only to the extent justified for the purpose, including quotations from newspaper articles and periodicals in the form of press summaries : Provided, That the source and the name of the author, if appearing on the work, are mentioned. A copy of a piracy is an infringement of the original, and it is no defense that the pirate, in such cases, did not know whether or not he was infringing any copyright; he at least knew that what he was copying was not his, and he copied at his peril. [30] The next question to resolve is to what extent can copying be injurious to the author of the book being copied. Is it enough that there are similarities in some sections of the books or large segments of the books are the same? In the case at bar, there is no question that petitioners presented several pages of the books CET and DEP that more or less had the same contents. It may be correct that the books being grammar books may contain materials similar as to some technical contents with other grammar books, such as the segment about the Author Card. However, the numerous pages that the petitioners presented showing similarity in the style and the manner the books were presented and the identical examples can not pass as similarities merely because of technical consideration. The respondents claim that their similarity in style can be attributed to the fact that both of them were exposed to the APCAS syllabus and their respective academic experience, teaching approach and methodology are almost identical because they were of the same background. However, we believe that even if petitioners and respondent Robles were of the same background in terms of teaching experience and orientation, it is not an excuse for them to be identical even in examples contained in their books. The similarities in examples and material contents are so obviously present in this case. How can similar/identical examples not be considered as a mark of copying? We consider as an indicia of guilt or wrongdoing the act of respondent Robles of pulling out from Goodwill bookstores the book DEP upon learning of petitioners complaint while pharisaically denying petitioners demand. It was further noted that when the book DEP was re-issued as a revised version, all the pages cited by petitioners to contain portion of their book College English for Today were eliminated. In cases of infringement, copying alone is not what is prohibited. The copying must produce an injurious effect. Here, the injury consists in that respondent Robles lifted from petitioners book materials that were the result of the latters research work and compila tion and misrepresented them as her own. She circulated the book DEP for commercial use and did not acknowledge petitioners as her source.

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Hence, there is a clear case of appropriation of copyrighted work for her benefit that respondent Robles committed. Petitioners work as authors is the product of their long and assiduous research and for another to represent it as her own is injury enough. In copyrighting books the purpose is to give protection to the intellectual product of an author. This is precisely what the law on copyright protected, under Section 184.1 (b). Quotations from a published work if they are compatible with fair use and only to the extent justified by the purpose, including quotations from newspaper articles and periodicals in the form of press summaries are allowed provided that the source and the name of the author, if appearing on the work, are mentioned. In the case at bar, the least that respondent Robles could have done was to acknowledge petitioners Habana et. al. as the source of the portions of DEP. The final product of an authors toil is her book. To allow another to copy the book without appropriate acknowledgment is injury enough. WHEREFORE, the petition is hereby GRANTED. The decision and resolution of the Court of Appeals in CA-G. R. CV No. 44053 are SET ASIDE. The case is ordered remanded to the trial court for further proceedings to receive evidence of the parties to ascertain the damages caused and sustained by petitioners and to render decision in accordance with the evidence submitted to it. SO ORDERED.

[G.R. No. 147043. June 21, 2005]

NBI MICROSOFT CORPORATION & LOTUS DEVELOPMENT CORP., petitioners, vs. JUDY C. HWANG, BENITO KEH & YVONNE K. CHUA/BELTRON COMPUTER PHILIPPINES INC., JONATHAN K. CHUA, EMILY K. CHUA, BENITO T. SANCHEZ, NANCY I. VELASCO, ALFONSO CHUA, ALBERTO CHUA, SOPHIA ONG, DEANNA CHUA/TAIWAN MACHINERY DISPLAY & TRADE CENTER, INC., and THE SECRETARY OF JUSTICE, respondents. DECISION CARPIO, J.:

The Case This is a petition for certiorari[1] of the Resolutions[2] of the Department of Justice dismissing for lack of merit and insufficiency of evidence petitioner Microsoft Corporations complaint against respondents for copyright infringement and unfair competition.

The Facts Petitioner Microsoft Corporation (Microsoft), a Delaware, United States corporation, owns the copyright and trademark to se veral computer software.[3] Respondents Benito Keh and Yvonne Keh are the President/Managing Director and General Manager, respectively, of respondent Beltron Computer Philippines, Inc. (Beltron), a domestic corporation. Respo ndents Jonathan K. Chua, Emily K. Chua, Benito T. Sanchez, and Nancy I. Velasco are Beltrons Directors. On the other hand, respondents Alfonso Chua, Alberto Chua, Judy K. Chua Hwang, Sophia Ong, a nd Deanna Chua are the Directors of respondent Taiwan Machinery Display & Trade Center, Inc. (TMTC), also a domestic corporation.[4] In May 1993, Microsoft and Beltron entered into a Licensing Agreement (Agreement). Und er Section 2(a) of the Agreement, as amended in January 1994, Microsoft authorized Beltron, for a fee, to: (i) xxx reproduce and install no more than one (1) copy of [Microsoft] software on each Customer System hard disk or Read Only Memory (ROM); [and] (ii) xxx distribute directly or indirectly and license copies of the Product (reproduced as per Section 2(a)(i) and/or acquired from Authorized Replicator or Authorized Distributor) in object code form to end users[.] xxxx[5] The Agreement also authorized Microsoft and Beltron to terminate the contract if the other fails to comply with any of the Ag reements provisions. Microsoft terminated the Agreement effective 22 June 1995 for Beltrons non-payment of royalties.[6]

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Afterwards, Microsoft learned that respondents were illegally copying and selling Microsoft software. Consequently, Microsoft, through its Philippine agent,[7] hired the services of Pinkerton Consulting Services (PCS), a private investigative firm. Microsoft also sought the assistance of the National Bureau of Investigation (NBI). On 10 November 1995, PCS employee John Benedic [8] Sacriz (Sacriz) and NBI agent Dominador Samiano, Jr. (Samiano), posing as representatives of a computer shop, [9] bought computer hardware (central processing unit (CPU) and computer monitor) and software (12 computer disks (CDs) in read-only memory (ROM) format) from respondents. The CPU contained pre installed[10] Microsoft Windows 3.1 and MS-DOS software. The 12 CD-ROMs, encased in plastic containers with Microsoft packaging, also contained Microsoft software.[11] At least two of the CD-ROMs were installers, so-called because they contain several software (Microsoft only or both Microsoft and non-Microsoft).[12] Sacriz and Samiano were not given the Microsoft end-user license agreements, users manuals, registration cards or certificates of authenticity for the articles they purchased. The receipt issued to Sacriz and Samiano for the CPU and monitor bore the heading T.M.T.C. (PHILS.) INC. BELTRON COMPUTER.[13] The receipt for the 12 CD-ROMs did not indicate its source although the name Gerlie appears below the entry delivered by.[14] On 17 November 1995, Microsoft applied for search warrants against respondents in the Regional Trial Court, Branch 23, Manila (RTC).[15] The RTC granted Microsofts application and issued two search warrants (Search Warrant Nos. 95 -684 and 95-685).[16] Using Search Warrant Nos. 95-684 and 95-685, the NBI searched the premises of Beltron and TMTC and seized several computer-related hardware, software, accessories, and paraphernalia. Among these were 2,831 pieces of CD-ROMs containing Microsoft software.[17] Based on the articles obtained from respondents, Microsoft and a certain Lotus Development Corporation (Lotus Corporation) charged respondents before the Department of Justice (DOJ) with copyright infringement under Section 5(A) in relation to Section 29 of Presidential Decree No. 49, as amended, (PD 49)[18] and with unfair competition under Article 189(1)[19] of the Revised Penal Code. In its Complaint (I.S. No. 96-193), which the NBI indorsed, Microsoft alleged that respondents illegally copied a nd sold Microsoft software.[20] In their joint counter-affidavit, respondents Yvonne Keh (respondent Keh) and Emily K. Chua (respondent Chua) denied the charge s against respondents. Respondents Keh and Chua alleged that: (1) Microsofts real intention in filing the complaint under I.S. No. 96-193 was to pressure Beltron to pay its alleged unpaid royalties, thus Microsoft should have filed a collection suit instead of a criminal complaint; (2) TMTC bought the confiscated 59 boxes of MS-DOS CDs from a Microsoft dealer in Singapore (R.R. Donnelly); (3) respondents are not the source of the Microsoft Windows 3.1 software pre-installed in the CPU bought by Sacriz and Samiano, but only of the MS-DOS software; (4) Microsofts alleged proof of purchase (receipt) for the 12 CD-ROMs is inconclusive because the receipt does not indicate its source; and (5) respondents Benito Keh, Jonathan K. Chua, Alfonso Chua, Alberto Chua, Judy K. Chua Hwang, Sophia Ong, and Deanna Chua are stockholders of Beltron and TMTC in name only and thus cannot be held criminally liable.[21] The other respondents did not file counter-affidavits. Meanwhile, respondents moved to quash Search Warrant Nos. 95-684 and 95-685. The RTC partially granted their motion in its Order of 16 April 1996. Microsoft sought reconsideration but the RTC denied Microsofts motio n in its Order of 19 July 1996. Microsoft appealed to the Court of Appeals in CA-G.R. CV No. 54600. In its Decision of 29 November 2001, the Court of Appeals granted Microsofts appeal and set aside the RTC Orders of 16 April 1996 and 19 July 1996. The Court of Appeals Decision became final on 27 December 2001.

The DOJ Resolutions In the Resolution of 26 October 1999, DOJ State Prosecutor Jocelyn A. Ong (State Prosecutor Ong) recommended the dismissal of Microsofts complaint for lack of merit and insufficiency of evidence. State Prosecutor Ong also recommended the dismissal of Lotus Corporations complaint for lack of interest to prosecute and for insufficiency of evidence. Assistant Chief State Prosecutor Lualhati R. B uenafe (Assistant Chief State Prosecutor Buenafe) approved State Prosecutor Ongs recommendations. [22] The 26 October 1999 Resolution reads in part: [T]wo (2) issues have to be resolved in this case, namely: a) b) Whether or not Beltron Computer and/or its stockholders should be held liable for the offenses charged. Whether or not prima facie case exist[s] against Taiwan Machinery Display and Trade Center, Inc. (TMTC) for violation of the offense charged.

Complainant had alleged that from the time the license agreement was terminated, respondent/s is/are no longer authorized to copy/distribute/sell Microsoft products. However, respondent/s averred that the case is civil in nature, not criminal, considering that the case stemmed only out of the desire of complainant to collect from them the amount of US$135,121.32 and that the contract entered into by the parties cannot be unilaterally terminated. In the order of Honorable William Bayhon dated July 19, 1996 [denying reconsideration to the Order partially quashing the search warrants], he observed the following:

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It is further argued by counsel for respondent that the act taken by private complainant is to spite revenge agains t the respondent Beltron for the latter failed to pay the alleged monetary obligation in the amount of US$135,121.32. That respondent has some monetary obligation to complainant which is not denied by the complainant. []It appears therefore that prior to the issuance of the subject search warrants, complainant had some business transactions with the respondent [Beltron] along the same line of products. Complainant failed to reveal the true circumstances existing between the two of them as it now appears, indeed the search warrant[s] xxx [are] being used as a leverage to secure collection of the money obligation which the Court cannot allow. From said order, it can be gleaned that the [RTC] xxx, had admitted that the search warrants applied for by complainant were merely used as a leverage for the collection of the alleged monetary obligation of the respondent/s. From said order, it can be surmise (sic) that the obligations between the parties is civil in nature not criminal. Moreover, complainant had time and again harped that respondent/s is/are not authorized to sell/copy/distribute Microsoft products at the time of the execution of the search warrants. Still, this office has no power to pass upon said issue for one has then to interpret the provisions of the contract entered into by the parties, which question, should be raised in a proper civil proceeding. Accordingly, absen[t] a resolution from the proper court of (sic) whether or not the contract is still binding between the parties at the time of the execution of the search warrants, this office cannot pass upon the issue of whether respondent/s is or are liable for the offense charged. As to the second issue, we find for the respondent/s. TMTC had provided sufficient evidence such as pro-forma invoice from R.R. Donnelley; Debt Advice of the Bank of Commerce; Official Receipts from the Bureau of Customs; and Import Entry Declaration of the Bureau of Customs to prove that indeed the Microsoft software in their possession were bought from Singapore. Thus, respondent/s in this case has/have no intent to defraud the public, as provided under Article 189 of the Revised Penal Code, for they bought said Microsoft MS-DOS 6.0 from an alleged licensee of Microsoft in Singapore, with all the necessary papers. In their opinion, what they have are genuine Microsoft software, therefore no unfair competition exist. Moreover, violation of P.D. 49 does not exist, for respondent/s was/were not the manufacturers of the Microsoft software seized and were selling their products as genuine Microsoft software, considering that they bought it from a Microsoft licensee. Complainant, on the other hand, considering that it has the burden of proving that the respondent/s is/are liable for the offense charged, has not presented any evidence that the items seized namely the 59 boxes of MS-DOS 6.0 software are counterfeit. The certification issued on December 12, 1995 by Christopher Austin, Corporate Attorney of the complainant, does not disclose this fact. For the term used by Mr. Austin was that the items seized were unauthorized. The question now, is whether the products were unauthorized because TMTC has no license to sell Microsoft products, or is it unauthorized because R.R. Donnelley has no authority to sell said products here in the Philippines. Still, to determine the culpability of the respondents, complainant should present evidence that what is in the possession of the respondent/s is/are counterfeit Microsoft products. This it failed to do.[23] Microsoft sought reconsideration and prayed for an ocular inspection of the articles seized from respondents. However, in the Resolution of 3 December 1999, Assistant Chief State Prosecutor Buenafe, upon State Prosecutor Ongs recommendation, denied Microsofts motion. [24] Microsoft appealed to the Office of the DOJ Secretary. In the Resolution of 3 August 2000, DOJ Undersecretary Regis V. Puno dismissed Microsofts appeal.[25] Microsoft sought reconsideration but its motion was denied in the Resolution of 22 December 2000.[26] Hence, this petition. Microsoft contends that: I. II. THE DOJ ERRED IN RULING THAT THE LIABILITY OF RESPONDENTS WAS ONLY CIVIL IN NATURE BY VIRTUE OF THE LICENSE AGREEMENT. THE DOJ MISAPPRECIATED THE FACT THAT RESPONDENTS WERE ENGAGED IN THE ILLEGAL IMPORTATION, SALE AND DISTRIBUTION OF COUNTERFEIT SOFTWARE AS EVIDENCED BY THE ITEMS PURCHASED DURING THE TEST-BUY AND THE ITEMS SEIZED FROM RESPONDENTS PREMISES.

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III. IV.

THE DOJ MISAPPRECIATED THE LAW ON COPYRIGHT INFRINGEMENT AND UNFAIR COMPETITION. ONLY TWO OUT OF THE NINE RESPONDENTS BOTHERED TO FILE COUNTER-AFFIDAVITS; HENCE, THE CHARGES AGAINST SEVEN [RESPONDENTS] REMAIN UNCONTROVERTED.[27]

In its Comment, filed by the Solicitor General, the DOJ maintains that it did not commit grave abuse of discretion in dismiss ing Microsofts complaint.[28] For their part, respondents allege in their Comment that Microsoft is guilty of forum-shopping because its petition in CA-G.R. CV No. 54600 was filed ahead of, and has a common interest with, this petition. On the merits, respondents reiterate their claims in their motion to qua sh Search Warrant Nos. 95-684 and 95-685 that the articles seized from them were either owned by others, purchased from legitimate sources, or not produced by Microsoft. Respondents also insist that the Agreement entitled Beltron to copy and replicate or reproduce Microsoft prod ucts. On the confiscated 2,831 CD-ROMs, respondents allege that a certain corporation[29] left the CD-ROMs with them for safekeeping. Lastly, respondents claim that there is no proof that the CPU Sacriz and Samiano bought from them contained pre-installed Microsoft software because the receipt for the CPU does not indicate [s]oftware hard disk. [30] In its Reply, Microsoft counters that it is not liable for forum-shopping because its petition in CA-G.R. CV No. 54600 involved the Orders of the RTC partially quashing Search Warrant Nos. 95-684 and 95-685 while this petition concerns the DOJ Resolutions dismissing its complaint against respondents for copyright infringement and unfair competition. On the merits, Microsoft maintains that respondents should be indicted for copyright infringement and unfair competition.[31]

The Issues

The petition raises the following issues: (1) Whether Microsoft engaged in forum-shopping; and (2) Whether the DOJ acted with grave abuse of discretion in not finding probable cause to charge respondents with copyright infringement and unfair competition.

The Ruling of the Court

The petition has merit. Microsoft did not Engage in Forum-Shopping Forum-shopping takes place when a litigant files multiple suits involving the same parties, either simultaneously or successively, to secure a favorable judgment.[32] Thus, it exists where the elements of litis pendentia are present, namely: (a) identity of parties, or at least such parties who represent the same interests in both actions; (b) identity of rights asserted and relief prayed for, the relief being founded on the same facts; and (c) the identity with respect to the two preceding particulars in the two cases is such that any judgment that may be rendered in the pending case, regardless of which party is successful, would amount to res judicata in the other case.[33] Forum-shopping is an act of malpractice because it abuses court processes.[34] To check this pernicious practice, Section 5, Rule 7 of the 1997 Rules of Civil Procedure requires the principal party in an initiatory pleading to submit a certification against forum-shopping.[35] Failure to comply with this requirement is a cause for the dismissal of the case and, in case of willful forum-shopping, for the imposition of administrative sanctions. Here, Microsoft correctly contends that it is not liable for forum-shopping. What Microsoft appealed in CA-G.R. CV No. 54600 were the RTC Orders partially quashing Search Warrant Nos. 95-684 and 95-685. In the present case, Microsoft is appealing from the DOJ Resolutions dismissing its complaint against respondents for copyright infringement and unfair competition. Thus, although the parties in CA-G.R. CV No. 54600 and this petition are identical, the rights asserted and the reliefs prayed for are not such that the judgment in CA-G.R. CV No. 54600 does not amount to res judicata in the present case. This renders forum-shopping impossible here. The DOJ Acted with Grave Abuse of Discretion in not Finding Probable Cause to Charge Respondents with Copyright Infringement and Unfair Competition Generally, this Court is loath to interfere in the prosecutors discretion in determining probable cause [36] unless such discretion is shown to have been abused.[37] This case falls under the exception.

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Unlike the higher quantum of proof beyond reasonable doubt required to secure a conviction, it is the lower standard of probable cause which is applied during the preliminary investigation to determine whether the accused should be held for trial. This standard is met if the facts and circumstances incite a reasonable belief that the act or omission complained of constitutes the offense charged. As we explained in Pilapil v. Sandiganbayan:[38] The term [probable cause] does not mean actual and positive cause nor does it import absolute certainty. It is merely based on opinion and reasonable belief. Thus, a finding of probable cause does not require an inquiry into whether there is sufficient evidence to procure a conviction. It is enough that it is believed that the act or omission complained of constitutes the offense charged. Precisely, there is a trial for the reception of evidence of the prosecution in support of the charge. PD 49 and Article 189(1) Section 5[39] of PD 49 (Section 5) enumerates the rights vested exclusively on the copyright owner. Contrary to the DOJs ruling, the gravamen of copyright infringement is not merely the unauthorized manufacturing of intellectual works but rather the unauthorized performance o f any of the acts covered by Section 5. Hence, any person who performs any of the acts under Section 5 without obtaining the copyright owners prior consent renders himself civilly[40] and criminally[41] liable for copyright infringement. We held in Columbia Pictures, Inc. v. Court of Appeals:[42] Infringement of a copyright is a trespass on a private domain owned and occupied by the owner of the copyright, and, therefore, protected by law, and infringement of copyright, or piracy, which is a synonymous term in this connection, consists in the doing by any person, without the consent of the owner of the copyright, of anything the sole right to do which is conferred by statute on the owner of the copyright. (Emphasis supplied) Significantly, under Section 5(A), a copyright owner is vested with the exclusive right to copy, distribute, multiply, [and] sell his intellectual works. On the other hand, the elements of unfair competition under Article 189(1)[43] of the Revised Penal Code are: (a) That the offender gives his goods the general appearance of the goods of another manufacturer or dealer; (b) That the general appearance is shown in the (1) goods themselves, or in the (2) wrapping of their packages, or in the (3) device or words therein, or in (4) any other feature of their appearance[;] (c) That the offender offers to sell or sells those goods or gives other persons a chance or opportunity to do the same with a like purpose[; and] (d) That there is actual intent to deceive the public or defraud a competitor.[44] The element of intent to deceive may be inferred from the similarity of the goods or their appearance. [45] On the Sufficiency of Evidence to Support a Finding of Probable Cause Against Respondents In its pleadings filed with the DOJ, Microsoft invoked three clusters of evidence to support its complaint against respondents, namely: (1) the 12 CD-ROMs containing Microsoft software Sacriz and Samiano bought from respondents; (2) the CPU with pre-installed Microsoft software Sacriz and Samiano also purchased from respondents; and (3) the 2,831 CD-ROMs containing Microsoft software seized from respondents.[46] The DOJ, on the one hand, refused to pass upon the relevance of these pieces of evidence because: (1) the obligations betw een the parties is civil and not criminal considering that Microsoft merely sought the issuance of Search Warrant Nos. 95 -684 and 95-685 to pressure Beltron to pay its obligation under the Agreement, and (2) the validity of Microsofts termination of the Agreement must first be resolved by the proper court. On the other hand, the DOJ ruled that Microsoft failed to present evidence proving that what were obtained from respondents were counterfeit Microsoft products. This is grave abuse of discretion.[47] First. Being the copyright and trademark owner of Microsoft software, Microsoft acted well within its rights in filing the complaint under I.S. No. 96-193 based on the incriminating evidence obtained from respondents. Hence, it was highly irregular for the DOJ to hold, based on the RTC Order of 19 July 1996, that Microsoft sought the issuance of Search Warrant Nos. 95-684 and 95-685, and by inference, the filing of the complaint under I.S. No. 96-193, merely to pressure Beltron to pay its overdue royalties to Microsoft. Significantly, in its Decision in CA-G.R. CV No. 54600 dated 29 November 2001, the Court of Appeals set aside the RTC Order of 19 July 1996. Respondents no longer contested that ruling which became final on 27 December 2001. Second. There is no basis for the DOJ to rule that Microsoft must await a prior resolution from the proper court of (sic) whether or not the [Agreement] is still binding between the parties. Beltron has not filed any suit to question Microsofts termination of the Agreement. Microsoft can neither be expected nor compelled to wait until Beltron decides to sue before Microsoft can seek remedies for violation of its intellectual property rights.

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Furthermore, some of the counterfeit CD-ROMs bought from respondents were installer CD-ROMs containing Microsoft software only or both Microsoft and non-Microsoft software. These articles are counterfeit per se because Microsoft does not (and could not have authorized anyone to) produce such CD-ROMs. The copying of the genuine Microsoft software to produce these fake CD-ROMs and their distribution are illegal even if the copier or distributor is a Microsoft licensee. As far as these installer CD-ROMs are concerned, the Agreement (and the alleged question on the validity of its termination) is immaterial to the determination of respondents liability for copyright infringement and unfa ir competition. Lastly, Section 10(b)[48] of the Agreement provides that Microsofts rights and remedies under the contract are not xxx exclusive and are in addition to any other rights and remedies provided by law or [the] Agreement. Thus, even if the Agreement still subsists, Microsoft is not precluded from seeking remedies under PD 49 and Article 189(1) of the Revised Penal Code to vindicate its rights. Third. The Court finds that the 12 CD-ROMs (installer and non-installer) and the CPU with pre-installed Microsoft software Sacriz and Samiano bought from respondents and the 2,831 Microsoft CD-ROMs seized from respondents suffice to support a finding of probable cause to indict respondents for copyright infringement under Section 5(A) in relation to Section 29 of PD 49 for unauthorized copying and selling of protected intellectual works. The installer CD-ROMs with Microsoft software, to repeat, are counterfeit per se. On the other hand, the illegality of the noninstaller CD-ROMs purchased from respondents and of the Microsoft software pre-installed in the CPU is shown by the absence of the standard features accompanying authentic Microsoft products, namely, the Microsoft end-user license agreements, users manuals, registration cards or certificates of authenticity. On the 2,831 Microsoft CD-ROMs[49] seized from respondents, respondent Beltron, the only respondent who was party to the Agreement, could not have reproduced them under the Agreement as the Solicitor General [50] and respondents contend. Beltrons rights[51] under the Agreement were limited to: (1) the reproduc[tion] and install[ation of] no more than one copy of [Microsoft] software on each Customer System hard disk or Read Only Memory (ROM); and (2) the distribut[ion] xxx and licens[ing of] copies of the [Microsoft] Product [as reproduced above] and/or acquired from Authorized Replicator or Authorized Distributor) in object code form to end users. The Agreement defines an authorized replicator as a third party approved by [Microsoft] which may reproduce and manufacture [Micros oft] Product[s] for [Beltron] xxx.[52] An authorized distributor, on the other hand, is a third party approved by [Microsoft] from which [Beltron] may purchase MED[53] Product.[54] Being a mere reproducer/installer of one Microsoft software copy on each customers hard disk or ROM, Beltron could only have acquired the hundreds of Microsoft CD-ROMs found in respondents possession from Microsoft distributors or replicators. However, respondents makes no such claim. What respondents contend is that these CD-ROMs were left to them for safekeeping. But neither is this claim tenable for lack of substantiation. Indeed, respondents Keh and Chua, the only respondents who filed counter-affidavits, did not make this claim in the DOJ. These circumstances give rise to the reasonable inference that respondents mass-produced the CD-ROMs in question without securing Microsofts prior authorization. The counterfeit non-installer CD-ROMs Sacriz and Samiano bought from respondents also suffice to support a finding of probable cause to indict respondents for unfair competition under Article 189(1) of the Revised Penal Code for passing off Microsoft products. From the pictures of the CD-ROMs packaging,[55] one cannot distinguish them from the packaging of CD-ROMs containing genuine Microsoft software. Such replication, coupled with the similarity of content of these fake CD-ROMs and the CD-ROMs with genuine Microsoft software, implies intent to deceive. Respondents contention that the 12 CD-ROMs Sacriz and Samiano purchased cannot be traced to them because the receipt for these articles does not indicate its source is unavailing. The receipt in question should be taken together with Microsofts claim that Sacr iz and Samiano bought the CD-ROMs from respondents.[56] Together, these considerations point to respondents as the vendor of the counterfeit CD-ROMs. Respondents do not give any reason why the Court should not give credence to Microsofts claim. For the same reason, the fact that the receipt for the CPU does not indicate [s]oftware hard disk does not mean that the CPU had no pre -installed Microsoft software. Respondents Keh and Chua admit in their counter-affidavit that respondents are the source of the pre-installed MS-DOS software. WHEREFORE, we GRANT the petition. We SET ASIDE the Resolutions dated 26 October 1999, 3 December 1999, 3 August 2000, and 22 December 2000 of the Department of Justice. SO ORDERED. Davide, Jr., C.J., (Chairman), Quisumbing, Ynares-Santiago, and Azcuna, JJ., concur. G.R. No. 175769-70 January 19, 2009

ABS-CBN BROADCASTING CORPORATION, Petitioners, vs. PHILIPPINE MULTI-MEDIA SYSTEM, INC., CESAR G. REYES, FRANCIS CHUA (ANG BIAO), MANUEL F. ABELLADA, RAUL B. DE MESA, AND ALOYSIUS M. COLAYCO, Respondents. DECISION

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YNARES-SANTIAGO, J.: This petition for review on certiorari1 assails the July 12, 2006 Decision2 of the Court of Appeals in CA-G.R. SP Nos. 88092 and 90762, which affirmed the December 20, 2004 Decision of the Director-General of the Intellectual Property Office (IPO) in Appeal No. 10-2004-0002. Also assailed is the December 11, 2006 Resolution3 denying the motion for reconsideration. Petitioner ABS-CBN Broadcasting Corporation (ABS-CBN) is licensed under the laws of the Republic of the Philippines to engage in television and radio broadcasting.4 It broadcasts television programs by wireless means to Metro Manila and nearby provinces, and by satellite to provincial stations through Channel 2 on Very High Frequency (VHF) and Channel 23 on Ultra High Frequency (UHF). The programs aired over Channels 2 and 23 are either produced by ABS-CBN or purchased from or licensed by other producers. ABS-CBN also owns regional television stations which pattern their programming in accordance with perceived demands of the region. Thus, television programs shown in Metro Manila and nearby provinces are not necessarily shown in other provinces. Respondent Philippine Multi-Media System, Inc. (PMSI) is the operator of Dream Broadcasting System. It delivers digital direct-to-home (DTH) television via satellite to its subscribers all over the Philippines. Herein individual respondents, Cesar G. Reyes, Francis Chua, Manuel F. Abellada, Raul B. De Mesa, and Aloysius M. Colayco, are members of PMSIs Board of Directors. PMSI was granted a legislative franchise under Republic Act No. 86305 on May 7, 1998 and was given a Provisional Authority by the National Telecommunications Commission (NTC) on February 1, 2000 to install, operate and maintain a nationwide DTH satellite service. When it commenced operations, it offered as part of its program line-up ABS-CBN Channels 2 and 23, NBN, Channel 4, ABC Channel 5, GMA Channel 7, RPN Channel 9, and IBC Channel 13, together with other paid premium program channels. However, on April 25, 2001,6 ABS-CBN demanded for PMSI to cease and desist from rebroadcasting Channels 2 and 23. On April 27, 2001, 7 PMSI replied that the rebroadcasting was in accordance with the authority granted it by NTC and its obligation under NTC Memorandum Circular No. 408-88,8 Section 6.2 of which requires all cable television system operators operating in a community within Grade A or B contours to carry the television signals of the authorized television broadcast stations.9 Thereafter, negotiations ensued between the parties in an effort to reach a settlement; however, the negotiations were terminated on April 4, 2002 by ABS-CBN allegedly due to PMSIs inability to ensure the prevention of illegal retransmission and further rebroadcast of its signa ls, as well as the adverse effect of the rebroadcasts on the business operations of its regional television stations.10 On May 13, 2002, ABS-CBN filed with the IPO a complaint for Violation of Laws Involving Property Rights, with Prayer for the Issuance of a Temporary Restraining Order and/or Writ of Preliminary Injunction, which was docketed as IPV No. 10 -2002-0004. It alleged that PMSIs unauthorized rebroadcasting of Channels 2 and 23 infringed on its broadcasting rights and copyright. On July 2, 2002, the Bureau of Legal Affairs (BLA) of the IPO granted ABS-CBNs application for a temporary restraining order. On July 12, 2002, PMSI suspended its retransmission of Channels 2 and 23 and likewise filed a petition for certiorari with the Court of Appeals, which was docketed as CA-G.R. SP No. 71597. Subsequently, PMSI filed with the BLA a Manifestation reiterating that it is subject to the must-carry rule under Memorandum Circular No. 04-0888. It also submitted a letter dated December 20, 2002 of then NTC Commissioner Armi Jane R. Borje to PMSI stating as follows: This refers to your letter dated December 16, 2002 requesting for regulatory guidance from this Commission in connection with the application and coverage of NTC Memorandum Circular No. 4-08-88, particularly Section 6 thereof, on mandatory carriage of television broadcast signals, to the direct-to-home (DTH) pay television services of Philippine Multi-Media System, Inc. (PMSI). Preliminarily, both DTH pay television and cable television services are broadcast services, the only difference being the medium of delivering such services (i.e. the former by satellite and the latter by cable). Both can carry broadcast signals to the remote areas, thus enriching the lives of the residents thereof through the dissemination of social, economic, educational information and cultural programs. The DTH pay television services of PMSI is equipped to provide nationwide DTH satellite services. Concededly, PMSIs DTH pay television services covers very much wider areas in terms of carriage of broadcast signals, including areas not reachable by cable television services thereby providing a better medium of dissemination of information to the public. In view of the foregoing and the spirit and intent of NTC memorandum Circular No. 4-08-88, particularly section 6 thereof, on mandatory carriage of television broadcast signals, DTH pay television services should be deemed covered by such NTC Memorandum Circular.

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For your guidance. (Emphasis added)11 On August 26, 2003, PMSI filed another Manifestation with the BLA that it received a letter dated July 24, 2003 from the NTC enjoining strict and immediate compliance with the must-carry rule under Memorandum Circular No. 04-08-88, to wit: Dear Mr. Abellada: Last July 22, 2003, the National Telecommunications Commission (NTC) received a letter dated July 17, 2003 from President/COO Rene Q. Bello of the International Broadcasting Corporation (IBC-Channel 13) complaining that your company, Dream Broadcasting System, Inc., has cut-off, without any notice or explanation whatsoever, to air the programs of IBC-13, a free-to-air television, to the detriment of the public. We were told that, until now, this has been going on. Please be advised that as a direct broadcast satellite operator, operating a direct-to-home (DTH) broadcasting system, with a provisional authority (PA) from the NTC, your company, along with cable television operators, are mandated to strictly comply with the existing policy of NTC on mandatory carriage of television broadcast signals as provided under Memorandum Circular No. 04-08-88, also known as the Revised Rules and Regulations Governing Cable Television System in the Philippines. This mandatory coverage provision under Section 6.2 of said Memorandum Circular, requires all cable television system operators, operating in a community within the Grade A or B contours to must -carry the television signals of the authorized television broadcast stations, one of which is IBC-13. Said directive equally applies to your company as the circular was issued to give consumers and the public a wider access to more sources of news, information, entertainment and other programs/contents. This Commission, as the governing agency vested by laws with the jurisdiction, supervision and control over all public services, which includes direct broadcast satellite operators, and taking into consideration the paramount interest of the public in general, hereby directs you to immediately restore the signal of IBC-13 in your network programs, pursuant to existing circulars and regulations of the Commission. For strict compliance. (Emphasis added)12 Meanwhile, on October 10, 2003, the NTC issued Memorandum Circular No. 10-10-2003, entitled Implementing Rules and Regulations Governing Community Antenna/Cable Television (CATV) and Direct Broadcast Satellite (DBS) Services to Promote Competition in the Sector. Article 6, Section 8 thereof states: As a general rule, the reception, distribution and/or transmission by any CATV/DBS operator of any television signals without any agreement with or authorization from program/content providers are prohibited. On whether Memorandum Circular No. 10-10-2003 amended Memorandum Circular No. 04-08-88, the NTC explained to PMSI in a letter dated November 3, 2003 that: To address your query on whether or not the provisions of MC 10-10-2003 would have the effect of amending the provisions of MC 4-08-88 on mandatory carriage of television signals, the answer is in the negative. xxxx The Commission maintains that, MC 4-08-88 remains valid, subsisting and enforceable. Please be advised, therefore, that as duly licensed direct-to-home satellite television service provider authorized by this Commission, your company continues to be bound by the guidelines provided for under MC 04-08-88, specifically your obligation under its mandatory carriage provisions, in addition to your obligations under MC 10-10-2003. (Emphasis added) Please be guided accordingly.13 On December 22, 2003, the BLA rendered a decision14 finding that PMSI infringed the broadcasting rights and copyright of ABS-CBN and ordering it to permanently cease and desist from rebroadcasting Channels 2 and 23.

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On February 6, 2004, PMSI filed an appeal with the Office of the Director-General of the IPO which was docketed as Appeal No. 10-2004-0002. On December 23, 2004, it also filed with the Court of Appeals a Motion to Withdraw Pe tition; Alternatively, Memorandum of the Petition for Certiorari in CA-G.R. SP No. 71597, which was granted in a resolution dated February 17, 2005. On December 20, 2004, the Director-General of the IPO rendered a decision15 in favor of PMSI, the dispositive portion of which states: WHEREFORE, premises considered, the instant appeal is hereby GRANTED. Accordingly, Decision No. 2003-01 dated 22 December 2003 of the Director of Bureau of Legal Affairs is hereby REVERSED and SET ASIDE. Let a copy of this Decision be furnished the Director of the Bureau of Legal Affairs for appropriate action, and the records be returned to her for proper disposition. The Documentation, Information and Technology Transfer Bureau is also given a copy for library and reference purposes. SO ORDERED.16 Thus, ABS-CBN filed a petition for review with prayer for issuance of a temporary restraining order and writ of preliminary injunction with the Court of Appeals, which was docketed as CA-G.R. SP No. 88092. On July 18, 2005, the Court of Appeals issued a temporary restraining order. Thereafter, ABS-CBN filed a petition for contempt against PMSI for continuing to rebroadcast Channels 2 and 23 despite the restraining order. The case was docketed as CA- G.R. SP No. 90762. On November 14, 2005, the Court of Appeals ordered the consolidation of CA-G.R. SP Nos. 88092 and 90762. In the assailed Decision dated July 12, 2006, the Court of Appeals sustained the findings of the Director-General of the IPO and dismissed both petitions filed by ABS-CBN.17 ABS-CBNs motion for reconsideration was denied, hence, this petition. ABS-CBN contends that PMSIs unauthorized rebroadcasting of Channels 2 and 23 is an infringement of its broadcasting rights and c opyright under the Intellectual Property Code (IP Code);18that Memorandum Circular No. 04-08-88 excludes DTH satellite television operators; that the Court of Appeals interpretation of the must-carry rule violates Section 9 of Article III19 of the Constitution because it allows the taking of property for public use without payment of just compensation; that the Court of Appeals erred in dismissing the petition for contempt docketed as CA-G.R. SP No. 90762 without requiring respondents to file comment. Respondents, on the other hand, argue that PMSIs rebroadcasting of Channels 2 and 23 is sanctioned by Memorandum Circular No. 04-08-88; that the must-carry rule under the Memorandum Circular is a valid exercise of police power; and that the Court of Appeals correctly dismissed CA-G.R. SP No. 90762 since it found no need to exercise its power of contempt. After a careful review of the facts and records of this case, we affirm the findings of the Director-General of the IPO and the Court of Appeals. There is no merit in ABS-CBNs contention that PMSI violated its broadcasters rights under Section 211 of the IP Code which provides in part: Chapter XIV BROADCASTING ORGANIZATIONS Sec. 211. Scope of Right. - Subject to the provisions of Section 212, broadcasting organizations shall enjoy the exclusive right to carry out, authorize or prevent any of the following acts: 211.1. The rebroadcasting of their broadcasts; xxxx Neither is PMSI guilty of infringement of ABS-CBNs copyright under Section 177 of the IP Code which states that copyright or economic rights shall consist of the exclusive right to carry out, authorize or prevent the public performance of the work (Section 177.6), and other communication to the public of the work (Section 177.7).20

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Section 202.7 of the IP Code defines broadcasting as the transmission by wireless means for the public reception of sounds or of images or of representations thereof; such transmission by satellite is also broadcasting where the means for decrypting are pr ovided to the public by the broadcasting organization or with its consent. On the other hand, rebroadcasting as defined in Article 3(g) of the International Convention for the Protection of Performers, Producers of Phonograms and Broadcasting Organizations, otherwise known as the 1961 Rome Convention, of which the Republic of the Philippines is a signatory, 21 is the simultaneous broadcasting by one broadcasting organization of the broadcast of another broadcasting organization. The Director-General of the IPO correctly found that PMSI is not engaged in rebroadcasting and thus cannot be considered to have infringed ABSCBNs broadcasting rights and copyright, thus: That the Appellants [herein respondent PMSI] subscribers are able to view Appellees [herein petitioner ABS -CBN] programs (Channels 2 and 23) at the same time that the latter is broadcasting the same is undisputed. The question however is, would the Appellant in doing so be considered engaged in broadcasting. Section 202.7 of the IP Code states that broadcasting means the transmission by wireless means for the public reception of sounds or of images or of representations thereof; such trans mission by satellite is also broadcasting where the means for decrypting are provided to the public by the broadcasting organization or with its consent. Section 202.7 of the IP Code, thus, provides two instances wherein there is broadcasting, to wit: 1. The transmission by wireless means for the public reception of sounds or of images or of representations thereof; and 2. The transmission by satellite for the public reception of sounds or of images or of representations thereof where the means for decrypting are provided to the public by the broadcasting organization or with its consent. It is under the second category that Appellants DTH satellite television service must be examined since it is satellite -based. The elements of such category are as follows: 1. There is transmission of sounds or images or of representations thereof; 2. The transmission is through satellite; 3. The transmission is for public reception; and 4. The means for decrypting are provided to the public by the broadcasting organization or with its consent. It is only the presence of all the above elements can a determination that the DTH is broadcasting and consequently, rebroadc asting Appellees signals in violation of Sections 211 and 177 of the IP Code, may be arrived at. Accordingly, this Office is of the view that the transmission contemplated under Section 202.7 of the IP Code presupposes that the origin of the signals is the broadcaster. Hence, a program that is broadcasted is attributed to the broadcaster. In the same manner, the rebroadcasted program is attributed to the rebroadcaster. In the case at hand, Appellant is not the origin nor does it claim to be the origin of the programs broadcasted by the Appellee. Appellant did not make and transmit on its own but merely carried the existing signals of the Appellee. When Appellants subscribers view Appellees programs in Channels 2 and 23, they know that the origin thereof was the Appellee. Aptly, it is imperative to discern the nature of broadcasting. When a broadcaster transmits, the signals are scattered or dispersed in the air. Anybody may pick-up these signals. There is no restriction as to its number, type or class of recipients. To receive the signals, one is not required to subscribe or to pay any fee. One only has to have a receiver, and in case of television signals, a television set, and to tune-in to the right channel/frequency. The definition of broadcasting, wherein it is required that the transmission is wireless, all the more supports this discussion. Apparently, the undiscriminating dispersal of signals in the air is possible only through wireless means. The use of wire in transmitting signals, such as cable television, limits the recipients to those who are connected. Unlike wireless transmissions, in wire-based transmissions, it is not enough that one wants to be connected and possesses the equipment. The service provider, such as cable television companies may choose its subscribers. The only limitation to such dispersal of signals in the air is the technical capacity of the transmitters and other equipment employed by the broadcaster. While the broadcaster may use a less powerful transmitter to limit its coverage, this is merely a business strategy or decision and not an inherent limitation when transmission is through cable.

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Accordingly, the nature of broadcasting is to scatter the signals in its widest area of coverage as possible. On this score, it may be said that making public means that accessibility is undiscriminating as long as it [is] within the range of the transmitter and equipment of the broadcaster. That the medium through which the Appellant carries the Appellees signal, that is via satellite, does not diminish the fact that it o perates and functions as a cable television. It remains that the Appellants transmission of signals via its DTH satellite television service cannot be considered within the purview of broadcasting. x x x xxxx This Office also finds no evidence on record showing that the Appellant has provided decrypting means to the public indiscriminately. Considering the nature of this case, which is punitive in fact, the burden of proving the existence of the elements constituting the acts punishable rests on the shoulder of the complainant. Accordingly, this Office finds that there is no reb roadcasting on the part of the Appellant of the Appellees programs on Channels 2 and 23, as defined under the Rome Convention.22 Under the Rome Convention, rebroadcasting is the simultaneous broadcasting by one broadcasting organization of the broadcast of another broadcasting organization. The Working Paper23 prepared by the Secretariat of the Standing Committee on Copyright and Related Rights defines broadcasting organizations as entities that take the financial and editorial responsibility for the selection and arrangemen t of, and investment in, the transmitted content.24 Evidently, PMSI would not qualify as a broadcasting organization because it does not have the aforementioned responsibilities imposed upon broadcasting organizations, such as ABS-CBN. ABS-CBN creates and transmits its own signals; PMSI merely carries such signals which the viewers receive in its unaltered form. PMSI does not produce, select, or determine the programs to be shown in Channels 2 and 23. Likewise, it does not pass itself off as the origin or author of such programs. Insofar as Channels 2 and 23 are concerned, PMSI merely retransmits the same in accordance with Memorandum Circular 04-08-88. With regard to its premium channels, it buys the channels from content providers and transmits on an as-is basis to its viewers. Clearly, PMSI does not perform the functions of a broadcasting organization; thus, it cannot be said that it is engaged in rebroadcasting Channels 2 and 23. The Director-General of the IPO and the Court of Appeals also correctly found that PMSIs services are similar to a cable television syste m because the services it renders fall under cable retransmission, as described in the Working Paper, to wit: (G) Cable Retransmission 47. When a radio or television program is being broadcast, it can be retransmitted to new audiences by means of cable or wire. In the early days of cable television, it was mainly used to improve signal reception, particularly in so-called shadow zones, or to distribute the signals in large buildings or building complexes. With improvements in technology, cable operators now often receive signals from satellites before retransmitting them in an unaltered form to their subscribers through cable. 48. In principle, cable retransmission can be either simultaneous with the broadcast over-the-air or delayed (deferred transmission) on the basis of a fixation or a reproduction of a fixation. Furthermore, they might be unaltered or altered, for example through replacement of commercials, etc. In general, however, the term retransmission seems to be reserved for such transmissions which are both simultaneous and unalt ered. 49. The Rome Convention does not grant rights against unauthorized cable retransmission. Without such a right, cable operators can retransmit both domestic and foreign over the air broadcasts simultaneously to their subscribers without permission from the broadcasting organizations or other rightholders and without obligation to pay remuneration.25 (Emphasis added) Thus, while the Rome Convention gives broadcasting organizations the right to authorize or prohibit the rebroadcasting of its broadcast, however, this protection does not extend to cable retransmission. The retransmission of ABS-CBNs signals by PMSI which functions essentially as a cable television does not therefore constitute rebroadcasting in violation of the formers intellectu al property rights under the IP Code. It must be emphasized that the law on copyright is not absolute. The IP Code provides that: Sec. 184. Limitations on Copyright. 184.1. Notwithstanding the provisions of Chapter V, the following acts shall not constitute infringement of copyright: xxxx

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(h) The use made of a work by or under the direction or control of the Government, by the National Library or by educational, scientific or professional institutions where such use is in the public interest and is compatible with fair use; The carriage of ABS-CBNs signals by virtue of the must-carry rule in Memorandum Circular No. 04-08-88 is under the direction and control of the government though the NTC which is vested with exclusive jurisdiction to supervise, regulate and control telecommunications and broadcast services/facilities in the Philippines.26 The imposition of the must-carry rule is within the NTCs power to promulgate rules and regulations, as public safety and interest may require, to encourage a larger and more effective use of communications, radio and television broadcasting facilities, and to maintain effective competition among private entities in these activities whenever the Commission finds it reasonably feasible. 27 As correctly observed by the Director-General of the IPO: Accordingly, the Must-Carry Rule under NTC Circular No. 4-08-88 falls under the foregoing category of limitations on copyright. This Office agrees with the Appellant [herein respondent PMSI] that the Must -Carry Rule is in consonance with the principles and objectives underlying Executive Order No. 436,28 to wit: The Filipino people must be given wider access to more sources of news, information, education, sports event and entertainment programs other than those provided for by mass media and afforded television programs to attain a well informed, well-versed and culturally refined citizenry and enhance their socio-economic growth: WHEREAS, cable television (CATV) systems could support or supplement the services provided by television broadcast facilities, local and overseas, as the national information highway to the countryside. 29 The Court of Appeals likewise correctly observed that: [T]he very intent and spirit of the NTC Circular will prevent a situation whereby station owners and a few networks would have unfettered power to make time available only to the highest bidders, to communicate only their own views on public issues, people, and to permit on the air only those with whom they agreed contrary to the state policy that the (franchise) grantee like the petitioner, private respondent and other TV station owners, shall provide at all times sound and balanced programming and assist in the functions of public information and education. This is for the first time that we have a structure that works to accomplish explicit state policy goals. 30 Indeed, intellectual property protection is merely a means towards the end of making society benefit from the creation of its men and women of talent and genius. This is the essence of intellectual property laws, and it explains why certain products of ingenuity that are concealed from the public are outside the pale of protection afforded by the law. It also explains why the author or the creator enjoys no more rights than are consistent with public welfare.31 Further, as correctly observed by the Court of Appeals, the must-carry rule as well as the legislative franchises granted to both ABS-CBN and PMSI are in consonance with state policies enshrined in the Constitution, specifically Sections 9, 32 17,33 and 2434 of Article II on the Declaration of Principles and State Policies.35 ABS-CBN was granted a legislative franchise under Republic Act No. 7966, Section 1 of which authorizes it to construct , operate and maintain, for commercial purposes and in the public interest, television and radio broadcasting in and throughout the Philippines x x x. S ection 4 thereof mandates that it shall provide adequate public service time to enable the government, through the said broadcasting stations, to reach the population on important public issues; provide at all times sound and balanced programming; promote public participation such as in community programming; assist in the functions of public information and education x x x. PMSI was likewise granted a legislative franchise under Republic Act No. 8630, Section 4 of which similarly states that it s hall provide adequate public service time to enable the government, through the said broadcasting stations, to reach the population on important public issues; provide at all times sound and balanced programming; promote public participation such as in community programming; assist in the functions of public information and education x x x. Section 5, paragraph 2 of the same law provides that the radio spectrum is a finite resource that is a part of the national patrimony and the use thereof is a privilege conferred upon the grantee by the State and may be withdrawn anytime, a fter due process. In Telecom. & Broadcast Attys. of the Phils., Inc. v. COMELEC,36 the Court held that a franchise is a mere privilege which may be reasonably burdened with some form of public service. Thus: All broadcasting, whether by radio or by television stations, is licensed by the government. Airwave frequencies have to be allocated as there are more individuals who want to broadcast than there are frequencies to assign. A franchise is thus a privilege subject, among other things, to amendment by Congress in accordance with the constitutional provision that any such franchise or right granted . . . shall b e subject to amendment, alteration or repeal by the Congress when the common good so requires.

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xxxx Indeed, provisions for COMELEC Time have been made by amendment of the franchises of radio and television broadcast stations and, until the present case was brought, such provisions had not been thought of as taking property without just compensation. Art. XII, 11 of the Constitution authorizes the amendment of franchises for the common good. What better measure can be conceived for the common good than o ne for free air time for the benefit not only of candidates but even more of the public, particularly the voters, so that they will be fully informed of the issues in an election? [I]t is the right of the viewers and listeners, not the right of the broadcasters, which is paramount. Nor indeed can there be any constitutional objection to the requirement that broadcast stations give free air time. Even in the United States, there are responsible scholars who believe that government controls on broadcast media can constitutionally be instituted to ensure diversity of views and attention to public affairs to further the system of free expression. For this purpose, broadcast stations may be required to give free air time to candidates in an election. Thus, Professor Cass R. Sunstein of the University of Chicago Law School, in urging reforms in regulations affecting the broadcast industry, writes: xxxx In truth, radio and television broadcasting companies, which are given franchises, do not own the airwaves and frequencies through which they transmit broadcast signals and images. They are merely given the temporary privilege of using them. Since a franchise is a mere privilege, the exercise of the privilege may reasonably be burdened with the performance by the grantee of some form of public service. x x x37 There is likewise no merit to ABS-CBNs claim that PMSIs carriage of its signals is for a commercial purpose; that its being the countrys top broadcasting company, the availability of its signals allegedly enhances PMSIs attractiveness to potential customers;38 or that the unauthorized carriage of its signals by PMSI has created competition between its Metro Manila and regional stations. ABS-CBN presented no substantial evidence to prove that PMSI carried its signals for profit; or that such carriage adversely affected the business operations of its regional stations. Except for the testimonies of its witnesses,[39] no studies, statistical data or information have been submitted in evidence. Administrative charges cannot be based on mere speculation or conjecture. The complainant has the burden of proving by substantial evidence the allegations in the complaint.40 Mere allegation is not evidence, and is not equivalent to proof. 41 Anyone in the country who owns a television set and antenna can receive ABS-CBNs signals for free. Other broadcasting organizations with free-toair signals such as GMA-7, RPN-9, ABC-5, and IBC-13 can likewise be accessed for free. No payment is required to view the said channels42 because these broadcasting networks do not generate revenue from subscription from their viewers but from airtime revenue from contracts with commercial advertisers and producers, as well as from direct sales. In contrast, cable and DTH television earn revenues from viewer subscription. In the case of PMSI, it offers its customers premium paid channels from content providers like Star Movies, Star World, Jack TV, and AXN, among others, thus allowing its customers to go beyond the limits of Free TV and Cable TV.43 It does not advertise itself as a local channel carrier because these local channels can be viewed with or without DTH television. Relevantly, PMSIs carriage of Channels 2 and 23 is material in arriving at the ratings and audience share of ABS -CBN and its programs. These ratings help commercial advertisers and producers decide whether to buy airtime from the network. Thus, the must-carry rule is actually advantageous to the broadcasting networks because it provides them with increased viewership which attracts commercial advertisers and producers. On the other hand, the carriage of free-to-air signals imposes a burden to cable and DTH television providers such as PMSI. PMSI uses none of ABSCBNs resources or equipment and carries the signals and shoulders t he costs without any recourse of charging.44 Moreover, such carriage of signals takes up channel space which can otherwise be utilized for other premium paid channels. There is no merit to ABS-CBNs argument that PMSIs carriage of Channels 2 and 23 resulted in competition between its Metro Manila and regional stations. ABS-CBN is free to decide to pattern its regional programming in accordance with perceived demands of the region; however, it cannot impose this kind of programming on the regional viewers who are also entitled to the free-to-air channels. It must be emphasized that, as a national broadcasting organization, one of ABS-CBNs responsibilities is to scatter its signals to the widest area of coverage as possible. That it should limit its signal reach for the sole purpose of gaining profit for its regional stations undermines public interest and deprives the viewers of their right to access to information. Indeed, television is a business; however, the welfare of the people must not be sacrificed in the pursuit of profit. The right of the viewers and listeners to the most diverse choice of programs available is paramount. 45 The Director-General correctly observed, thus:

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The Must-Carry Rule favors both broadcasting organizations and the public. It prevents cable television companies from excluding broa dcasting organization especially in those places not reached by signal. Also, the rule prevents cable television companies from depriving viewers in far-flung areas the enjoyment of programs available to city viewers. In fact, this Office finds the rule more burdensome on the part of the cable television companies. The latter carries the television signals and shoulders the costs without any recourse of charging. On the other hand, the signals that are carried by cable television companies are dispersed and scattered by the television stations and anybody with a television set is free to pick them up. With its enormous resources and vaunted technological capabilities, Appellees [herein petitioner ABS -CBN] broadcast signals can reach almost every corner of the archipelago. That in spite of such capacity, it chooses to maintain regional stations, is a business decision. That the Must -Carry Rule adversely affects the profitability of maintaining such regional stations since there will be competition between them and its Metro Manila station is speculative and an attempt to extrapolate the effects of the rule. As discussed above, Appellants DTH satellite t elevision services is of limited subscription. There was not even a showing on part of the Appellee the number of A ppellants subscribers in one region as compared to non subscribing television owners. In any event, if this Office is to engage in conjecture, such competition between the regional stations and the Metro Manila station will benefit the public as such comp etition will most likely result in the production of better television programs. 46 All told, we find that the Court of Appeals correctly upheld the decision of the IPO Director-General that PMSI did not infringe on ABS-CBNs intellectual property rights under the IP Code. The findings of facts of administrative bodies charged with their specific field of expertise, are afforded great weight by the courts, and in the absence of substantial showing that such findings are made from an erroneous estimation of the evidence presented, they are conclusive, and in the interest of stability of the governmental structure, should not be disturbed.47 Moreover, the factual findings of the Court of Appeals are conclusive on the parties and are not reviewable by the Supreme Court. They carry even more weight when the Court of Appeals affirms the factual findings of a lower fact-finding body,48 as in the instant case. There is likewise no merit to ABS-CBNs contention that the Memorandum Circular excludes from its coverage DTH television services such as those provided by PMSI. Section 6.2 of the Memorandum Circular requires all cable television system operators operating in a community within Grade A or B contours to carry the television signals of the authorized television broadcast stations.49 The rationale behind its issuance can be found in the whereas clauses which state: Whereas, Cable Television Systems or Community Antenna Television (CATV) have shown their ability to offer additional programming and to carry much improved broadcast signals in the remote areas, thereby enriching the lives of the rest of the population through the dissemination of social, economic, educational information and cultural programs; Whereas, the national government supports the promotes the orderly growth of the Cable Television industry within the framework of a regulated fee enterprise, which is a hallmark of a democratic society; Whereas, public interest so requires that monopolies in commercial mass media shall be regulated or prohibited, hence, to achieve the same, the cable TV industry is made part of the broadcast media; Whereas, pursuant to Act 3846 as amended and Executive Order 205 granting the National Telecommunications Commission the authority to set down rules and regulations in order to protect the public and promote the general welfare, the National Telecommunications Commission hereby promulgates the following rules and regulations on Cable Television Systems; The policy of the Memorandum Circular is to carry improved signals in remote areas for the good of the general public and to promote dissemination of information. In line with this policy, it is clear that DTH television should be deemed covered by the Memorandum Circular. Notwithstanding the different technologies employed, both DTH and cable television have the ability to carry improved signals and promote dissemination of information because they operate and function in the same way. In its December 20, 2002 letter,50 the NTC explained that both DTH and cable television services are of a similar nature, the only difference being the medium of delivering such services. They can carry broadcast signals to the remote areas and possess the capability to enrich the lives of the residents thereof through the dissemination of social, economic, educational information and cultural programs. Consequently, while the Memorandum Circular refers to cable television, it should be understood as to include DTH television which provides essentially the same services. In Eastern Telecommunications Philippines, Inc. v. International Communication Corporation,51 we held: The NTC, being the government agency entrusted with the regulation of activities coming under its special and technical forte, and possessing the necessary rule-making power to implement its objectives, is in the best position to interpret its own rules, regulations and guidelines. The Court has consistently yielded and accorded great respect to the interpretation by administrative agencies of their own rules unless there is an error of law, abuse of power, lack of jurisdiction or grave abuse of discretion clearly conflicting with the letter and spirit of the law. 52

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With regard to the issue of the constitutionality of the must-carry rule, the Court finds that its resolution is not necessary in the disposition of the instant case. One of the essential requisites for a successful judicial inquiry into constitutional questions is that the resolution of the constitutional question must be necessary in deciding the case.53 In Spouses Mirasol v. Court of Appeals,54 we held: As a rule, the courts will not resolve the constitutionality of a law, if the controversy can be settled on other grounds. The policy of the courts is to avoid ruling on constitutional questions and to presume that the acts of the political departments are valid, absent a clear and unmistakable showing to the contrary. To doubt is to sustain. This presumption is based on the doctrine of separation of powers. This means that the measure had first been carefully studied by the legislative and executive departments and found to be in accord with the Constitution before it was finally enacted and approved.55 The instant case was instituted for violation of the IP Code and infringement of ABS-CBNs broadcasting rights and copyright, which can be resolved without going into the constitutionality of Memorandum Circular No. 04-08-88. As held by the Court of Appeals, the only relevance of the circular in this case is whether or not compliance therewith should be considered manifestation of lack of intent to commit infringement, and if it is, whether such lack of intent is a valid defense against the complaint of petitioner. 56 The records show that petitioner assailed the constitutionality of Memorandum Circular No. 04-08-88 by way of a collateral attack before the Court of Appeals. In Philippine National Bank v. Palma,57 we ruled that for reasons of public policy, the constitutionality of a law cannot be collaterally attacked. A law is deemed valid unless declared null and void by a competent court; more so when the issue has not been duly pleaded in the trial court.58 As a general rule, the question of constitutionality must be raised at the earliest opportunity so that if not raised in the pleadings, ordinarily it may not be raised in the trial, and if not raised in the trial court, it will not be considered on appeal. 59 In Philippine Veterans Bank v. Court of Appeals,60 we held: We decline to rule on the issue of constitutionality as all the requisites for the exercise of judicial review are not present herein. Specifically, the question of constitutionality will not be passed upon by the Court unless, at the first opportunity, it is properly raised and presented in an appropriate case, adequately argued, and is necessary to a determination of the case, particularly where the issue of constitutionality is the very lis mota presented.x x x61 Finally, we find that the dismissal of the petition for contempt filed by ABS-CBN is in order. Indirect contempt may either be initiated (1) motu proprio by the court by issuing an order or any other formal charge requiring the respondent to show cause why he should not be punished for contempt or (2) by the filing of a verified petition, complying with the requirements for filing initiatory pleadings.62 ABS-CBN filed a verified petition before the Court of Appeals, which was docketed CA G.R. SP No. 90762, for PMSIs alleged disobe dience to the Resolution and Temporary Restraining Order, both dated July 18, 2005, issued in CA-G.R. SP No. 88092. However, after the cases were consolidated, the Court of Appeals did not require PMSI to comment on the petition for contempt. It ruled on the merits of CA-G.R. SP No. 88092 and ordered the dismissal of both petitions. ABS-CBN argues that the Court of Appeals erred in dismissing the petition for contempt without having ordered respondents to comment on the same. Consequently, it would have us reinstate CA-G.R. No. 90762 and order respondents to show cause why they should not be held in contempt. It bears stressing that the proceedings for punishment of indirect contempt are criminal in nature. The modes of procedure and rules of evidence adopted in contempt proceedings are similar in nature to those used in criminal prosecutions. 63 While it may be argued that the Court of Appeals should have ordered respondents to comment, the issue has been rendered moot in light of our ruling on the merits. To order respondents to comment and have the Court of Appeals conduct a hearing on the contempt charge when the main case has already been disposed of in favor of PMSI would be circuitous. Where the issues have become moot, there is no justiciable controversy, thereby rendering the resolution of the same of no practical use or value.64 WHEREFORE, the petition is DENIED. The July 12, 2006 Decision of the Court of Appeals in CA-G.R. SP Nos. 88092 and 90762, sustaining the findings of the Director-General of the Intellectual Property Office and dismissing the petitions filed by ABS-CBN Broadcasting Corporation, and the December 11, 2006 Resolution denying the motion for reconsideration, are AFFIRMED. SO ORDERED.

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Intellectual Property Law Course Outline

Course Syllabus For Intellectual Property Law Based on 2012 Supreme Court Bar Examination Syllabus 1. Intellectual Property Rights in general (Sec. 1-4, Rep. Act No. 8293) a. Intellectual property rights (Sec. 4) Case: a. Mighty Corporation and La Campana Fabrica de Tobaco, Inc. v. E. & J. Gallo Winery and Andersons Group, Inc., G.R. No. 154342, July 14, 2004 b. Differences between copyrights, trademarks and patent (Sec. 4) Case: a. Pearl & Dean (Phil.) Inc. v. Shoemart, Inc. and North Edsa Marketing Inc., G.R. No. 148222, August 15, 2003 b. Elidad C. Kho, doing business under the name and style of KEC Cosmetics Laboratory v. Hon. Court of Appeals, Summerville General Merchandising and Company, and Ang Tiam Chay, G.R. No. 115758, March 19, 2002 c. Technology transfer arrangements Add: The Intellectual Property Office (Sec. 6-19, Rep. Act No. 8293) Republic Act No. 10055 and 10372

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Case: a. In-N-Out Burger, Inc., v. Sehwani, Incorporated and/or Benitas Frites, Inc., G.R. No. 179127, December 24, 2008 b. Phil Pharmawealth, Inc., v. Pfizer, Inc. and Pfizer (Phil.) Inc., G.R. No. 167715, November 17, 2010 2. Patents (Secs. 21 120, IPC) Add: Applicable Provisions of Rep. Act No. 9502 a. Patentable inventions (1) Elements of Patentability (2) Novelty (3) Non-Prejudicial Disclosure (4) Inventive Step (5) Industrial Applicability b. Non-patentable inventions c. Ownership of a patent (1) Right to a patent (2) First-to-file rule (3) Inventions created pursuant to a Commission (4) Right of priority Add: Procedure in Patent Registration Term of Patent Registration Case: a. Phil Pharmawealth, Inc., v. Pfizer, Inc. and Pfizer (Phil.) Inc., G.R. No. 167715, November 17, 2010 d. Grounds for cancellation of a patent e. Remedy of the true and actual inventor Add: Remedies of a Person Declared by Final Court Order Having Right to the Patent f. Rights conferred by a patent g. Limitations of patent rights (1) Prior user (2) Use by the government h. Patent infringement (1) Tests in patent infringement (a) Literal infringement

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(b) Doctrine of equivalents Case: a. Smith Kline Beckman Corp. v. Court of Appeals and Tryco Pharma, G.R. No. 126627, August 14, 2003 (2) Civil and criminal action (3) Prescriptive period (4) Defenses in action for infringement i. Licensing (1) Voluntary Add: Prohibited Clauses Mandatory Provisions (2) Compulsory j. Assignment and transmission of rights Add: Utility Models Industrial Designs 3. Trademarks (Secs. 121 170, IPC) a. Definitions of marks, collective marks, trade names (Sec. 121) Add: Functions of a mark Case: a. Mirpuri v. Court of Appeals, G.R. No. 114508. November 19, 1999 b. Berris Agricultural Co., Inc. v. Norby Abyadang, G.R. No. 183404, October 13, 2010 b. Acquisition of ownership of mark (Sec. 122) c. Acquisition of ownership of trade name Case: a. Coffee Partners, Inc. v. San Francisco Coffee and Roastery, Inc, G.R. No. 169504, March 3, 2010 d. Non-registrable marks (Sec. 123) Case:

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a. Fredco Manufacturing Corp. v. President and Fellows of Harvard College, G.R. No. 185917, June 1, 2011 b. Ana Ang v. Toribio Teodoro, G.R. No. L-48226, December 14, 1942 c. McDonalds Corporation v. L.C. Big Mac Burger, Inc. G.R. No. 14399 d. McDonalds Corporation v. MacJoy Fastfood Corp., G.R. No. 166115, February 2, 2007 e. Lyceum of the Philippines v. Court of Appeals, G.R. No. 101897, March 5, 1993 e. Prior use of mark as a requirement f. Tests to determine confusing similarity between marks (1) Dominancy test (2) Holistic test Add: Lack of Proof of Actual Confusion Case: a. Del Monte Corp. v. Court of Appeals, G. R. No. L-78325, January 25, 1990 b. Asia Brewery, Inc. v. Court of Appeals and San Miguel Corporation, G.R. No. 103543, July 5, 1993 c. Berries Agricultural Co., Inc. v. Norvy Abyadang, G.R. No. 183404, October 13, 2010 d. Prosource International, Inc., v. Horphag Research Management SA, G.R. No. 180073, November 25, 2009 g. Well-known marks (Sec. 123.1 [e] and [f]) Case: 1. 246 Corporation v. Hon. Reynaldo B. Daway, G.R. No. 157216, G.R. No. 157216, November 20, 2003 h. Rights conferred by registration (Sec. 147) Add: Application Procedure (Sec. 124 144) Priority Right (Sec. 131) Duration (Sec. 145) Renewal (Sec. 146) Use of Indications by Third Parties for Other Purposes (Sec.148) Assignment and Transfer of Registration (Sec. 149) License Contracts (Sec. 150) Cancellation (Sec. 151) Effect of Non-use (Sec. 152) Remedies (Sec. 155 158) Limitations (Sec. 159) Trademark Dilution Case: a. Prosource International, Inc., v. Horphag Research Management SA, G.R. No. 180073, November 25, 2009 b. Dermaline Inc. v. Myra Pharmaceuticals, Inc., G.R. No. 190065, August 16, 2010

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c. Levi Strauss v. Clinton Apparelle, Inc., G. R. No. 138900, September 20, 2005 i. Use by third parties of names, etc. similar to registered mark k. Unfair competition (Sec. 168) Add: False Designation of Origin (Sec. 169) Distinguish from Trademark Infringement l. Trade names or business names (Sec. 165) m. Collective marks (Sec. 121.2 in relation to Sec. 167) n. Criminal penalties for infringement, unfair competition, false designation of origin, and false description or misrepresentation 4. Copyrights (Secs. 171 129, IPC) a. Basic principles b. Copyrightable works (1) Original works (Sec. 172) (2) Derivative works (Sec. 173) c. Non-copyrightable works (Secs. 175-176) Case: a. Joaquin v. Drilon, G.R. No. 108946, January 28, 1999 d. Rights of copyright owner (Sec. 177) e. Rules on ownership of copyright (Sec. 178 183) f. Limitations on copyright (Sec. 184 190) (1) Doctrine of fair use (2) Copyright infringement (Sec. 216) Case: a. Habana v. Robles, G.R. No. 131522, July 19, 1999 b. NBI-Microsoft Corp. v. Judy Hwang, et al., G.R. No. 147043, June 21, 2005 c. ABS-CBN Broadcasting Corporation v. Philippine Multi-Media System, Inc., et al., G.R. No.s 175769-70, January 19, 2009 (a) Remedies (b) Criminal penalties (Sec. 217) Add: Moral Rights (Sec. 193 199)

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