SECOND DIVISION

[G.R. Nos. L-27425 & L-30505. April 28, 1980.]

CONVERSE RUBBER CORPORATION and EDWARDSON MANUFACTURING CORPORATION, plaintiffs-appellants, vs. JACINTO RUBBER &

Sycip, Salazar, Luna & Associates for plaintiff-appellants.

Juan R. David for defendants-appellants.

DECISION

BARREDO, J p:

Direct appeal in G.R. No. L-27425 by both plaintiffs and defendants from the decision of the Court of First
Instance of Rizal in its Civil Case No. 9380, a case alleged unfair competition, the dispositive part of which reads:
"Upon the foregoing, judgment is hereby rendered:
1. Permanently restraining the defendants, their agents, employees and other persons acting in their
behalf from manufacturing and selling in the Philippines rubber shoes having the same or confusingly
similar appearance as plaintiff Converse Rubber's Converse Chuck Taylor All Star' rubber shoes, particularly
from manufacturing and selling in the Philippines rubber shoes with (a) ankle patch with a five-pointed blue
star against a white background, (b) red and blue bands, (c) white toe patch with raised diamond shaped
areas, and (d) brown sole of the same or similar design as the sole of 'Converse Chuck Taylor All
Star' rubber-soled canvas footwear;
"2. Ordering defendant Jacinto Rubber & Plastics Company, Inc. to change the design and
appearance of 'Custombuilt' shoes in accordance with the sketch submitted by defendant Jacinto Rubber to
plaintiff Converse Rubber on October 3, 1964 and to desist from using a star both as a symbol and as a
word;
"3. Ordering defendant Jacinto Rubber & Plastics Company, Inc. to pay plaintiffs the sum of
P160,000.00 as compensatory damages for the years 1962 to 1965 plus 5% of the gross sales of
'Custombuilt' shoes from 1966 until defendant Jacinto Rubber & Plastics Company, Inc. stop selling
'Custombuilt' shoes of the present design and appearance;
"4. Ordering defendants jointly and severally to pay plaintiffs P10,000.00 as attorney's fees.
SO ORDERED." (Pages 228-229, Record on Appeal.)
plaintiffs praying for a bigger amount of damages and defendants asking that the decision be declared null and void for lack
of jurisdiction, or, alternatively, that the same be reversed completely by dismissing the complaint; and another direct
appeal, in G. R. No. L-30505 by above defendant Jacinto Rubber & Plastics Co., Inc. and, a new party, Philippine
Marketing and Management Corporation from the same trial court's order in the same main civil case finding them in
contempt of court "in disregarding the permanent injunction" contained in the appealed decision.
RE: G.R.  NO.  L-27425
Being comprehensive and well prepared, We consider it sufficient to quote the following portions of the impugned
decision as basis for the resolution of the conflicting appeals aforementioned:
"This is an action for unfair competition. Plaintiff Converse Rubber Corporation, (is) an American
Corporation, manufacturer (of) canvas rubber shoes under the trade name 'Converse Chuck Taylor All Star';
in the Philippines, it has an exclusive licensee, plaintiff Edwardson Manufacturing Corporation, for the
manufacture and sale in the Philippines of its product. Plaintiff Converse is the owner of trademarks and
patent, registered with United States Patent Office, covering the words 'All Star', the representation and
design of a five-pointed star, and the design of the sole. The trademark 'Chuck Taylor' was registered by
plaintiff Converse with the Philippines Patent Office on March 3, 1966. Since 1946, 'Chuck Taylor' is being
sold in the Philippines. It has been used exclusively by Philippine basketball teams competing in
international competitions. It is also popular among players in various basketball leagues, like the MICAA
and the NCAA, because of its high quality and attractive style. 'Chuck Taylor' currently retails at P46.00 per
pair.
"Defendant Jacinto Rubber & Plastics Company, Inc., a local corporation, likewise, manufactures
and sells canvas rubber shoes. It sells its product under the trade names 'Custombuilt Viscount', 'Custombuilt
Challenger', and 'Custombuilt Jayson's'. Its trademark 'Custombuilt Jayson's was registered by the
Philippines Patent Office on November 29, 1957. The gross sales from 1962 to 1965 of 'Custombuilt' shoes
total P16,474,103.76. 'Custombuilt' is retailed at P11.00.
"In 1963, plaintiff Converse and defendant Jacinto entered into protracted negotiations for a
licensing agreement whereby defendant Jacinto would be the exclusive license of plaintiff Converse in the
Philippines for the manufacture and sale of 'Chuck Taylor' shoes but with the right to continue
manufacturing and selling its own products. One of the points taken up by parties was the design and general
appearance of 'Custombuilt' shoes. Plaintiff Converse insisted on the condition that defendant Jacinto change
the design of 'Custombuilt' shoes so as to give 'Custombuilt' a general appearance different from Chuck
Taylor.' After an extensive discussion, defendant Jacinto gave into to the demand of plaintiff Converse; it
submitted to plaintiff Converse for the latter's approval a sketch of a new design for 'Custombuilt'. This
design was accepted by plaintiff Converse. Defendant Jacinto Rubber then proposed that the licensing
agreement be made in favor of its affiliates, defendant Ace Rubber. On January 22, 1965, defendant
Ace Rubber signed the licensing agreement while defendant Jacinto Rubber and Arturo Jacinto signed the
guarantee agreement to secure the performance by defendant Ace Rubber of its obligations under the
licensing agreement. Both documents, it should be noted, contained the following covenants:
'9. (a) Ace acknowledges that Converse is the exclusive owner of the said Converse —
names and design, as used in connection with the manufacture, advertising and sale of footwear:
that Converse has the exclusive right to use said Converse-names in such connection throughout the
world, subject to the terms of this Agreement; and that neither Ace nor any person acting by,
through or under Ace will, at anytime, question or dispute said ownership or the exclusive rights
of Converse with respect thereto
'(b) Nothing herein shall be deemed to constitute a warranty by Converse as to the non-
existence of infringements of Converse-names in the Republic of the Philippines. The term
'infringement' as used in this Agreement shall include practices which give rise to a cause of action
for damages or to injunctive relief under Sections 23 and 29 of R. A. No. 166 of the Republic of the
Philippines or any other applicable law of said Republic. During the term thereof, Ace at its expense
shall diligently investigate all infringements of the use of said Converse-names, whether or not such
infringements violate laws pertaining to the registration of trademarks or trade names, and shall
notify Converse promptly as to any infringements of said Converse-names within said territory, and
shall at its expense use its best efforts to prevent such infringements by all reasonable means,
including the prosecution of litigation where necessary or advisable. Any award for damages which
Ace may recover in such litigation shall accrue to the benefit of, and shall be owned and retained by
Ace.'
"14. Ace shall not, during the term hereof, manufacture or sell footwear which would, by reason of
its appearance and/or design, be likely, or tend, to be confused by the public with any of the  Converse-
named products to be manufactured and sold hereunder, or shall, in any manner, infringe Converse designs.
If at any time and from time to time the manufacture of footwear under Converse-names for sale hereunder
does not fully utilize Ace's production capacity, Ace shall, on Converse's order, within the limits of such
surplus capacity, manufacture footwear of kinds and in amounts specified by Converse, at a price no higher
than the lowest price at which similar footwear has been sold to customer of Ace during the period of one (1)
year immediately preceding the date of such order, and upon no less favorable discounts and terms of sale
than similar footwear is customarily offered by Ace to its most favored customer, payable in United States
funds, if the earned royalty hereunder is then so payable, otherwise in Republic of the Philippines funds.'
"20. It being the mutual intention of the parties that Converse's exclusive property interests in
the Converse-names shall at all times be protected to the full extent of the law, Ace agrees that it will
execute all amendments to this Agreement which may be proposed from time to time by  Converse for the
purpose of fully protecting said interests.'
 "However, the licensing agreement did not materialize, because Hermogenes Jacinto refused to sign
the guarantee.
"Plaintiff Converse and plaintiff Edwardson then executed licensing agreement, making plaintiff
Edwardson the exclusive Philippine licensee for the manufacture and sale of Chuck Taylor.' On June 18,
1966, plaintiffs sent a written demand to defendants to stop manufacturing and selling 'Custombuilt' shoes of
identical appearance as 'Chuck Taylor'. Defendants did not reply to plaintiffs' letter. Hence, this suit.
"Plaintiffs contend that 'Custombuilt' shoes are identical in design and general appearance to 'Chuck
Taylor' and, claiming prior identification of 'Chuck Taylor' in the mind of the buying public in the
Philippines, they contend that defendants are guilty of unfair competition by selling 'Custombuilt' of the
design and with the general appearance of 'Chuck Taylor'. The design and appearance of both products, as
shown by the samples and photographs of both products, are not disputed. Defendants insist that (a) there is
no similarity in design and general appearance between 'Custombuilt' and 'Chuck Taylor', pointing out that
'Custombuilt' is readily identifiable by the tradename 'Custombuilt' appearing on the ankle patch, the heel
patch, and on the sole. It is also vigorously contended by defendants that the registration of
defendant Jacinto Rubber's trademark 'Custombuilt' being prior to the registration in the Philippines of
plaintiff Converse Rubber's trademark 'Chuck Taylor', plaintiffs have no cause of action. It appears that
defendant started to manufacture and sell 'Custombuilt' of its present design and with its present appearance
in 1962. On the other hand, as earlier mentioned, 'Chuck Taylor' started to be sold in the Philippines in 1946
and has been enjoying a reputation for quality among basketball players in the Philippines.
"The Court sees no difficulty in finding that the competing products are identical in appearance
except for the trade names. The respective designs, the shapes and the color of the ankle patch, the bands, the
toe patch and the sole of the two products are exactly the same. At a distance of a few meters, it is
impossible to distinguish Custombuilt' from 'Chuck Taylor'. The casual buyer is thus liable to mistake one
for the other. Only by a close examination and by paying attention to the trade names will the ordinary buyer
be able to tell that the product is either 'Custombuilt' or 'Chuck Taylor', as the case may be. Even so, he will
most likely think that the competing products, because they are strikingly identical in design and appearance
are manufactured by one and the same manufacturer. Clearly, this case satisfied the test of unfair
competition. Priority in registration in the Philippines of a trademark is not material in an action for unfair
competition as distinguished from an action for infringement of trademark. The basis of an action for unfair
competition is confusing and misleading similarity in general appearance, not similarity of trademarks.
"The Court is not impressed by defendants' good faith in claiming that they have the right to
continue manufacturing 'Custombuilt' of identical design and appearance as 'Chuck Taylor. While it is true
that the licensing agreement between plaintiff Converse and defendant did not materialize, the execution of
the documents by the defendants constitute an admission on the part of plaintiff Converse Rubber's property
right in design and appearance of 'Chuck Taylor'. The covenants, quoted above, show that defendants
acknowledged that plaintiff Converse Rubber 'is the exclusive owner of the said Converse-names and
design.' Defendants further covenanted not to 'manufacture or sell footwear which would by reason of its
appearance and/or design, be likely, or tend, to be confused by the public with any of the Converse-named
products . . . or shall, in any manner, infringe Converse designs'. That defendants are fully aware that
'Custombuilt' is identical in design and appearance to 'Chuck Taylor' has conclusively been admitted by them
in their correspondence with plaintiff Converse leading to the submission by defendants to
plaintiff Converse of a sketch of a new design that would give 'Custombuilt' an appearance different from
that of 'Chuck Taylor'.
"Aside from the written admission of defendants, the facts clearly indicate that defendants copied
the design of 'Chuck Taylor' with intent to gain. Chuck Taylor, as has been noted earlier, was ahead of
Custombuilt' in the Philippines market and has been enjoying a high reputation for quality and style. Even
defendants' own exhibits leave no room for doubt that defendants copied the design and appearance of
'Chuck Taylor' for the purpose of cashing in on the reputation of 'Chuck Taylor'. The samples of defendants'
product show, indeed, as announced by defendants' counsel the 'metamorphosis' of defendants' product. In
the beginning, the design of defendants' product was entirely different from its present design and the design
of 'Chuck Taylor'. It was only in 1962, or 16 years after 'Chuck Taylor' has been in the market, that
defendants adopted the present design of 'Custombuilt'. It is also noteworthy that 'Custombuilt' sells at P35
less than 'Chuck Taylor'; thus the casual buyer is led to believe that he is buying the same product at a lower
price. Not surprisingly, the volume of sales of 'Custombuilt' increased from 35% to 75% of defendants' total
sales after they incorporated in their product the design and appearance of 'Chuck Taylor'.
 "It is thus clear that defendants are guilty of unfair competition by giving 'Custombuilt' the same
general appearance as 'Chuck Taylor'. It is equally clear that defendants in so doing are guilty of bad faith.
There remains for the Court to consider the damages that defendants should be liable for to plaintiffs.
Plaintiffs claim compensatory damages equivalent to 30% of the gross sales of 'Custombuilt' and attorney's
fees in the amount of P25,000.00. By defendants' own evidence, the gross sales of 'Custombuilt' from 1962,
the year defendants adopted the present design of their product, to 1965 total P16,474,103.76. If the Court
should grant plaintiffs' prayer for compensatory damages equivalent to 30% of defendants' gross sales, the
compensatory damages would amount to P4,942,231.13. Considering the amount of gross sales of
'Custombuilt', an award to plaintiffs for 30% of defendants' annual gross sales would seriously cripple, if not
bankrupt, defendant companies. The Court is aware that defendants' investment is substantial and that
defendants support a substantial number of employees and laborers. This being so, the Court is of the
opinion that plaintiffs are entitled to only one (1) per cent of annual gross sales of 'Custombuilt' shoes of
current design. As for attorney's fees, the Court is of the opinion that P10,000.00 is reasonable." (Pages 217-
228, Record on Appeal.)
Defendants-appellants have assigned the following alleged errors:
"I
"THE COURT A QUO ERRED IN ASSUMING JURISDICTION OVER THE COMPLAINT OF
PLAINTIFFS-APPELLEES.
II
"THE COURT A QUO ERRED IN ARRIVING AT THE CONCLUSION THAT THE
DEFENDANTS ARE GUILTY OF UNFAIR COMPETITION WHEN
DEFENDANT JACINTO RUBBER & PLASTICS CO., INC., MANUFACTURED AND SOLD RUBBER-
SOLED CANVAS SHOES UNDER ITS REGISTERED TRADE MARK 'CUSTOMBUILT'.
III
"THE COURT A QUO ERRED IN ADJUDICATING IN FAVOR OF THE PLAINTIFF THE
SUM OF P160,000.00 AS COMPENSATORY DAMAGES AND P10,000.00 AS ATTORNEY'S FEES."
(Pp. A & B, Brief for Defendants-Appellants.).
We have carefully gone over the records and reviewed the evidence to satisfy Ourselves of the similarity of the
shoes manufactured and sold by plaintiffs with those sold by defendants, and We find the conclusions of the trial court to be
correct in all respects. In fact, in their brief, defendants do not contest at all the findings of the trial court insofar as material
identity between the two kinds of shoes in question is concerned. We have Ourselves examined the exhibits in detail,
particularly, the comparative pictures and other representations of the shoes in question, and We do not hesitate in holding
that the plaintiffs complaint of unfair competition is amply justified.
From said examination, We find the shoes manufactured by defendants to contain, as found by the trial court,
practically all the features of those of the plaintiff Converse Rubber Corporation and manufactured, sold or marketed by
plaintiff Edwardson Manufacturing Corporation, except for their respective brands, of course. We fully agree with the trial
court that "the respective designs, shapes, the colors of the ankle patches, the bands, the toe patch and the soles of the two
products are exactly the same . . . (such that) "at a distance of a few meters, it is impossible to distinguish "Custombuilt"
from "Chuck Taylor". These elements are more than sufficient to serve as basis for a charge of unfair competition. Even if
not all the details just mentioned were identical, with the general appearances alone of the two products, any ordinary, or
even perhaps even a not too perceptive and discriminating customer could be deceived, and, therefore, Custombuilt could
easily be passed off for Chuck Taylor. Jurisprudence supports the view that under such circumstances, the imitator must be
held liable. In R. F. & J. Alexander & Co. Ltd. et al. vs. Ang et al., 97 Phil. 157, at p. 160, this Court held:
"By 'purchasers' and 'public' likely to be deceived by the appearance of the goods, the statute means
the 'ordinary purchaser'. And although this Court apparently shifted its position a bit in Dy Buncio vs. Tan
Tiao Bok, 42 Phil. 190, by referring to simulations likely to mislead 'the ordinarily intelligent buyer', it
turned to the general accepted doctrine in E. Spinner & Co. vs. Neuss Hesslein, 54 Phil. 224, where it spoke
of 'the casual purchasers' 'who knows the goods only by name.'
"It stands to reason that when the law speaks of purchasers' it generally refers to ordinary or average
purchasers.
'. . . in cases of unfair competition, while the requisite degree of resemblance or similarity
between the names, brands, or other indicia is not capable of exact definition, it may be stated
 generally that the similarity must be such, but need only be such, as is likely to mislead purchasers
of ordinary caution and prudence; or in other words, the ordinary buyer, into the belief that the
goods or wares are those, or that the name or business is that, of another producer or tradesman. It is
not necessary in either case that the resemblance be sufficient to deceive experts, dealers, or other
persons specially familiar with the trademark or goods involved. Nor is it material that a critical
inspection and comparison would disclose differences, or that persons seeing the trademarks or
articles side by side would not be deceived' (52 Am. Jur. pp. 600-601)." (Brief for Plaintiffs as
Appellees, pp. 28-29, p. 71, Record.)
Indeed, the very text of the law on unfair competition in this country is clear enough. It is found in Chapter VI
of Republic Act 166 reading thus:
"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 trade name 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 of those of the
one having established such goodwill, or who shall commit any acts calculated to produce said result, shall
be guilty of unfair competition, and shall be subject to an action therefor.
"In particular, and without in any way limiting the scope of unfair competition, the following shall
be deemed guilty of unfair competition:
"(a) Any person, who in selling his goods shall give them the general appearance of goods
of another manufacturer or dealer, either as to the goods themselves or in the wrapping of the
packages in which they are contained, or the devices or words thereon, or in any other feature of
their appearance, which would 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."
It is the theory of defendants-appellants, however, that plaintiffs-appellees have failed to establish a case of unfair
competition because "inasmuch as the former (Converse Chuck Taylor) was not sold in the local markets from 1949 to
1967, no competition, fair or unfair, could have been offered to it by the latter product (Custombuilt Challenger) during the
said period." While the argument, it may be conceded, makes sense as a proposition in practical logic, as indeed, it served
as a legal defense in jurisprudence in the past, the modern view, as contended by plaintiffs "represents a tendency to mold,
and even to expand; legal remedies in this field to conform to ethical practices." (Brief of Plaintiffs as Appellees, pp. 16-
17.) As a matter of fact, in Ang vs. Toribio, 74 Phil. 129, this Court aptly pointed out:
". . . 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 elements of strict competition in itself has
ceased to be the determining factor. The owner of a trademark or trade-name has 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 fraud."
Additionally, We quote with approval counsel's contention thus:
"In no uncertain terms, the statute on unfair competition extends protection to the goodwill of a
manufacturer or dealer. It attaches no fetish to the word 'competition'. In plain language it declares that a
'person who has identified in the public the goods he manufactures or deals in, his business or services from
those of others, whether or not a 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.' It denominates as 'unfair competition'
'any acts' calculated to result in the passing off of other goods 'for those of the one having established such
goodwill.' Singularly absent is a requirement that the goodwill sought to be protected in an action for unfair
competition must have been established in an actual competitive situation. Nor does the law require that the
deception or other means contrary to good faith or any acts calculated to pass off other goods for those of
one who has established a goodwill must have been committed in an actual competitive situation.
"To read such conditions, as defendants-appellants seek to do, in the plain prescription of the law is
to re-construct it. Indeed, goodwill established in other than a competitive milieu is no less a property right
that deserves protection from unjust appropriation or injury. This, to us, is precisely the clear sense of the
law when it declares without equivocation that 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, 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.'
"Plaintiffs-appellees have a established goodwill. This goodwill, the trial court found, defendants-
appellants have pirated in clear bad faith to their unjust enrichment. It is strange that defendants-appellants
now say that they should be spared from the penalty of the law, because they were not really in competition
with plaintiffs-appellees." (Pp. 21-22, Id.)
In a desperate attempt to escape liability, in their first assigned error, defendants-appellants assail the jurisdiction of
the trial court, contending that inasmuch as Converse Rubber Corporation is a non-resident corporation, it has no legal right
to sue in the courts of the Philippines, citing Marshall-Wells Co. vs. Elser & Co., 46 Phil. 70 and Commissioner of Internal
Revenue vs. United States Lines Co., G.R. No. L-16850, May 30, 1962 (5 SCRA 175) and, furthermore, that plaintiff
Edwardson Manufacturing Corporation, although "a domestic corporation, is nothing but a licensee
of Converse Rubber Corporation in the local manufacturing, advertisement, sale and distribution of the rubber-soled
footwear", hence, it is equally without such personality. (p. 18, Brief of Defendants-Appellants).
We are not impressed. The easy and, We hold to be correct, refutation of defendants' position is stated adequately
and understandably in plaintiffs' brief as appellees as follows: LLpr
"The disability under Section 69 of the Corporation Law of an unlicensed foreign corporation refers
to transacting business in the Philippines and maintaining a 'suit for the recovery of any debt, claim, or
demand whatever' arising from its transacting business in the Philippines. In Marshall-Wells, this Court
precisely rejected a reading of Section 69 of the Corporation Law as 'would give it a literal meaning', i. e.,
'No foreign corporation shall be permitted by itself or assignee any suit for the recovery of any deed, claim,
or demand unless it shall have the license prescribed by Section 68 of the Law. 'The effect of the statute,'
declared this Court, 'preventing foreign corporations from doing business and from bringing actions in the
local courts, except on compliance with elaborate requirements, must not be unduly extended or improperly
applied (at page 75). In Commissioner of Internal Revenue  v. United States Lines Company , this Court did
not hold that an unlicensed foreign corporation may not sue in the Philippines. The Court simply held that a
foreign shipping company, represented by a local agent, is doing business in the Philippines so as to subject
it to the 'operation of our revenue and tax laws.'
"Western Equipment and Supply Co. v. Reyes, 51 Phil. 115, made clear that the disability of a
foreign corporation from suing in the Philippines is limited to suits 'to enforce any legal or contract rights
arising from, or growing out, of any business which it has transacted in the Philippine Islands.' . . . On the
other hand, where the purpose of a suit is 'to protect its reputation, its corporate name, its goodwill,
whenever that reputation, corporate name or goodwill have, through the natural development of its trade,
established themselves,' an unlicensed foreign corporation may sue in the Philippines (at page 128). So
interpreted by the Supreme Court, it is clear that Section 69 of the Corporation Law does not disqualify
plaintiff-appellee Converse Rubber, which does not have a branch office in any part of the Philippines and is
not 'doing business' in the Philippines (Record on Appeal, pp. 190-191), from filing and prosecuting this
action for unfair competition.
"The futility of the error assigned by defendants-appellants becomes more evident in light of the
explicit provision of Section 21 (a) of Republic Act No. 166, as amended, that a foreign corporation, whether
or not licensed to transact business in the Philippines may bring an action for unfair competition provided
the country of which it 'is a citizen, or in which it is domiciled, by treaty, convention or law, grants a similar
privilege to juristic persons in the Philippines.' The Convention of Paris for the Protection of Industrial
Property, to which the Philippines adheres, provides, on a reciprocal basis that citizens of a union member
may file an action for unfair competition and infringement of trademarks, patents, etc. (61 O. G. 8010) in
 any of the union members. The United States of America, of which Converse Rubber is a citizen, is also a
signatory to this Convention. Section 1126 (b) and (h) of Public Law 489 of the United States of America
allows corporations organized under the laws of the Philippines to file an action for unfair competition in the
United States of America, whether or not it is licensed to do business in the United States. ((Annex 'H' of
Partial Stipulation of Facts, Record on Appeal, p. 192).
"As regards the other plaintiff-appellee, Edwardson Manufacturing Corporation, it is indisputable
that it has a direct interest in the success of this action: as exclusive licensee of Converse Rubber in the
manufacture and sale of 'Chuck Taylor' shoes in the Philippines, naturally it would be directly affected by
the continued manufacture and sale by defendants-appellants of shoes that are confusingly identical in
appearance and design with Chuck Taylor.'" (Brief of Plaintiffs as Appellees, pp. 11-14.)
As can be seen, what is actually the only controversial matter in this case is that which refers to the assessment of
damages by the trial court, which both plaintiffs and defendants consider erroneous, defendants maintaining, of course, that
it is excessive, even baseless, while, on the other hand, plaintiffs posit that it is far short from what the law and the relevant
circumstances require.
 
Under Section 29 of the Republic Act 166, aforequoted, it will be observed that the first paragraph thereof refers to
the property rights in goodwill of a "person who has identified in the mind of the public goods he manufactures or deals in,
his business or offices from those of others, whether or not a mark or trade name is employed", while the second paragraph
speaks of "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 .. for those of the one having established such goodwill." This second paragraph, which may be
read together with the first paragraph, makes the deceiver or imitator "guilty of unfair competition and shall be subjected to
an action therefore", meaning what the first paragraph refers to as the "remedies provided in Section twenty-three,
Chapter V" of the Act. It is implicit in the decision of the trial court and the briefs of the parties that everyone here
concerned has acted on the basis of the assumptions just stated.
Now, Section 23 reads:
"Actions, and damages and injunction for infringement. — Any person entitled to the exclusive use
of a registered mark or trade name may recover damages in a civil action from any person who infringes his
rights, and the measure of the damages suffered shall be either the reasonable profit which the complaining
party would have made, had the defendant not infringed his said rights, or the profit which the defendant
actually made out of the infringement, or in the event such measure of damages cannot be readily ascertained
with reasonable certainty, then the court may award as damages a reasonable percentage based upon the
amount of gross sales of the defendant of the value of the services in connection with which the mark or
trade name was used in the infringement of the rights of the complaining party. In cases where actual intent
to mislead the public or to defraud the complaining party shall be shown, in the discretion of the court, the
damages may be doubled.
"The complaining party, upon proper showing, may also be granted injunction."
In the light of the foregoing provision, We find difficulty in seeing the basis of the trial court for reducing the 30%,
claimed by plaintiffs, of the gross earnings of defendants from the sale of Custombuilt from 1962 to merely 1% as the
measure of compensatory damages to which plaintiffs are entitled for that period. Perhaps, as His Honor pessimistically
argued, defendants would suffer crippling of their business. But it is quite clear from the circumstances surrounding their
act of deliberately passing off the rubber shoes produced by them for those over which plaintiffs had priorly established
goodwill, that defendants had tremendously increased their volume of business and profits in the imitated shoes and have
precisely incurred, strictly speaking, the liability of the damages to be paid by them be doubled, per the last sentence of
Section 23.
We are of the considered opinion that the trial court was overly liberal to the defendants-appellants. The
P160,000.00 awarded by His Honor as compensatory damages for the years 1962 to 1965 are utterly inadequate. Even the
5% of the gross sales of "Custombuilt" shoes from 1966 until its injunction is fully obeyed are short of what the law
contemplates in cases of this nature. We hold that considering that the gross sales of defendants-appellants increased to
P16,474,103.76, (as admitted in defendants-appellants' own brief, p. 2), only 75% of which, plaintiffs-appellants generously
assert corresponded to Custombuilt sales, it would be but fair and just to award plaintiffs-appellants 15% of such 75% as
compensatory damages from 1962 up to the finality of this decision. In other words, 75% of P16,474,103.76 would be
P12,355,577.82 and 15% of this last amount would be P1,853,336.67, which should be awarded to plaintiffs-appellants for
the whole period already stated, without any interest, without prejudice to plaintiffs-appellants seeking by motion in the
trial court in this same case any further damage should defendants-appellants continue to disobey the injunction herein
affirmed after the finality of this decision.
We feel that this award is reasonable. It is not farfetched to assume that the net profit of the imitator which, after all
is what the law contemplates as basis for damages if it were only actually ascertainable, in the manufacture of  rubber shoes
should not be less than 20 to 25% of the gross sales. Regrettably, neither of the parties presented positive evidence in this
respect, and the Court is left to use as basis its own projection in the light of usual business practices. We could, to be sure,
return this case to the lower court for further evidence on this point, but, inasmuch as this litigation started way back about
fourteen years ago and it would take more years before any final disposition is made hereof should take the course, We are
convinced that the above straight computation, without any penalty of interest, is in accordance with the spirit of the law
governing this case.
In re G. R. No. L-30505
The subject matter of this appeal is the order of the trial court, incident to its main decision We have just reviewed
above, dismissing "for lack of jurisdiction the contempt charge filed by plaintiffs against defendant Jacinto Rubber &
Plastics Co. Inc., Ace Rubber & Plastics Corporation; Philippine & Management Corporation and their respective corporate
officers.
Importantly, it is necessary to immediately clear up the minds of appellees in regard to some aspects of the
argument on double jeopardy discussed by their distinguished counsel in his preliminary argument in his brief (pp. 9-13). It
is contended therein that inasmuch as the denial orders of August 23, 1967, December 29, 1967 and January 24, 1968 have
the character of acquittals, contempt proceedings being criminal in nature, this appeal subjects appellees to double jeopardy.
Such contention misses, however, the important consideration that the said denial orders, were, as explained by His Honor
himself in his last two orders, based on the assumption that he had lost jurisdiction over the incident by virtue of the earlier
perfection of the appeals of both parties from the decision on the merits.
It is thus the effect of this assumption, revealed later by the trial judge, on the first order of August 23, 1967 that
needs clarificatory disquisition, considering that the said first order was exclusively based on "the interests of justice" and
"lack of merit" and made no reference at all to jurisdiction. If indeed the trial court had lost jurisdiction, it would be clear
that said order could have no legal standing, and the argument of double jeopardy would have no basis.
But after mature deliberation, and in the light of Cia General de Tabacos de Filipinas vs. Alhambra Cigar &
Cigarette Manufacturing Co., 33 Phil. 503, cited by appellant's counsel in his brief, We are convinced that the trial court in
the case at bar had jurisdiction to entertain and decide the motion for contempt in question. Indeed, the enforcement of
either final or preliminary-made-final injunctions in decisions of trial courts are immediately executory. The reason for this
rule lies in the nature itself of the remedy. If a preliminary injunction, especially one issued after a hearing is enforceable
immediately to protect the rights of the one asking for it, independently of the pendency of the main action, there is no
reason why when that preliminary injunction is made final after further and fuller hearing of the merits of the plaintiff's
cause of action, its enforceability should have lesser force. The same must be true with stronger basis in the case of a
permanent injunction issued as part of the judgment. The aim is to stop the act complained of immediately because the
court has found it necessary to serve the interests of justice involved in the litigation already resolved by it after hearing and
reception of the evidence of both parties.
As a matter of fact, it is quite obvious that an action for unfair competition with prayer for an injunction partakes of
the nature of an action for injunction within the contemplation of Section 4 of Rule 39, and this cited provision states
explicitly that "unless otherwise ordered by the court, a judgment in an action for injunction — shall not be stayed after its
rendition and before an appeal is taken or during the pendency of an appeal." In the above-mentioned case of Cia. General
de Tabacos, the Court held:
"The appellant contends here: First, that the injunction is indefinite and uncertain to such an extent
that a person of ordinary intelligence would be unable to comply with it and still protect his acknowledged
rights; second, that the injunction is void for the reason that the judgment of the court on which it is based is
not responsive to the pleadings or to the evidence in the case and has nothing in the record to support it;
third, that the court erred in assuming jurisdiction and fining defendant after an appeal had been taken from
the judgment of the court and the perpetual injunction issued thereon. There are other objections that need no
particular discussion.
"Discussing these questions generally it may be admitted, as we stated in our decision in the main
case (G. R., No. 10251, ante p. 485) that, while the complaint set forth an action on a trade-name and for
unfair competition, accepting the plaintiff's interpretation of it, the trial court based its judgment on the
violation of a trade-mark, although the complaint contained no allegation with respect to a trade-mark and no
issue was joined on that subject by the pleadings and no evidence was introduced on the trial with respect
 thereto. There was, however, some evidence in the case with respect to the plaintiff's ownership of the trade-
name 'Isabela,' for the violation of which the plaintiff was suing, and there was some evidence which might
support an action of unfair competition, if such an action could be sustained under the statute. Therefore,
although the judgment of the trial court was based on the violation of a trade-mark, there was some evidence
to sustain the judgment if it had been founded on a violation of the trade-name or on unfair competition. The
judgment, as we have already found in the main case, was erroneous and was reversed for that reason; but
having some evidence to sustain it, it was not void and the injunction issued in that action was one which the
court had power to issue. Although the judgment was clearly erroneous and without basis in law, it was,
nevertheless, a judgment of a court of competent jurisdiction which had authority to render that particular
judgment and to issue a permanent injunction thereon. 
xxx xxx xxx
". . . The question is not was the judgment correct on the law and the facts, but was it a valid
judgment? If so, and if the injunction issued thereon was definite and certain and was within the subject
matter of the judgment, the defendant was bound to obey it, however erroneous it may have been." (Pp. 505-
506, 506, 33 Phil.)
It is interesting to note that while the trial court was of the opinion that it had lost jurisdiction over the motion for
contempt, upon insistence of the plaintiffs, in its order of January 24, 1968, It made the following findings of fact: LLjur
"It is not controverted on December 14, 1966, the Philippine Marketing and Management sold to
Virginia Ventures 12 pairs of 'Custombuilt' rubber shoes bearing an Identical design and general appearance
as that prohibited in the injunction. It is likewise not controverted that subsequent to December 14, 1966 the
sale of the said rubber shoes was advertised by Philippine Marketing and Management Corporation in
several metropolitan newspapers even during the pendency of the contempt proceedings.
The only issue of fact is whether or not in selling and advertising the sale of the prescribed shoes the
Philippine Marketing and Management Corporation conspired with the defendants, particularly
defendant Jacinto Rubber, or acted as its agent, employee or in any other capacity with knowledge of the
issuance of the said permanent injunction. On this point. the evidence of the plaintiffs shows that
Hermogenes Jacinto, Arturo Jacinto, Fernando Jacinto and Milagros J. Jose constitute the majority of the
board of directors of the Philippine Marketing and Management Corporation; that Hermogenes Jacinto is the
president, Arturo Jacinto is the vice-president, and Fernando Jacinto and Milagros J. Jose are directors, of
defendant Jacinto Rubber; that Milagros J. Jose is the treasurer of the Philippine Marketing and Management
Corporation; and that Ramon V. Tupas, corporate secretary of the Philippine Marketing and Management
Corporation, actively assisted by Atty. Juan T. David, counsel of record of the defendants, in defending the
defendants in this case. It also appears from the different advertisements published in the metropolitan
papers that Philippine Marketing and Management Corporation is the exclusive distributor of the questioned
"Custombuilt" rubber shoes. Moreover, during the trial of this case on the merits the defendants admitted
that the Philippine Marketing and Management Corporation is a sister corporation of
defendant Jacinto Rubber, both corporations having identical stockholders, and Hermogenes Jacinto and
Fernando Jacinto are stockholders and incorporators of the Philippine Marketing and Management
Corporation.
"On the other hand, the defendants, particularly defendant Jacinto Rubber, presented no evidence to
disprove its intra-corporate relationship with the Philippine Marketing and Management Corporation. Instead
it presented, over the objection of the plaintiffs, the affidavit of its executive vice-president,
Geronimo Jacinto, who affirmed that defendant Jacinto Rubber had no knowledge of, or participation in, the
acts complained of in the motion to declare them in contempt of Court and that it has not in any way violated
any order of this Court. On its part, the Philippine Marketing and Management Corporation presented as a
witness its general manager, Aniceto Tan, who testified that the Philippine Marketing and Management
Corporation is not an agent or sister corporation of defendant Jacinto Rubber; that he came to know of the
pendency of this case and the issuance of the permanent injunction only on December 19, 1966 when served
with a copy of plaintiffs' motion; and that the Philippine Marketing and Management Corporation buys the
'Custombuilt Rubber' shoes from defendant Jacinto Rubber which it resells to the general public. It is
noteworthy, however, that this particular witness made several admissions in the course of his testimony
which shed light on the question at issue. Thus, he admitted that prior to the formal organization of the
Philippine Marketing and Management Corporation in January 1966 he was the sales manager of
defendant Jacinto Rubber; that after the organization of the said corporation, he was informed that
defendant Jacinto Rubber would discontinue its sales operations and instead give the exclusive distribution
of the shoes to the Philippine Marketing and Management Corporation; and that he was then offered the
 position of sales manager of Philippine Marketing and Management because of his extensive experience in
the distribution of 'Custombuilt' rubber shoes. Also, he testified that the subscribed capital stock of the
Philippine Marketing and Management Corporation is only P100,000.00 out of which P25,000.00 has been
paid whereas its average monthly purchases of 'Custombuilt' rubber shoes is between P300,000.00 to
P400,000.00 or between P4,000,000.00 to P5,000,000.00 annually. Such huge purchases Philippine
Marketing and Management Corporation is able to make, in spite of its meager capital, because
defendant Jacinto Rubber allows it to buy on credit.
"Considering the substantial identity of the responsible corporate officers of the
defendant Jacinto Rubber and the Philippine Marketing and Management Corporation, the huge volume of
alleged purchases of 'Custombuilt' shoes by the Philippine Marketing and Management Corporation
compared to its paid in capital, and the cessation of the sales operations of defendant Jacinto Rubber after the
organization of the former, the Court is convinced beyond reasonable doubt that the Philippine Marketing
and Management Corporation is the selling arm or branch of defendant Jacinto Rubber and that both
corporations are controlled by substantially the same persons, the Jacinto family. The contention of the
Philippine Marketing and Management Corporation that it sold the 12 pairs of 'Custombuilt' shoes on
December 14, 1966 without knowledge of the issuance of the injunction is belied by its conduct of
continuing the sale and the advertisement of said shoes even during the pendency of the contempt
proceedings. This conduct clearly reveals the wilfulness and contumacy with which it had disregarded the
injunction. Besides, it is inherently improbable that defendant Jacinto Rubber and Atty. Ramon B. Tupas did
not inform the Philippine Marketing and Management Corporation of the issuance of the injunction, a fact
which undoubtedly has a material adverse effect on its business.
"Upon the foregoing, the Court is convinced that defendants and Philippine Marketing and
Management Corporation are guilty of contempt of court in disregarding the permanent injunction issued by
this Court in its decision on the merits of the main case. However, for the reasons stated in the Order of
December 29, 1967, the Court maintains that it has lost jurisdiction over the case." (Pp. 115-120, Record on
Appeal.)
Stated differently, since the trial court had jurisdiction to take cognizance of the motion, its findings of facts should as a rule
bind the parties, and, in this connection, appellees do not seriously challenge said findings. And since We are holding that
the trial court had jurisdiction, the above findings may well be determinative of the factual issues among the parties herein.
We are thus faced with the following situations:
The first order of dismissal of August 23, 1967, albeit issued with jurisdiction, was incomplete because it contained
no statement of facts and law on which it was based in violation of the pertinent constitutional precept. It could not stand as
it was.
The second order of December 29, 1967 was still incomplete, with the added flaw that His Honor declared himself
therein as having lost jurisdiction.
On the other hand, while the third order of January 24, 1968 filled the omissions of the first two orders, it,
however, reiterated the erroneous ruling of the second order regarding loss of jurisdiction of the court over the incident.
Combining the three orders, it can be seen that the result is that the trial court found from the evidence that its
injunction had indeed been violated, but it erroneously considered itself devoid of authority to impose the appropriate
penalty, for want of jurisdiction. Upon these premises, We hold that the factual findings of the trial court in its third order
may well stand as basis for the imposition of the proper penalty. llcd
To be sure, appellees are almost in the right track in contending that the first denial order of the trial court found
them not guilty. What they have overlooked however is that such a finding cannot be equated with an acquittal in a criminal
case that bars a subsequent jeopardy. True it is that generally, contempt proceedings are characterized as criminal in nature,
but the more accurate juridical concept is (that contempt proceedings may actually be either civil or criminal, even if the
distinction between one and the other may be so thin as to be almost imperceptible. But it does exist in law. It is criminal
when the purpose is to vindicate the authority of the court and protect its outraged dignity. It is civil when there is failure to
do something ordered by a court to be done for the benefit of a party. (3 Moran, Rules of Court, pp. 343-344, 1970 ed; see
also Perkins vs. Director of Prisons, 58 Phil. 272; Harden vs. Director of Prisons, 81 Phil. 741.) And with this distinction in
mind, the fact that the injunction in the instant case is manifestly for the benefit of plaintiffs makes of the contempt herein
involved civil, not criminal. Accordingly, the conclusion is inevitable that appellees have been virtually found by the trial
court guilty of civil contempt, not criminal contempt, hence the rule on double jeopardy may not be invoked.
WHEREFORE, judgment is hereby rendered — in G. R. No. L-27425 — affirming the decision of the trial court
with the modification of the amount of the damages awarded to plaintiffs in the manner hereinabove indicated; and in G.R.
 No. L-30505 — the three orders of dismissal of the trial court of the contempt charges against appellees are all hereby
reversed, and on the basis of the factual findings made by said court in its last order of January 24, 1968, appellees are
hereby declared in contempt of court and the records of the contempt proceedings (G. R. No. L-30505) are ordered returned
to the trial court for further proceedings in line with the above opinion, namely for the imposition of the proper penalty, its
decision being incomplete in that respect. Costs against appellees in G. R. No. L-27425, no costs in G. R. No. L-30505.
These decisions may be executed separately.
|||  (Converse Rubber Corp. v. Rubber & Plastics Co., Inc., G.R. Nos. L-27425 & L-30505, [April 28, 1980], 186 PHIL 85-109)

THIRD DIVISION

[G.R. No. 86683. January 21, 1993.]

PHILIP S. YU, petitioner, vs. THE HONORABLE COURT OF APPEALS. THE HONORABLE PRESIDING JUDGE, RTC OF MANILA, BRANCH
XXXIV (34) and UNISIA MERCHANDISING CO., INC., respondents.

Oscar M. Manahan for petitioner.

Alfredo G. De Guzman for private respondent.

SYLLABUS

1. REMEDIAL LAW; PROVISIONAL REMEDIES; INJUNCTION; PROPER REMEDY TO PREVENT WRONGFUL INTERFERENCE WITH CONTRACT BY
STRANGERS. — Injunction is the appropriate remedy to prevent a wrongful interference with contracts by strangers to such contracts where the legal remedy is insufficient and the
resulting injury is irreparable (Gilchrist vs. Cuddy, 29 Phil. 542 [1915]; 4-A Padilla, Civil Code Annotated, 1988 Ed., p. 90).

2. CIVIL LAW; OBLIGATIONS AND CONTRACTS; RIGHT TO PERFORM EXCLUSIVE DISTRIBUTORSHIP, A PROPRIETY RIGHT WHICH A PARTY MAY
PROTECT. — The right to perform an exclusive distributorship agreement and to reap the profits resulting from such performance are proprietary rights which a party may protect.
(30 Am. Jur. Section 19, pp. 71-72; Jurado, Comments and Jurisprudence on Obligations and Contracts, 1983 8th Rev. Ed., p. 336) which may otherwise not be dismissed, nay, rendered
illusory by the expedient act of utilizing or interposing a person or firm to obtain goods from the supplier to defeat the very purpose for which the exclusive distributorship was
conceptualized, at the expense of the sole authorized distributor (43 C.J.S. 597)

DECISION

MELO, J p:

Petitioner, the exclusive distributor of the House of Mayfair wallcovering products in the Philippines, cried
foul when his former dealer of the same goods, herein private respondent, purchased the merchandise from the House
of Mayfair in England through FNF Trading in West Germany and sold said merchandise in the Philippines. Both the
court of origin and the appellate court rejected petitioner's thesis that private respondent was engaged in a sinister
form of unfair competition within the context of Article 28 of the New Civil Code (pp. 23 and 64, Rollo). Hence, the
petition at bar.
There is no dispute that petitioner has had an exclusive sales agency agreement with the House of Mayfair
since 1987 to promote and procure orders for Mayfair wallcovering products from customers in the Philippines
(Annex "B", Petition; p. 30, Rollo). Even as petitioner was such exclusive distributor, private respondent, which was
then petitioner's dealer, imported the same goods via the FNF Trading which eventually sold the merchandise in the
domestic market (TSN, September 20, 1988, p. 9; p. 117, Rollo). In the suit for injunction which petitioner filed
before the Regional Trial Court of the National Capital Judicial Region stationed at Manila, petitioner pressed the idea
that he was practically by-passed and that private respondent acted in concert with the FNF Trading in misleading
Mayfair into believing that the goods ordered by the trading firm were intended for shipment to Nigeria although they
were actually shipped to and sold in the Philippines (Paragraph 5, Complaint; p. 34, Rollo). Private respondent
professed ignorance of the exclusive contract in favor of petitioner. Even then, private respondent responded by
asserting that petitioner's understanding with Mayfair is binding only between the parties thereto (Paragraph 5,
Answer; p. 50, Rollo).
In the course of hearing the arguments for and against the issuance of the requested writ of preliminary
injunction, petitioner impressed before the lower court that he is seeking to enjoin the sale and distribution by private
respondent of the same goods in the market (TSN, September 20, 1988, p. 35; p. 142, Rollo) but the Honorable Cesar
V. Alejandria, Presiding Judge of Branch 34 was unperturbed, thusly: prLL
"Resolving plaintiff's motion embodied in the complaint for the issuance of a writ of
preliminary injunction after hearing, but without prejudging the merits of the case, and finding from
the evidences adduced by the plaintiff, that the terms and conditions of the agency agreement, Exhibit
"A-inj." between the plaintiff and The House of Mayfair of England for the exclusive distributorship
by the plaintiff of the latter's goods, apertain to them; that there is no privity of contract between the
plaintiff and the defendant; that the controversy in this case arose from a breach of contract by the
FNF Trading of Germany, for having shipped goods it has purchased from The House of Mayfair to
the Philippines: that as shown in Exh. "J-inj.", the House of Mayfair was demanding payment of
4,500.00 from the FNF Trading for restitution of plaintiff's alleged loss on account of the shipment of
the goods in question here in the Philippines and now in the possession of the defendant; it appears to
the Court that to restrain the defendant from selling the goods it has ordered from the FNF Trading of
Germany, would be without legal justification.
WHEREFORE, the motion for the issuance of a writ of preliminary injunction to restrain the
defendant from selling the goods it has ordered from the FNF Trading of Germany is hereby
DENIED." (p. 64, Rollo.)
 The indifference of the trial court towards petitioner's supplication occasioned the filing of a petition for
review on certiorari with the Court of Appeals but Justice Ordoñez-Benitez, with whom Justices Bellosillo and Kalalo
concurred, reacted in the same nonchalant fashion. According to the appellate court, petitioner was not able to
demonstrate the unequivocal right which he sought to protect and that private respondent is a complete stranger vis-a-
vis the covenant between petitioner and Mayfair. Apart from these considerations, the reviewing authority noted that
petitioner could be fully compensated for the prejudice he suffered judging from the tenor of Mayfair's
correspondence to FNF Trading wherein Mayfair took the cudgels for petitioner in seeking compensation for the
latter's loss as a consequence of private respondent's scheme (p. 79, Rollo; pp. 23-29, Rollo).
In the petition at hand, petitioner anchors his plea for redress on his perception that private respondent has
distributed and continues to sell Mayfair covering products in contravention of petitioner's exclusive right conferred
by the covenant with the House of Mayfair.
On March 13, 1989, a temporary restraining order was issued to last until further notice from this Court
directed against private respondent (p. 188, Rollo). Notwithstanding such proscription, private respondent persisted in
the distribution and sale (p. 208; 228-229, Rollo), triggering petitioner's motion to cite private respondent's manager in
contempt of court (p. 223, Rollo). Considering that private respondent's manager, Frank Sia, admitted the acts
complained of, a fine of P500.00 was imposed on him but he failed to pay the same within the five-day period
provided in Our Resolution of June 21, 1989 (p. 236, Rollo). cdphil
Did respondent appellate court correctly agree with the lower court in disallowing the writ solicited by herein
petitioner?
That the exclusive sales contract which links petitioner and the House of Mayfair is solely the concern of the
privies thereto and cannot thus extend its chain as to bind private respondent herein is, We believe, beside the point.
Verily, injunction is the appropriate remedy to prevent a wrongful interference with contracts by  strangers to such
contracts where the legal remedy is insufficient and the resulting injury is irreparable (Gilchrist vs. Cuddy, 29 Phil.
542 [1915]; 4-A Padilla, Civil Code Annotated, 1988 Ed., p. 90). The liability of private respondent, if any, does not
emanate from the four corners of the contract for undoubtedly, Unisia Merchandising Co., Inc. is not a party thereto
but its accountability is "an independent act generative of civil liability" (Daywalt vs. Corporacion de PP. Agustinos
Recoletos, 39 Phil. 587 [1919]; 4 Paras, Civil Code of the Philippines Annotated, 1981 10th Ed., p. 439; 4 Tolentino,
Commentaries and Jurisprudence on the Civil Code, 1986 Ed., p. 439). These observations, however, do not in the
least convey the message that We have placed the cart ahead of the horse, so to speak, by pronouncing private
respondent's liability at this stage in view of the pendency of the main suit for injunction below. We are simply
rectifying certain misperceptions entertained by the appellate court as regards the feasibility of requesting a
preliminary injunction to enjoin a stranger to an agreement.
To Our mind, the right to perform an exclusive distributorship agreement and to reap the profits resulting
from such performance are proprietary rights which a party may protect. (30 Am. Jur. Section 19, pp. 71-72; Jurado,
Comments and Jurisprudence on Obligations and Contracts, 1983 8th Rev. Ed., p. 336) which may otherwise not be
diminished, nay, rendered illusory by the expedient act of utilizing or interposing a person or firm to obtain goods
from the supplier to defeat the very purpose for which the exclusive distributorship was conceptualized, at the expense
of the sole authorized distributor (43 C.J.S. 597).
Another circumstance which respondent court overlooked was petitioner's suggestion, which was not disputed
by herein private respondent in its comment, that the House of Mayfair in England was duped into believing that the
goods ordered through the FNF Trading were to be shipped to Nigeria only, but the goods were actually sent to and
sold in the Philippines. A ploy of this character is akin to the scenario of a third person who induces a party to renege
on or violate his undertaking under a contract, thereby entitling the other contracting party to relief therefrom ( Article
1314, New Civil Code). The breach caused by private respondent was even aggravated by the consequent diversion of
trade from the business of petitioner to that of private respondent caused by the latter's species of unfair competition
as demonstrated no less by the sales effected inspite of this Court's restraining order. This brings Us to the irreparable
mischief which respondent court misappreciated when it refused to grant the relief simply because of the observation
that petitioner can be fully compensated for the damage. A contrario, the injury is irreparable where it is continuous
and repeated since from its constant and frequent recurrence, no fair and reasonable redress can be had therefor by
petitioner insofar as his goodwill and business reputation as sole distributor are concerned. Withal, to expect petitioner
to file a complaint for every sale effected by private respondent will certainly court multiplicity of suits (3 Francisco,
Revised Rules of Court, 1985 Edition, p. 261). prLL
 
 WHEREFORE, the petition is hereby GRANTED. The decision of the Court of Appeals dated January 13,
1989 in CA-G.R. SP No. 16019 and the Order dated October 16, 1988 issued by the magistrate at the court of origin
are hereby REVERSED and SET ASIDE. Let this case be remanded to the court of origin for issuance of a writ of
preliminary injunction upon petitioner's posting of a bond in the sum of Fifty Thousand (P50,000.00) Pesos to be
approved by said court, to remain effective during the trial on the merits until final determination of the case. The
manager of private respondent, Frank Sia, is hereby ordered to pay to the Clerk of Court within five (5) days from
notice hereof the fine of P500.00, as previously imposed on him, with a warning that failure to do so will be dealt with
more severely.
Upon issuance of the writ of preliminary injunction, the restraining order issued on March 13, 1989 by this
Court shall be deemed automatically lifted.
SO ORDERED.
||| (Yu v. Court of Appeals, G.R. No. 86683, [January 21, 1993], 291 PHIL 336-342)
 SECOND DIVISION

[G.R. No. 149907. April 16, 2009.]

ROMA DRUG and ROMEO RODRIGUEZ, as Proprietor of ROMA DRUG, petitioners, vs. THE REGIONAL TRIAL COURT OF GUAGUA,
PAMPANGA, THE PROVINCIAL PROSECUTOR OF PAMPANGA, BUREAU OF FOOD & DRUGS (BFAD) and GLAXO
SMITHKLINE, respondents.

DECISION

TINGA, J p:

On 14 August 2000, a team composed of the National Bureau of Investigation (NBI) operatives and inspectors of the
Bureau of Food and Drugs (BFAD) conducted a raid on petitioner Roma Drug, a duly registered sole proprietorship of petitioner
Romeo Rodriguez (Rodriguez) operating a drug store located at San Matias, Guagua, Pampanga. The raid was conducted
pursuant to a search warrant 1 issued by the Regional Trial Court (RTC), Branch 57, Angeles City. The raiding team seized
several imported medicines, including Augmentin (375mg.) tablets, Orbenin (500mg.) capsules, Amoxil (250mg.) capsules
and Ampiclox (500mg.). 2 It appears that Roma Drug is one of six drug stores which were raided on or around the same time
upon the request of SmithKline Beecham Research Limited (SmithKline), a duly registered corporation which is the local
distributor of pharmaceutical products manufactured by its parent London-based corporation. The local SmithKline has since
merged with Glaxo Wellcome Phil. Inc. to form Glaxo SmithKline, private respondent in this case. The seized medicines, which
were manufactured by SmithKline, were imported directly from abroad and not purchased through the local SmithKline, the
authorized Philippine distributor of these products. DEScaT
The NBI subsequently filed a complaint against Rodriguez for violation of Section 4 (in relation to Sections 3 and 5)
of Republic Act No. 8203, also known as the Special Law on Counterfeit Drugs (SLCD), with the Office of the Provincial
Prosecutor in San Fernando, Pampanga. The section prohibits the sale of counterfeit drugs, which under Section 3 (b) (3),
includes "an unregistered imported drug product." The term "unregistered" signifies the lack of registration with the Bureau of
Patent, Trademark and Technology Transfer of a trademark, tradename or other identification mark of a drug in the name of a
natural or juridical person, the process of which is governed under Part III of the Intellectual Property Code.
In this case, there is no doubt that the subject seized drugs are identical in content with their Philippine-registered
counterparts. There is no claim that they were adulterated in any way or mislabeled at least. Their classification as "counterfeit" is
based solely on the fact that they were imported from abroad and not purchased from the Philippine-registered owner of the patent
or trademark of the drugs.
During preliminary investigation, Rodriguez challenged the constitutionality of the SLCD. However, Assistant
Provincial Prosecutor Celerina C. Pineda skirted the challenge and issued a Resolution dated 17 August 2001 recommending that
Rodriguez be charged with violation of Section 4 (a) of the SLCD. The recommendation was approved by Provincial Prosecutor
Jesus Y. Manarang n approved the recommendation. 3
Hence, the present Petition for Prohibition questing the RTC-Guagua Pampanga and the Provincial Prosecutor to desist
from further prosecuting Rodriguez, and that Sections 3 (b) (3), 4 and 5 of the SLCD be declared unconstitutional. In gist,
Rodriguez asserts that the challenged provisions contravene three provisions of the Constitution. The first is the equal protection
clause of the Bill of Rights. The two other provisions are Section 11, Article XIII, which mandates that the State make "essential
goods, health and other social services available to all the people at affordable cost;" and Section 15, Article II, which states that it
is the policy of the State "to protect and promote the right to health of the people and instill health consciousness among them."
Through its Resolution dated 15 October 2001, the Court issued a temporary restraining order enjoining the RTC from
proceeding with the trial against Rodriguez, and the BFAD, the NBI and Glaxo Smithkline from prosecuting the petitioners. 4
Glaxo Smithkline and the Office of the Solicitor General (OSG) have opposed the petition, the latter in behalf of public
respondents RTC, Provincial Prosecutor and Bureau of Food and Drugs (BFAD). On the constitutional issue, Glaxo Smithkline
asserts the rule that the SLCD is presumed constitutional, arguing that both Section 15, Article II and Section 11, Article XIII "are
not self-executing provisions, the disregard of which can give rise to a cause of action in the courts." It adds that Section 11,
Article XIII in particular cannot be work n "to the oppression and unlawful of the property rights of the legitimate manufacturers,
importers or distributors, who take pains in having imported drug products registered before the BFAD." Glaxo Smithkline
further claims that the SLCD does not in fact conflict with the aforementioned constitutional provisions and in fact are in accord
with constitutional precepts in favor of the people's right to health. CHDTEA
The Office of the Solicitor General casts the question as one of policy wisdom of the law that is, beyond the interference
of the judiciary. 5 Again, the presumption of constitutionality of statutes is invoked, and the assertion is made that there is no
clear and unequivocal breach of the Constitution presented by the SLCD.
II.
The constitutional aspect of this petition raises obviously interesting questions. However, such questions have in fact
been mooted with the passage in 2008 of Republic Act No. 9502, also known as the "Universally Accessible Cheaper and Quality
Medicines Act of 2008". 6
Section 7 of Rep. Act No. 9502 amends Section 72 of the Intellectual Property Code in that the later law unequivocally
grants third persons the right to import drugs or medicines whose patent were registered in the Philippines by the owner of the
product:
Sec. 7. Section 72 of Republic Act No. 8293, otherwise known as the Intellectual Property Code of the
Philippines, is hereby amended to read as follows:
"Sec. 72. Limitations of Patent Rights. — The owner of a patent has no right to prevent third parties from
performing, without his authorization, the acts referred to in Section 71 hereof in the following circumstances:
"72.1. Using a patented product which has been put on the market in the Philippines by the owner of the
product, or with his express consent, insofar as such use is performed after that product has been so put on the said
market: Provided, That, with regard to drugs and medicines, the limitation on patent rights shall apply after
a drug or medicine has been introduced in the Philippines or anywhere else in the world by the patent
owner, or by any party authorized to use the invention: Provided, further, That the right to import the
drugs and medicines contemplated in this section shall be available to any government agency or any
private third party;
 "72.2. Where the act is done privately and on a non-commercial scale or for a non-commercial purpose:
Provided, That it does not significantly prejudice the economic interests of the owner of the patent;
"72.3. Where the act consists of making or using exclusively for experimental use of the invention for
scientific purposes or educational purposes and such other activities directly related to such scientific or
educational experimental use; DCISAE
"72.4. In the case of drugs and medicines, where the act includes testing, using, making or selling the
invention including any data related thereto, solely for purposes reasonably related to the development and
submission of information and issuance of approvals by government regulatory agencies required under any law
of the Philippines or of another country that regulates the manufacture, construction, use or sale of any product:
Provided, That, in order to protect the data submitted by the original patent holder from unfair commercial use
provided in Article 39.3 of the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS
Agreement), the Intellectual Property Office, in consultation with the appropriate government agencies, shall issue
the appropriate rules and regulations necessary therein not later than one hundred twenty (120) days after the
enactment of this law;
"72.5.  Where the act consists of the preparation for individual cases, in a pharmacy or by a medical
professional, of a medicine in accordance with a medical shall apply after a drug or medicine has been introduced
in the Philippines or anywhere else in the world by the patent owner, or by any party authorized to use the
invention: Provided, further, That the right to import the drugs and medicines contemplated in this section shall be
available to any government agency or any private third party; n . . . 7
The unqualified right of private third parties such as petitioner to import or possess "unregistered imported drugs" in the
Philippines is further confirmed by the "Implementing Rules to Republic Act No. 9502" promulgated on 4 November 2008. 8 The
relevant provisions thereof read:
Rule 9. Limitations on Patent Rights. The owner of a patent has no right to prevent third parties from
performing, without his authorization, the acts referred to in Section 71 of the IP Code as enumerated hereunder:
(i) Introduction in the Philippines or Anywhere Else in the World.
Using a patented product which has been put on the market in the Philippines by the owner of the
product, or with his express consent, insofar as such use is performed after that product has been so put on the said
market: Provided, That, with regard to drugs and medicines, the limitation on patent rights shall apply after a drug
or medicine has been introduced in the Philippines or anywhere else in the world by the patent owner, or by any
party authorized to use the invention: Provided, further, That the right to import the drugs and medicines
contemplated in this section shall be available to any government agency or any private third
party. (72.1) TCHEDA
The drugs and medicines are deemed introduced when they have been sold or offered for sale anywhere
else in the world. (n)
It may be that Rep. Act No. 9502 did not expressly repeal any provision of the SLCD. However, it is clear that the
SLCO's classification of "unregistered imported drugs" as "counterfeit drugs", and of corresponding criminal penalties therefore
are irreconcilably in the imposition conflict with Rep. Act No. 9502 since the latter indubitably grants private third persons the
unqualified right to import or otherwise use such drugs. Where a statute of later date, such as Rep. Act No. 9502, clearly reveals
an intention on the part of the legislature to abrogate a prior act on the subject that intention must be given effect.  9 When a
subsequent enactment covering a field of operation coterminus with a prior statute cannot by any reasonable construction be given
effect while the prior law remains in operative existence because of irreconcilable conflict between the two acts, the latest
legislative expression prevails and the prior law yields to the extent of the conflict. 10 Irreconcilable inconsistency between two
laws embracing the same subject may exist when the later law nullifies the reason or purpose of the earlier act, so that the latter
loses all meaning and function. 11 Legis posteriores n priores contrarias abrogant.
For the reasons above-stated, the prosecution of petitioner is no longer warranted and the quested writ of prohibition
should accordingly be issued.
III.
Had the Court proceeded to directly confront the constitutionality of the assailed provisions of the SLCD, it is apparent
that it would have at least placed in doubt the validity of the provisions. As written, the law makes a criminal of any person who
imports an unregistered drug regardless of the purpose, even if the medicine can spell life or death for someone in the Philippines.
It does not accommodate the situation where the drug is out of stock in the Philippines, beyond the reach of a patient who
urgently depends on it. It does not allow husbands, wives, children, siblings, parents to import the drug in behalf of their loved
ones too physically ill to travel and avail of the meager personal use exemption allotted by the law. It discriminates, at the
expense of health, against poor Filipinos without means to travel abroad to purchase less expensive medicines in favor of their
wealthier brethren able to do so. Less urgently perhaps, but still within the range of constitutionally protected behavior, it deprives
 Filipinos to choose a less expensive regime for their health care by denying them a plausible and safe means of purchasing
medicines at a cheaper cost.
The absurd results from this far-reaching ban extends to implications that deny the basic decencies of humanity. The law
would make criminals of doctors from abroad on medical missions of such humanitarian organizations such as the International
Red Cross, the International Red Crescent, Medicin Sans Frontieres, and other like-minded groups who necessarily bring their
own pharmaceutical drugs when they embark on their missions of mercy. After all, they are disabled from invoking the bare
"personal use" exemption afforded by the SLCD. cATDIH
Even worse is the fact that the law is not content with simply banning, at civil costs, the importation of unregistered
drugs. It equates the importers of such drugs, many of whom motivated to do so out of altruism or basic human love, with the
malevolents who would alter or counterfeit pharmaceutical drugs for reasons of profit at the expense of public safety. Note that
the SLCD is a special law, and the traditional treatment of penal provisions of special laws is that of malum prohibitum — or
punishable regardless of motive or criminal intent. For a law that is intended to help save lives, the SLCD has revealed itself
as a heartless, soulless legislative piece.
The challenged provisions of the SLCD apparently proscribe a range of constitutionally permissible behavior. It is
laudable that with the passage of Rep. Act No. 9502, the State has reversed course and allowed for a sensible and compassionate
approach with respect to the importation of pharmaceutical drugs urgently necessary for the people's constitutionally-recognized
right to health.
WHEREFORE, the petition is GRANTED in part. A writ of prohibition is hereby ISSUED commanding respondents
from prosecuting petitioner Romeo Rodriguez for violation of Section 4 or Rep. Act No. 8203. n The Temporary Restraining
Order dated 15 October 2001 is hereby made PERMANENT. No pronouncements as to costs.
SO ORDERED.
||| (Roma Drug v. RTC of Guagua, Pampanga, G.R. No. 149907, [April 16, 2009], 603 PHIL 141-150)
 THIRD DIVISION

[G.R. No. 179127. December 24, 2008.]

IN-N-OUT BURGER, INC., petitioner, vs. SEHWANI, INCORPORATED AND/OR BENITA'S FRITES, INC., respondents.

DECISION

CHICO-NAZARIO, J p:

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. CIaASH
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
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-N-OUT" 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, Benita Frites, 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 petitioner's products. 7 DITEAc
 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
Benita's 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 petitioner's 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
registration 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 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. Petitioner's 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 petitioner's 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: EIcSDC
With the foregoing disquisition, Certificate of Registration No. 56666 dated 17 December 1993 for the
mark "IN-N-OUT" (the inside of the letter "O" formed like a star) issued in favor of Sehwani, Incorporated is
hereby CANCELLED. Consequently, respondents Sehwani, Inc. and Benita's Frites are hereby ordered to
permanently cease and desist from using the mark "IN-N-OUT" and "IN-N-OUT BURGER LOGO" on its goods
and in its business. With 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 petitioner's Motion for Partial Reconsideration 16 were denied by the IPO Director for Legal Affairs in
Resolution No. 2004-18 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 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: DHATcE
THE IPO DIRECTOR GENERAL COMMITTED GRAVE ERROR IN DISMISSING APPEAL NO. 14-2004-
00004 ON A MERE TECHNICALITY
THE BUREAU OF LEGAL AFFAIR'S (SIC) DECISION AND RESOLUTION (1) CANCELLING
RESPONDENT'S CERTIFICATE OF REGISTRATION FOR THE MARK "IN-N-OUT", AND (2) ORDERING
PETITIONERS TO PERMANENTLY CEASE AND DESIST FROM USING THE SUBJECT MARK ON ITS
GOODS AND BUSINESS ARE CONTRARY TO LAW AND/OR 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 reinstate 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' Petition 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
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. SaITHC
During the pendency of petitioner's 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 petitioner's 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 sometime 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 petitioner's 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 attorney's 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. Attorney's 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 ATTORNEY'S FEES
TO RESPONDENTS
THE IPO DIRECTOR GENERAL COMMITTED GRAVE ERROR IN AFFIRMING THE BUREAU OF
LEGAL AFFAIR'S DECISION (1) CANCELLING PETITIONER'S CERTIFICATE OF REGISTRATION FOR
THE MARK "IN-N-OUT", AND (2) ORDERING PETITIONERS TO PERMANENTLY CEASE AND DESIST
FROM USING THE SUBJECT MARK ON ITS GOODS AND BUSINESS cCSHET
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 petitioner's 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 General's
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.
(b) 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
(c) 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 attorney's fees to the respondent
(ii) 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 attorney's fees; DTEIaC
(iii) 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
(iv) make the injunction permanent.
[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 petitioner's assertion that respondents had committed forum
shopping 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 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 attorney's 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, respondent's 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 petitioner's Motion for Reconsideration of its
aforementioned Decision. acTDCI
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 2007 DECLARING
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 General's dismissal of
respondents' appeal for being filed 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.
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 Secretary's Certificate executed by Arnold M. Wensinger on 20 August 2007, stating that
petitioner had authorized the lawyers of Villaraza 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
Secretary's Certificate reads:
Subscribed and sworn to me this 20th day of August 2007 in Irving California.
 (Sgd.) Rachel A. Blake
Notary Public 30
Respondents aver that the said Secretary's 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) petitioner's
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. Baranda's
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 statement that the Verification/Certification was notarized within the notary public's territorial jurisdiction, as required under
the 2004 Rules on Notarial Practice. 32 SDTIHA
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 Secretary's 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 Secretary's 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 party's
representative, lawyer or any other person who personally knows the truth of the facts alleged in the pleading may sign the
verification. 36 Atty. Barranda, as petitioner's 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. Baranda's 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. TcEAIH
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 Court's 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 in CA-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. CSDcTA
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 Affair's (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 Affair's (sic) Decision (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." 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 res judicata.
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.
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. ADCETI
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) An assurance to comply with the provisions of the intellectual property law
violated;
(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 ISCaDH
(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) The assessment of damages;
(ix) Censure; and
(x) 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.) TAcDHS
Unquestionably, petitioner's complaint, which seeks the cancellation of the disputed mark in the name of respondent Sehwani,
Incorporated, and damages for violation of petitioner's 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 Functions. — The Director General
shall exercise the following powers and functions:
xxx xxx xxx
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;
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.
xxx xxx xxx
Section 170. Penalties. — Independent of the civil and administrative sanctions imposed by law, a
criminal penalty of imprisonment from two (2) years to five (5) years and a fine ranging from Fifty thousand
pesos (P50,000) to Two hundred thousand pesos (P200,000), shall be imposed on any person who is found guilty
of committing any of the acts mentioned in Section 155, Section 168, and Subsection 169.1.
Based on the foregoing discussion, the IPO Director of Legal Affairs had jurisdiction to decide the petitioner's
administrative case against respondents and the IPO Director General had exclusive jurisdiction over the appeal of the judgment
of the IPO Director of Legal Affairs. cCSHET
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 dated 15 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-à-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.
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. Actual
fraudulent 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 [petitioner's]
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 [petitioner's]
IN-N-OUT Burger's name and trademark IN-N-OUT with Arrow design.
There is no evidence that the [respondents] were authorized by the [petitioner] to use the latter's 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 [petitioner's] 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. . . . .
xxx xxx xxx
[Respondents'] use of IN-N-OUT BURGER in business signages reveals fraudulent intent to deceive
purchasers. Exhibit "GG", which shows the business establishment of [respondents] illustrates the imitation of
[petitioner's] 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, [petitioner's] corporate name. It has used the
"IN-N-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." DCcHAa
The Office cannot give credence to the [respondent's] claim of good faith and that they have openly and
continuously 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 must 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
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. AHDaET
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, attorney's fees may likewise be awarded to petitioner since
exemplary damages 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
respondent's failure to present countervailing evidence. Considering moreover the reputation of petitioner's counsel, the actual
attorney's fees paid by petitioner would far exceed the amount that 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. DaTHAc
SO ORDERED.
||| (In-N-Out Burger, Inc. v. Sehwani, Inc., G.R. No. 179127, [December 24, 2008], 595 PHIL 1119-1153)
 FIRST DIVISION

[G.R. Nos. 160054-55. July 21, 2004.]

MANOLO P. SAMSON, petitioner, vs. HON. REYNALDO B. DAWAY, in his capacity as Presiding Judge, Regional Trial Court of Quezon City, Branch
90, PEOPLE OF THE PHILIPPINES and CATERPILLAR, INC., respondents.

DECISION

YNARES-SANTIAGO, J p:

Assailed in this petition for certiorari is the March 26, 2003 Order 1 of the Regional Trial Court of Quezon City, Branch 90,
which denied petitioner's — (1) motion to quash the information; and (2) motion for reconsideration of the August 9, 2002 Order
denying his motion to suspend the arraignment and other proceedings in Criminal Case Nos. Q-02-108043-44. Petitioner also
questioned its August 5, 2003 Order 2 which denied his motion for reconsideration.
The undisputed facts show that on March 7, 2002, two informations for unfair competition under Section 168.3 (a), in
relation to Section 170, of the Intellectual Property Code (Republic Act No. 8293), similarly worded save for the dates and places of
commission, were filed against petitioner Manolo P. Samson, the registered owner of ITTI Shoes. The accusatory portion of said
informations read:
That on or about the first week of November 1999 and sometime prior or subsequent thereto, in Quezon
City, Philippines, and within the jurisdiction of this Honorable Court, above-named accused, owner/proprietor of
ITTI Shoes/Mano Shoes Manufacturing Corporation located at Robinson's Galleria, EDSA corner Ortigas
Avenue, Quezon City, did then and there willfully, unlawfully and feloniously distribute, sell and/or offer for sale
CATERPILLAR products such as footwear, garments, clothing, bags, accessories and paraphernalia which are
closely identical to and/or colorable imitations of the authentic Caterpillar products and likewise using
trademarks, symbols and/or designs as would cause confusion, mistake or deception on the part of the buying
public to the damage and prejudice of CATERPILLAR, INC., the prior adopter, user and owner of the following
 internationally: "CATERPILLAR", "CAT", "CATERPILLAR & DESIGN", "CAT AND DESIGN", "WALKING
MACHINES" and "TRACK-TYPE TRACTOR & DESIGN."
CONTRARY TO LAW. 3
On April 19, 2002, petitioner filed a motion to suspend arraignment and other proceedings in view of the existence of an
alleged prejudicial question involved in Civil Case No. Q-00-41446 for unfair competition pending with the same branch; and also in
view of the pendency of a petition for review filed with the Secretary of Justice assailing the Chief State Prosecutor's resolution
finding probable cause to charge petitioner with unfair competition. In an Order dated August 9, 2002, the trial court denied the
motion to suspend arraignment and other proceedings. 4
On August 20, 2002, petitioner filed a twin motion to quash the informations and motion for reconsideration of the order
denying motion to suspend, this time challenging the jurisdiction of the trial court over the offense charged. He contended that since
under Section 170 of R.A. No. 8293, the penalty 5 of imprisonment for unfair competition does not exceed six years, the offense is
cognizable by the Municipal Trial Courts and not by the Regional Trial Court, per R.A. No. 7691.
In its assailed March 26, 2003 Order, the trial court denied petitioner's twin motions.  6 A motion for reconsideration thereof
was likewise denied on August 5, 2003.
Hence, the instant petition alleging that respondent Judge gravely abused its discretion in issuing the assailed orders.
The issues posed for resolution are — (1) Which court has jurisdiction over criminal and civil cases for violation of
intellectual property rights? (2) Did the respondent Judge gravely abuse his discretion in refusing to suspend the arraignment and other
proceedings in Criminal Case Nos. Q-02-108043-44 on the ground of — (a) the existence of a prejudicial question; and (b) the
pendency of a petition for review with the Secretary of Justice on the finding of probable cause for unfair competition?
Under Section 170 of R.A. No. 8293, which took effect on January 1, 1998, the criminal penalty for infringement of
registered marks, unfair competition, false designation of origin and false description or representation, is imprisonment from 2 to 5
years and a fine ranging from Fifty Thousand Pesos to Two Hundred Thousand Pesos, to wit:
SEC. 170. Penalties. — Independent of the civil and administrative sanctions imposed by law, a criminal
penalty of imprisonment from two (2) years to five (5) years and a fine ranging from Fifty thousand pesos
(P50,000.00) to Two hundred thousand pesos (P200,000.00), shall be imposed on any person who is found guilty
of committing any of the acts mentioned in Section 155 [Infringement], Section 168 [Unfair Competition] and
Section 169.1 [False Designation of Origin and False Description or Representation].
Corollarily, Section 163 of the same Code states that actions (including criminal and civil) under Sections 150, 155, 164, 166,
167, 168 and 169 shall be brought before the proper courts with appropriate jurisdiction under existing laws, thus —
SEC. 163. Jurisdiction of Court. — All actions under Sections 150, 155, 164 and 166 to 169 shall be
brought before the proper courts with appropriate jurisdiction under existing laws. (Emphasis supplied)
The existing law referred to in the foregoing provision is Section 27 of R.A. No. 166 (The Trademark Law) which provides
that jurisdiction over cases for infringement of registered marks, unfair competition, false designation of origin and false description or
representation, is lodged with the Court of First Instance (now Regional Trial Court) —
SEC. 27. Jurisdiction of Court of First Instance. — All actions under this Chapter [V — Infringement]
and Chapters VI [Unfair Competition] and VII [False Designation of Origin and False Description or
Representation], hereof shall be brought before the Court of First Instance.
We find no merit in the claim of petitioner that R.A. No. 166 was expressly repealed by R.A. No. 8293. The repealing clause
of R.A. No. 8293, reads —
SEC. 239. Repeals. — 239.1. All Acts and parts of Acts inconsistent herewith, more
particularly Republic Act No. 165, as amended; Republic Act No. 166, as amended; and Articles 188 and 189 of
the Revised Penal Code; Presidential Decree No. 49, including Presidential Decree No. 285, as amended, are
hereby repealed. (Emphasis added)
Notably, the aforequoted clause did not expressly repeal R.A. No. 166 in its entirety, otherwise, it would not have used the
phrases "parts of Acts" and "inconsistent herewith;" and it would have simply stated "Republic Act No. 165, as amended; Republic
Act No. 166, as amended; and Articles 188 and 189 of the Revised Penal Code; Presidential Decree No. 49, including Presidential
Decree No. 285, as amended are hereby repealed." It would have removed all doubts that said specific laws had been rendered without
force and effect. The use of the phrases "parts of Acts" and "inconsistent herewith" only means that the repeal pertains only to
provisions which are repugnant or not susceptible of harmonization with R.A. No. 8293. 7 Section 27 of R.A. No. 166, however, is
consistent and in harmony with Section 163 of R.A. No. 8293. Had R.A. No. 8293 intended to vest jurisdiction over violations of
intellectual property rights with the Metropolitan Trial Courts, it would have expressly stated so under Section 163 thereof.
 Moreover, the settled rule in statutory construction is that in case of conflict between a general law and a special law, the
latter must prevail. Jurisdiction conferred by a special law to Regional Trial Courts must prevail over that granted by a general law to
Municipal Trial Courts. 8
In the case at bar, R.A. No. 8293 and R.A. No. 166 are special laws 9 conferring jurisdiction over violations of intellectual
property rights to the Regional Trial Court. They should therefore prevail over R.A. No. 7691, which is a general law. 10 Hence,
jurisdiction over the instant criminal case for unfair competition is properly lodged with the Regional Trial Court even if the penalty
therefor is imprisonment of less than 6 years, or from 2 to 5 years and a fine ranging from P50,000.00 to P200,000.00.
In fact, to implement and ensure the speedy disposition of cases involving violations of intellectual property rights
under R.A. No. 8293, the Court issued A.M. No. 02-1-11-SC dated February 19, 2002 designating certain Regional Trial Courts as
Intellectual Property Courts. On June 17, 2003, the Court further issued a Resolution consolidating jurisdiction to hear and
decide Intellectual Property Code and Securities and Exchange Commission cases in specific Regional Trial Courts designated as
Special Commercial Courts.
The case of Mirpuri v. Court of Appeals, 11 invoked by petitioner finds no application in the present case. Nowhere
in Mirpuri did we state that Section 27 of R.A. No. 166 was repealed by R.A. No. 8293. Neither did we make a categorical ruling
therein that jurisdiction over cases for violation of intellectual property rights is lodged with the Municipal Trial Courts. The passing
remark in Mirpuri on the repeal of R.A. No. 166 by R.A. No. 8293 was merely a backgrounder to the enactment of the
present Intellectual Property Code and cannot thus be construed as a jurisdictional pronouncement in cases for violation of intellectual
property rights.
Anent the second issue, petitioner failed to substantiate his claim that there was a prejudicial question. In his petition, he
prayed for the reversal of the March 26, 2003 order which sustained the denial of his motion to suspend arraignment and other
proceedings in Criminal Case Nos. Q-02-108043-44. For unknown reasons, however, he made no discussion in support of said prayer
in his petition and reply to comment. Neither did he attach a copy of the complaint in Civil Case No. Q-00-41446 nor quote the
pertinent portion thereof to prove the existence of a prejudicial question.
 
At any rate, there is no prejudicial question if the civil and the criminal action can, according to law, proceed independently
of each other. 12 Under Rule 111, Section 3 of the Revised Rules on Criminal Procedure, in the cases provided in Articles 32, 33, 34
and 2176 of the Civil Code, the independent civil action may be brought by the offended party. It shall proceed independently of the
criminal action and shall require only a preponderance of evidence.
In the case at bar, the common element in the acts constituting unfair competition under Section 168 of  R.A. No. 8293 is
fraud. 13 Pursuant to Article 33 of the Civil Code, in cases of defamation, fraud, and physical injuries, a civil action for damages,
entirely separate and distinct from the criminal action, may be brought by the injured party. Hence, Civil Case No. Q-00-41446, which
as admitted 14 by private respondent also relate to unfair competition, is an independent civil action under Article 33 of the  Civil
Code.As such, it will not operate as a prejudicial question that will justify the suspension of the criminal cases at bar.
Section 11(c), Rule 116 of the Revised Rules on Criminal Procedure provides —
SEC. 11. Suspension of arraignment. — Upon motion by the proper party, the arraignment shall be
suspended in the following cases —
xxx xxx xxx
(c) A petition for review of the resolution of the prosecutor is pending at either the Department of Justice,
or the Office of the President; Provided, that the period of suspension shall not exceed sixty (60) days counted
from the filing of the petition with the reviewing office.
While the pendency of a petition for review is a ground for suspension of the arraignment, the aforecited provision limits the
deferment of the arraignment to a period of 60 days reckoned from the filing of the petition with the reviewing office. It follows,
therefore, that after the expiration of said period, the trial court is bound to arraign the accused or to deny the motion to defer
arraignment.
In the instant case, petitioner failed to establish that respondent Judge abused his discretion in denying his motion to suspend.
His pleadings and annexes submitted before the Court do not show the date of filing of the petition for review with the Secretary of
Justice. 15 Moreover, the Order dated August 9, 2002 denying his motion to suspend was not appended to the petition. He thus failed
to discharge the burden of proving that he was entitled to a suspension of his arraignment and that the questioned orders are contrary
to Section 11(c), Rule 116 of the Revised Rules on Criminal Procedure. Indeed, the age-old but familiar rule is that he who alleges
must prove his allegations.
In sum, the dismissal of the petition is proper considering that petitioner has not established that the trial court committed
grave abuse of discretion. So also, his failure to attach documents relevant to his allegations warrants the dismissal of the petition,
pursuant to Section 3, Rule 46 of the Rules of Civil Procedure, which states:
 SEC. 3. Contents and filing of petition; effect of non-compliance with requirements. — The petition shall
contain the full names and actual addresses of all the petitioners and respondents, a concise statement of the
matters involved, the factual background of the case, and the grounds relied upon for the relief prayed for.
It shall be filed in seven (7) clearly legible copies together with proof of service thereof on the
respondent with the original copy intended for the court indicated as such by the petitioner, and shall be
accompanied by a clearly legible duplicate original or certified true copy of the judgment, order, resolution, or
ruling subject thereof, such material portions of the record as are referred to therein, and other documents
relevant or pertinent thereto.
xxx xxx xxx
The failure of the petitioner to comply with any of the foregoing requirements shall be sufficient ground
for the dismissal of the petition. (Emphasis added) aHTEIA
WHEREFORE, in view of all the foregoing, the petition is dismissed.
SO ORDERED.
||| (Samson v. Daway, G.R. Nos. 160054-55, [July 21, 2004], 478 PHIL 784-794)
 SECOND DIVISION

[G.R. No. 161823. March 22, 2007.]

SONY COMPUTER ENTERTAINMENT, INC., petitioner, vs. SUPERGREEN, INCORPORATED, respondent.

DECISION

QUISUMBING, J p:

This petition for review seeks to reverse the Decision 1 dated June 30, 2003 of the Court of Appeals in CA-G.R.
SP No. 67612 and the Resolution 2 dated January 16, 2004, denying reconsideration. The Court of Appeals had denied the
petition for certiorari assailing the trial court's quashal of the search warrant. AIaHES
The case stemmed from the complaint filed with the National Bureau of Investigation (NBI) by petitioner Sony
Computer Entertainment, Inc., against respondent Supergreen, Incorporated. The NBI found that respondent engaged in
the reproduction and distribution of counterfeit "PlayStation" game software, consoles and accessories in violation of
Sony Computer's intellectual property rights. Thus, NBI applied with the Regional Trial Court (RTC) of Manila, Branch 1
for warrants to search respondent's premises in Parañaque City and Cavite. On April 24, 2001, the RTC of Manila issued
Search Warrants Nos. 01-1986 to 01-1988 covering respondent's premises at Trece-Tanza Road, Purok 7, Barangay de
Ocampo, Trece Martires City, Cavite, and Search Warrants Nos. 01-1989 to 01-1991 covering respondent's premises at
Room 302, 3rd Floor Chateau de Baie Condominium, 149 Roxas Boulevard corner Airport Road, Parañaque City. The
NBI simultaneously served the search warrants on the subject premises and seized a replicating machine and several units
of counterfeit "PlayStation" consoles, joy pads, housing, labels and game software.
On June 11, 2001, respondent filed a motion to quash Search Warrants Nos. 01-1986 to 01-1988 and/or release of
seized properties on the ground that the search warrant failed to particularly describe the properties to be seized. The trial
court denied the motion for lack of merit.
On August 4, 2001, respondent filed another motion to quash, this time, questioning the propriety of the venue.
Petitioner opposed the motion on the ground that it violated the omnibus motion rule wherein all objections not included
shall be deemed waived. In an Order 3 dated October 5, 2001, the trial court affirmed the validity of Search Warrants Nos.
01-1989 to 01-1991 covering respondent's premises in Parañaque City, but quashed Search Warrants Nos. 01-1986 to 01-
1988 covering respondent's premises in Cavite. The trial court held that lack of jurisdiction is an exception to the omnibus
motion rule and may be raised at any stage of the proceedings. The dispositive portion of the order read,
Accordingly, Search Warrants Nos. 01-1986, 01-1987 and 01-1988 are hereby ordered quashed
and set aside. HTSAEa
The National Bureau of Investigation and/or any other person in actual custody of the goods
seized pursuant thereto are hereby directed to return the same to the respondents.
SO ORDERED. 4
Petitioner elevated the matter to the Court of Appeals, which dismissed the petition for certiorari. The appellate
court ruled that under Section 2, 5 Rule 126 of the Rules of Court, the RTC of Manila had no jurisdiction to issue a search
warrant enforceable in Cavite, and that lack of jurisdiction was not deemed waived. Petitioner moved for reconsideration
but the same was denied. The Court of Appeals disposed, as follows:
WHEREFORE, the instant Petition is hereby denied and accordingly DISMISSED.
SO ORDERED. 6
Petitioner now comes before us raising the following issues:
I
WHETHER OR NOT VENUE IN SEARCH WARRANT APPLICATIONS INVOLVES
TERRITORIAL JURISDICTION.
II
WHETHER OR NOT THE CORRECTNESS OF VENUE IN AN APPLICATION FOR SEARCH
WARRANT IS DEEMED WAIVED IF NOT RAISED BY THE RESPONDENT IN ITS MOTION TO
QUASH.
III
WHETHER OR NOT THE OFFENSES INVOLVED IN THE SUBJECT SEARCH WARRANTS
ARE "CONTINUING CRIMES" WHICH MAY BE VALIDLY TRIED IN ANOTHER
JURISDICTION WHERE THE OFFENSE WAS PARTLY COMMITTED. 7
In sum, we are asked to resolve whether the quashal of Search Warrants Nos. 01-1986 to 01-1988 was
valid. AECacS
Citing Malaloan v. Court of Appeals, 8 where this Court clarified that a search warrant application is only a
special criminal process and not a criminal action, petitioner contends that the rule on venue for search warrant application
is not jurisdictional. Hence, failure to raise the objection waived it. Moreover, petitioner maintains that applying for search
warrants in different courts increases the possibility of leakage and contradictory outcomes that could defeat the purpose
for which the warrants were issued.
Petitioner further asserts that even granting that the rules on search warrant applications are jurisdictional, the
application filed either in the courts of the National Capital Region or Fourth Judicial Region is still proper because the
crime was continuing and committed in both Parañaque City and Cavite.
Respondent counters that Section 2 is explicit on where applications should be filed and provided the territorial
limitations on search warrants. Respondent claims that Malaloan is no longer applicable jurisprudence with the
promulgation of the 2000 Rules of Criminal Procedure. Even granting that petitioner has compelling reasons, respondent
maintains that petitioner cannot file the application with the RTC of Manila because Cavite belongs to another judicial
region. Respondent also argues that the doctrine on continuing crime is applicable only to the institution of a criminal
action, not to search warrant applications which is governed by Rule 126, and in this case Section 2.
To start, we cautioned that our pronouncement in Malaloan should be read into the Judiciary Reorganization Act
of 1980 9 conferring on the regional trial courts and their judges a territorial jurisdiction, regional in scope. Both the main
decision and the dissent in Malaloan recognized this.
Now, in the present case, respondent's premises in Cavite, within the Fourth Judicial Region, is definitely beyond
the territorial jurisdiction of the RTC of Manila, in the National Capital Region. Thus, the RTC of Manila does not have
the authority to issue a search warrant for offenses committed in Cavite. Hence, petitioner's reliance in  Malaloan is
misplaced. Malaloan involved a court in the same judicial region where the crime was committed. The instant case
involves a court in another region. Any other interpretation re-defining territorial jurisdiction would amount to judicial
legislation. 10
Nonetheless, we agree with petitioner that this case involves a transitory or continuing offense of unfair
competition under Section 168 of Republic Act No. 8293, 11 which provides,
SEC. 168. Unfair Competition, Rights, Regulation and Remedies. — . . .
168.2. Any person who shall employ deception or any other means contrary to good faith by
which he shall pass off the goods manufactured by him or in which he deals, or his business, or services
 for those of the one having established such goodwill, or who shall commit any acts calculated to
produce said result, shall be guilty of unfair competition, and shall be subject to an action therefor.
168.3. In particular, and without in any way limiting the scope of protection against unfair
competition, the following shall be deemed guilty of unfair competition:
(a) Any person, who is selling his goods and gives them the general appearance of goods of
another manufacturer or dealer, either as to the goods themselves or in the wrapping of the packages in
which they are contained, or the devices or words thereon, or in any other feature of their appearance,
which would be likely to influence purchasers to believe that the goods offered are those of a
manufacturer or dealer, other than the actual manufacturer or dealer, or who otherwise clothes the
goods with such appearance as shall deceive the public and defraud another of his legitimate trade, or
any subsequent vendor of such goods or any agent of any vendor engaged in selling such goods with a
like purpose;
(b) Any person who by any artifice, or device, or who employs any other means calculated to
induce the false belief that such person is offering the services of another who has identified such
services in the mind of the public; or
(c) Any person who shall make any false statement in the course of trade or who shall commit
any other act contrary to good faith of a nature calculated to discredit the goods, business or services of
another.
Pertinent too is Article 189 (1) of the Revised Penal Code that enumerates the elements of unfair competition, to
wit:
(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. 12
Respondent's imitation of the general appearance of petitioner's goods was done allegedly in Cavite. It sold the
goods allegedly in Mandaluyong City, Metro Manila. The alleged acts would constitute a transitory or continuing offense.
Thus, clearly, under Section 2 (b) of Rule 126, Section 168 of Rep. Act No. 8293 and Article 189 (1) of the Revised Penal
Code, petitioner may apply for a search warrant in any court where any element of the alleged offense was committed,
including any of the courts within the National Capital Region (Metro Manila). 13
WHEREFORE, the petition is GRANTED. The Decision dated June 30, 2003 and the Resolution dated January
16, 2004 of the Court of Appeals in CA-G.R. SP No. 67612 are SET ASIDE. The Order dated October 5, 2001 of the
Regional Trial Court of Manila, Branch 1, is PARTLY MODIFIED. Search Warrants Nos. 01-1986 to 01-1988 are hereby
declared valid.
SO ORDERED.
||| (Sony Computer Entertainment, Inc. v. Supergreen, Inc., G.R. No. 161823, [March 22, 2007], 547 PHIL 639-646)
 FIRST DIVISION

[G.R. Nos. 63796-97. May 21, 1984.]

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

[G.R. No. 65659. May 21, 1984.]

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

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

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

SYLLABUS

1. MERCANTILE LAW; CORPORATION LAW; FOREIGN CORPORATIONS; FOREIGN CORPORATION ACTING THROUGH A MIDDLEMAN TRANSACTING
IN OWN NAME DEEMED NOT "DOING BUSINESS" IN THE PHILIPPINES; CASE AT BAR. — In the present case, the petitioner is a foreign corporation. The marketing of its
products in the Philippines is done through an exclusive distributor, Rustan Commercial Corporation. The latter is an independent entity which buys and then markets not only products
of the petitioner but also many other products bearing equally well-known and established trademarks and tradenames. In other words, Rustan is not a mere agent or conduit of the
petitioner. Applying Rule I Section 1 (g) of the rules and regulations promulgated by the Board of Investments pursuant to its rule-making power under Presidential Decree No. 1789,
otherwise known as the Omnibus Investment Code, to the facts of this case, we find and conclude that the petitioner is not doing business in the Philippines. Rustan is actually a
middleman acting and transacting business in its own name and/or its own account and not in the name or for the account of the petitioner.

2. REMEDIAL LAW; ACTIONS; PARTIES TO AN ACTION; CAPACITY TO SUE; FOREIGN CORPORATION NOT DOING BUSINESS IN THE PHILIPPINES
NEEDS NO LICENSE TO SUE BEFORE PHILIPPINE COURTS FOR INFRINGEMENT OF TRADEMARK AND UNFAIR COMPETITION. — As early as 1927, this Court was,
and it still is, of the view that a foreign corporation not doing business in the Philippines needs no license to sue before Philippine courts for infringement of trademark and unfair
competition (Western Equipment and Supply Co. vs. Reyes, 51 Phil. 115). In East Board Navigation Ltd. v. Ysmael and Co., Inc. (102 Phil. 1), we recognized a right of foreign
corporation to sue on isolated transactions. In General Garments Corp. v. Director of Patents, (41 SCRA 50), we sustained the right of Puritan Sportswear Corp., a foreign corporation not
licensed to do and not doing business in the Philippines, to file a petition for cancellation of a trademark before the Patent Office.

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

4. MERCANTILE LAW; CORPORATION LAW; FOREIGN CORPORATIONS; RIGHT TO SUE IN PHILIPPINE COURTS; ACCORDED BY PARIS CONVENTION
FOR THE PROTECTION OF INDUSTRIAL PROPERTY TO WHICH PHILIPPINES AND FRANCE ARE PARTIES. — In upholding the right of the petitioner to maintain the
present suit before our courts for unfair competition or infringement of trademarks of a foreign corporation, we are moreover recognizing our duties and the rights of foreign states under
the Paris Convention for the Protection of Industrial Property to which the Philippines and France are parties. We are simply interpreting and enforcing a solemn international
commitment of the Philippines embodied in a multilateral treaty to which we are a party and which we entered into because it is in our national interest to do so.

5. REMEDIAL LAW; CRIMINAL PROCEDURE; SEARCH WARRANTS; PROBABLE CAUSE, ESSENTIAL TO ISSUANCE. — As a mandatory requirement for the
issuance of a valid search warrant, the Constitution requires in no uncertain terms the determination of probable cause by the judge after examination under oath or affirmation of the
complainant and the witnesses he may produce (Constitution, Art. IV, Sec. 3).

6. ID.; ID.; ID.; PROBABLE CAUSE, DEFINED. — Probable cause has traditionally meant such facts and circumstances antecedent to the issuance of the warrant that are
in themselves sufficient to induce a cautious man to rely upon them and act in pursuance thereof (People vs. Sy Juco, 64 Phil. 667). This concept of probable cause was amplified and
modified by our ruling in Stonehill v. Diokno, 20 SCRA 383, that probable cause "presupposes the introduction of competent proof that the party against whom it is sought has performed
particular acts, or committed specific commission, violating a given provision of our criminal laws."

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

8. ID.; ID.; ID.; ID.; MOTION TO QUASH WARRANT; GRANT THEREOF IN CASE AT BAR CONSTITUTES GRAVE ABUSE OF DISCRETION. — The
respondent court, therefore, complied with the constitutional and statutory requirements the issuance of a valid search warrant. At that point in time, it was fully convinced that there
existed probable cause. But after hearing the motion to quash and the oppositions thereto, the respondent court executed a complete turnabout and declared that there was no probable
cause to justify its earlier issuance of the warrants. True, the lower court should be given the opportunity to correct its errors, if there be any, but the rectification must, as earlier stated be
based on sound and valid grounds. In this case, there was no compelling justification for the about face. The allegation that vital facts were deliberately suppressed or concealed by
petitioner should have been assessed more carefully because the object of the quashal was the return of items already seized and easily examined by the court. The items were alleged to
be fake and quite obviously would be needed as evidence in the criminal prosecution. Moreover, an application for search warrant is heard  ex-parte. It is neither a trial nor a part of the
trial. Action on these applications must be expedited for time is of the essence. Great reliance has to be accorded by the judge to the testimonies under oath of the complainant and the
witnesses. The allegation of Hemandas that the applicant withheld information from the respondent court was clearly no basis to order the return of the seized items.

9. MERCANTILE LAW; PATENTS OFFICE; CERTIFICATE OF REGISTRATION IN THE SUPPLEMENTAL REGISTER; NOT A  PRIMA FACIE EVIDENCE OF
REGISTRANT'S RIGHT. — A certificate of registration in the Supplemental Register is not a prima facie evidence of the validity of registration, of the registrant's exclusive right to use
the same in connection with the goods, business, or services specified in the certificate. Such a certificate of registration can not be filed, with effect, with the Bureau of Customs in order
to exclude from the Philippines, foreign goods bearing infringement marks or trade names (Rule 124, Revised Rules of Practice Before the Phil. Pat. Off. in Trademark Cases; Martin,
Philippine Commercial Laws, Vol. 2, pp. 513-515).

10. ID.; ID.; ID.; PURPOSE. — Registration in the Supplemental Register, therefore, serves as notice that the registrant is using or has appropriated the trademark. By the
very fact that the trademark cannot as yet be entered in the Principal Register, all who deal with it should be on guard that there are certain defects, some obstacles which the user must
still overcome before he can claim legal ownership of the mark or ask the courts to vindicate his claims of an exclusive right to the use of the same. It would be deceptive for a party with
nothing more than a registration in the Supplemental Register to posture before courts of justice as if the registration is in the Principal Register.

11. REMEDIAL LAW; CRIMINAL ACTION; PROSECUTION OF CIVIL ACTION; PREJUDICIAL QUESTION; CASE AT BAR, NOT A CASE OF. — The case
which suspends a criminal prosecution under Section 5, Rule 111 of the Revised Rules of Court on prejudicial questions must be a civil case which is determinative of the innocence or,
subject to the availability of other defenses, the guilt of the accused. The pending case before the Patent Office is an administrative proceeding and not a civil case. The decision of the
Patent Office cannot be finally determinative of the private respondent's innocence of the charges against him (Flordelis v. Castillo, 58 SCRA 301).

12. MERCANTILE LAW; LAW ON TRADEMARKS AND TRADENAMES; PURPOSE OF LAW PROTECTING TRADEMARKS. — The purpose of the law
protecting a trademark can not be overemphasized. They are to point out distinctly the origin or ownership of the article to which it is affixed, to secure to him, who has been instrumental
in bringing into a market a superior article of merchandise, the fruit of his industry and skill, and to prevent fraud and imposition (Etepha  v. Director of Patents, 16 SCRA 495). The
legislature has enacted laws to regulate the use of trademarks and provide for the protection thereof. Modern trade and commerce demands that depredations on legitimate trademarks of
non-nationals including those who have not shown prior registration thereof should not be countenanced. The law against such depredations is not only for the protection of the owner of
the trademark but also, and more importantly, for the protection of purchasers from confusion, mistake, or deception as to the goods they are buying (Asari Yoko Co., Ltd.  v. Kee Boc, 1
SCRA 1).

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

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

DECISION

GUTIERREZ, JR., J p:

It is among this Court's concerns that the Philippines should not acquire an unbecoming reputation among the
manufacturing and trading centers of the world as a haven for intellectual pirates imitating and illegally profiting from
trademarks and tradenames which have established themselves in international or foreign trade. LLjur
Before this Court is a petition for certiorari with preliminary injunction filed by La Chemise Lacoste, S.A., a well
known European manufacturer of clothings and sporting apparels sold in the international market and bearing the
trademarks "LACOSTE", "CHEMISE LACOSTE", "CROCODILE DEVICE" and a composite mark consisting of the word
"LACOSTE" and a representation of a crocodile/alligator. The petitioner asks us to set aside as null and void, the order of
Judge Oscar C. Fernandez, of Branch XLIX, Regional Trial Court, National Capital Judicial Region, granting the motion to
quash the search warrants previously issued by him and ordering the return of the seized items. LLphil
The facts are not seriously disputed. The petitioner is a foreign corporation, organized and existing under the laws
of France and not doing business in the Philippines. It is undeniable from the records that it is the actual owner of the
abovementioned trademarks used on clothings and other goods specifically sporting apparels sold in many parts of the
world and which have been marketed in the Philippines since 1964. The main basis of the private respondent's case is its
claim of alleged prior registration.
In 1975, Hemandas & Co., a duly licensed domestic firm applied for and was issued Reg. No. SR-2225 (SR stands
for Supplemental Register) for the trademark "CHEMISE LACOSTE & CROCODILE DEVICE" by the Philippine Patent
Office for use on T-shirts, sportswear and other garment products of the company. Two years later, it applied for the
registration of the same trademark under the Principal Register. The Patent Office eventually issued an order dated March
3, 1977 which states that:
xxx xxx xxx
". . . Considering that the mark was already registered in the Supplemental Register in favor of herein
applicant, the Office has no other recourse but to allow the application, however, Reg. No. SR-2225 is
now being contested in a Petition for Cancellation docketed as IPC No. 1046, still registrant is
presumed to be the owner of the mark until after the registration is declared cancelled."
Thereafter, Hemandas & Co. assigned to respondent Gobindram Hemandas all rights, title, and interest in the trademark
"CHEMISE LACOSTE & DEVICE".
On November 21, 1980, the petitioner filed its application for registration of the trademark "Crocodile Device"
(Application Serial No. 43242) and "Lacoste" (Application Serial No. 43241). The former was approved for publication
while the latter was opposed by Games and Garments in Inter Partes Case No. 1658. In 1982, the petitioner filed a Petition
for the Cancellation of Reg. No. SR-2225 docketed as Inter Partes Case No. 1689. Both cases have now been considered by
this Court in Hemandas v. Hon. Roberto Ongpin (G.R. No. 65659).
 On March 21, 1983, the petitioner filed with the National Bureau of Investigation (NBI) a letter-complaint alleging
therein the acts of unfair competition being committed by Hemandas and requesting their assistance in his apprehension and
prosecution. The NBI conducted an investigation and subsequently filed with the respondent court two applications for the
issuance of search warrants which would authorize the search of the premises used and occupied by the Lacoste Sports
Center and Games and Garments both owned and operated by Hemandas.
The respondent court issued Search Warrant Nos. 83-128 and 83-129 for violation of Article 189 of the Revised
Penal Code, "it appearing to the satisfaction of the judge after examining under oath applicant and his witnesses that there
are good and sufficient reasons to believe that Gobindram Hemandas . . . has in his control and possession in his premises
the . . . properties subject of the offense." (Rollo, pp. 67 and 69) The NBI agents executed the two search warrants and as a
result of the search found and seized various goods and articles described in the warrants.
Hemandas filed a motion to quash the search warrants alleging that the trademark used by him was different from
petitioner's trademark and that pending the resolution of IPC No. 1658 before the Patent Office, any criminal or civil action
on the same subject matter and between the same parties would be premature.
The petitioner filed its opposition to the motion arguing that the motion to quash was fatally defective as it cited no
valid ground for the quashal of the search warrants and that the grounds alleged in the motion were absolutely without
merit. The State Prosecutor likewise filed his opposition on the grounds that the goods seized were instrument of a crime
and necessary for the resolution of the case on preliminary investigation and that the release of the said goods would be
fatal to the case of the People should prosecution follow in court. LLjur
The respondent court was, however, convinced that there was no probable cause to justify the issuance of the
search warrants. Thus, in its order dated March 22, 1983, the search warrants were recalled and set aside and the NBI
agents or officers in custody of the seized items were ordered to return the same to Hemandas (Rollo, p. 25).
The petitioner anchors the present petition on the following issues:
"Did respondent judge act with grave abuse of discretion amounting to lack of jurisdiction,
"(i) in reversing the finding of probable cause which he himself had made in issuing
the search warrants, upon allegations which are matters of defense and as such can be raised
and resolved only upon trial on the merits; and
"(ii) in finding that the issuance of the search warrants is premature in the face of the
fact that (a) Lacoste's registration of the subject trademarks is still pending with the Patent
Office with opposition from Hemandas; and (b) the subject trademarks had been earlier
registered by Hemandas in his name in the Supplemental Register of the Philippine Patent
Office?
Respondent, on the other hand, centers his arguments on the following issues:
I
THE PETITIONER HAS NO CAPACITY TO SUE BEFORE PHILIPPINE COURTS.
II
THE RESPONDENT JUDGE DID NOT COMMIT A GRAVE ABUSE OF DISCRETION
TANTAMOUNT TO LACK OF JURISDICTION IN ISSUING THE ORDER DATED APRIL 22,
1983.
Hemandas argues in his comment on the petition for certiorari that the petitioner being a foreign corporation failed
to allege essential facts bearing upon its capacity to sue before Philippine courts. He states that not only is the petitioner not
doing business in the Philippines but it also is not licensed to do business in the Philippines. He also cites the case
of Leviton Industries v. Salvador (114 SCRA 420) to support his contention. The Leviton case, however, involved a
complaint for unfair competition under Section 21-A of Republic Act No. 166 which provides:
"Sec. 21-A. Any foreign corporation or juristic person to which a mark or tradename has been registered or
assigned under this Act may bring an action hereunder for infringement, for unfair competition, or false
designation of origin and false description, whether or not it has been licensed to do business in the
Philippines under Act numbered Fourteen Hundred and Fifty-Nine, as amended, otherwise known as the
Corporation Law, at the time it brings the complaint; Provided, That the country of which the said foreign
corporation or juristic person is a citizen, or in which it is domiciled, by treaty, convention or law, grants a
similar privilege to corporate or juristic persons of the Philippines."
 We held that it was not enough for Leviton, a foreign corporation organized and existing under the laws of the
State of New York, United States of America, to merely allege that it is a foreign corporation. It averred in Paragraph 2 of
its complaint that its action was being filed under the provisions of Section 21-A of Republic Act No. 166, as amended.
Compliance with the requirements imposed by the abovecited provision was necessary because Section 21-A of Republic
Act No. 166 having explicitly laid down certain conditions in a specific proviso, the same must be expressly averred before
a successful prosecution may ensue, It is therefore, necessary for the foreign corporation to comply with these requirements
or aver why it should be exempted from them, if such was the case. The foreign corporation may have the right to sue
before Philippine courts, but our rules on pleadings require that the qualifying circumstances necessary for the assertion of
such right should first be affirmatively pleaded.
In contradistinction, the present case involves a complaint for violation of Article 189 of the Revised Penal Code.
The Leviton case is not applicable.
Asserting a distinctly different position from the Leviton argument, Hemandas argued in his brief that the petitioner
was doing business in the Philippines but was not licensed to do so. To support this argument, he states that the applicable
ruling is the case of Mentholatum Co., Inc. v. Mangaliman; (72 Phil. 524) where Mentholatum Co. Inc., a foreign
corporation and Philippine-American Drug Co., the former's exclusive distributing agent in the Philippines filed a
complaint for infringement of trademark and unfair competition against the Mangalimans. Cdpr
The argument has no merit. The Mentholatum case is distinct from and inapplicable to the case at bar. Philippine-
American Drug Co., Inc., was admittedly selling products of its principal, Mentholatum Co., Inc., in the latter's name or for
the latter's account. Thus, this Court held that "whatever transactions the Philippine-American Drug Co., Inc. had executed
in view of the law, the Mentholatum Co., Inc., did it itself. And, the Mentholatum Co., Inc., being a foreign corporation
doing business in the Philippines without the license required by Section 68 of the Corporation Law, it may not prosecute
this action for violation of trademark and unfair competition."
In the present case, however, the petitioner is a foreign corporation not doing business in the Philippines. The
marketing of its products in the Philippines is done through an exclusive distributor, Rustan Commercial Corporation. The
latter is an independent entity which buys and then markets not only products of the petitioner but also many other products
bearing equally well-known and established trademarks and tradenames. In other words, Rustan is not a mere agent or
conduit of the petitioner.
The rules and regulations promulgated by the Board of Investments pursuant to its rule-making power
under Presidential Decree No. 1789, otherwise known as the Omnibus Investment Code, support a finding that the
petitioner is not doing business in the Philippines. Rule I, Sec 1 (g) of said rules and regulations defines "doing business" as
one which includes, inter alia:
"(1) . . . A foreign firm which does business through middlemen acting on their own names, such as
indentors, commercial brokers or commission merchants, shall not be deemed doing business in the
Philippines. But such indentors, commercial brokers or commission merchants shall be the ones deemed to
be doing business in the Philippines.
"(2) Appointing a representative or distributor who is domiciled in the Philippines, unless said representative
or distributor has an independent status, i.e., it transacts business in its name and for its account, and not in
the name or for the account of a principal. Thus, where a foreign firm is represented by a person or local
company which does not act in its name but in the name of the foreign firm, the latter is doing business in
the Philippines."
xxx xxx xxx
Applying the above provisions to the facts of this case, we find and conclude that the petitioner is not doing
business in the Philippines. Rustan is actually a middleman acting and transacting business in its own name and or its own
account and not in the name or for the account of the petitioner.
But even assuming the truth of the private respondent's allegation that the petitioner failed to allege material facts
in its petition relative to capacity to sue, the petitioner may still maintain the present suit against respondent Hemandas. As
early as 1927, this Court was, and it still is, of the view that a foreign corporation not doing business in the Philippines
needs no license to sue before Philippine courts for infringement of trademark and unfair competition. Thus, in  Western
Equipment and Supply Co. v. Reyes (51 Phil. 115), this Court held that a foreign corporation which has never done any
business in the Philippines and which is unlicensed and unregistered to do business here, but is widely and favorably known
in the Philippines through the use therein of its products bearing its corporate and tradename, has a legal right to maintain
an action in the Philippines to restrain the residents and inhabitants thereof from organizing a corporation therein bearing
the same name as the foreign corporation, when it appears that they have personal knowledge of the existence of such a
foreign corporation, and it is apparent that the purpose of the proposed domestic corporation is to deal and trade in the same
goods as those of the foreign corporation.
We further held:
xxx xxx xxx
". . . That company is not here seeking to enforce any legal or control rights arising from, or growing out of,
any business which it has transacted in the Philippine Islands. The sole purpose of the action:
"'Is to protect its reputation, its corporate name, its goodwill, whenever that reputation,
corporate name or goodwill have, through the natural development of its trade, established
themselves. And it contends that its rights to the use of its corporate and trade name:
"'Is a property right, a right in rem, which it may assert and protect against all the
world, in any of the courts of the world — even in jurisdictions where it does not transact
business — just the same as it may protect its tangible property, real or personal, against
trespass, or conversion. Citing sec. 10, Nims on Unfair Competition and TradeMarks and cases
cited; secs. 21-22, Hopkins on TradeMarks, Trade Names and Unfair Competition and cases
cited.' That point is sustained by the authorities, and is well stated in Hanover Star Mining Co.
v. Allen and Wheeler Co. (208 Fed., 513), in which the syllabus says:
"'Since it is the trade and not the mark that is to be protected, a trade-mark
acknowledges no territorial boundaries of municipalities or states or nations, but extends to
every market where the trader's goods have become known and identified by the use of the
mark.'"
Our recognizing the capacity of the petitioner to sue is not by any means novel or precedent setting. Our
jurisprudence is replete with cases illustrating instances when foreign corporations not doing business in the Philippines
may nonetheless sue in our courts. In East Board Navigation Ltd, v. Ysmael and Co., Inc. (102 Phil. 1), we recognized a
right of foreign corporation to sue on isolated transactions. In General Garments Corp. v. Director of Patents (41 SCRA
50), we sustained the right of Puritan Sportswear Corp., a foreign corporation not licensed to do and not doing business in
the Philippines, to file a petition for cancellation of a trademark before the Patent Office. prcd
More important is the nature of the case which led to this petition. What preceded this petition for certiorari was a
letter-complaint filed before the NBI charging Hemandas with a criminal offense, i.e., violation of Article 189 of the
Revised Penal Code. If prosecution follows after the completion of the preliminary investigation being conducted by the
Special Prosecutor the information shall be in the name of the People of the Philippines and no longer the petitioner which
is only an aggrieved party since a criminal offense is essentially an act against the State. It is the latter which is principally
the injured party although there is a private right violated. Petitioner's capacity to sue would become, therefore, of not much
significance in the main case. We cannot allow a possible violator of our criminal statutes to escape prosecution upon a far-
fetched contention that the aggrieved party or victim of a crime has no standing to sue.
In upholding the right of the petitioner to maintain the present suit before our courts for unfair competition or
infringement of trademarks of a foreign corporation, we are moreover recognizing our duties and the rights of foreign states
under the Paris Convention for the Protection of Industrial Property to which the Philippines and France are parties. We are
simply interpreting and enforcing a solemn international commitment of the Philippines embodied in a multilateral treaty to
which we are a party and which we entered into because it is in our national interest to do so.
The Paris Convention provides in part that:
ARTICLE 1
"(1) The countries to which the present Convention applies constitute themselves into a Union for the
protection of industrial property.
"(2) The protection of industrial property is concerned with patents, utility models, industrial designs,
trademarks service marks trade names, and indications of source or appellations of origin and the repression
of unfair competition.
xxx xxx xxx
ARTICLE 2
"(2) Nationals of each of the countries of the Union shall, as regards the protection of industrial property,
enjoy in all the other countries of the Union the advantages that their respective laws now grant, or may
hereafter grant, to nationals, without prejudice to the rights specially provided by the present Convention.
 Consequently, they shall have the same protection as the latter, and the same legal remedy against any
infringement of their rights, provided they observe the conditions and formalities imposed upon nationals.
 
xxx xxx xxx
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, imitation or translation, liable to create confusion, of a mark considered by
the competent authority of the country of registration or use to be well-known in that country as being
already the mark of a person entitled to the benefits of the present Convention and used for identical or
similar goods. These provisions shall also apply when the essential part of the mark constitutes a
reproduction of any such well-known mark or an imitation liable to create confusion therewith.
xxx xxx xxx
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.
xxx xxx xxx
ARTICLE 10bis
"(1) The countries of the Union are bound to assure to persons entitled to the benefits of the Union effective
protection against unfair competition.
xxx xxx xxx
ARTICLE 10ter
"(1) The countries of the Union undertake to assure to nationals of the other countries of the Union
appropriate legal remedies to repress effectively all the acts referred to in Articles 9, 10 and 10bis.
"(2) They undertake, further, to provide measures to permit syndicates and associations which represent the
industrialists, producers or traders concerned and the existence of which is not contrary to the laws of their
countries, to take action in the Courts or before the administrative authorities, with a view to the repression
of the acts referred to in Articles 9,10 and 10bis, in so far as the law of the country in which protection is
claimed allows such action by the syndicates and associations of that country.
xxx xxx xxx
ARTICLE 17
"Every country party to this Convention undertakes to adopt, in accordance with its constitution, the
measures necessary to ensure the application of this Convention.
"It is understood that at the time an instrument of ratification or accession is deposited on behalf of a
country; such country will be in a position under its domestic law to give effect to the provisions of this
Convention." (61 O.G. 8010).
xxx xxx xxx
In Vanity Fair Mills, Inc. v. T. Eaton Co. (234 F. 2d 633) the United States Circuit Court of Appeals had occasion
to comment on the extraterritorial application of the Paris Convention. It said that:
"[11] The International Convention is essentially a compact between the various member countries to accord
in their own countries to citizens of the other contracting parties trademark and other rights comparable to
those accorded their own citizens by their domestic law. The underlying principle is that foreign nationals
should be given the same treatment in each of the member countries as that country makes available to its
own citizens. In addition, the Convention sought to create uniformity in certain respects by obligating each
member nation 'to assure to nationals of countries of the Union an effective protection against unfair
competition.'
 "[12] The Convention is not premised upon the idea that the trade- mark and related laws of each member
nation shall be given extra-territorial application, but on exactly the converse principle that each nation's law
shall have only territorial application. Thus a foreign national of a member nation using his trademark in
commerce in the United States is accorded extensive protection here against infringement and other types of
unfair competition by virtue of United States membership in the Convention. But that protection has its
source in, and is subject to the limitations of, American law, not the law of the foreign national's own
country." . . .
By the same token, the petitioner should be given the same treatment in the Philippines as we make available to our
own citizens. We are obligated to assure to nationals of "countries of the Union" an effective protection against unfair
competition in the same way that they are obligated to similarly protect Filipino citizens and firms.
Pursuant to this obligation, the Ministry of Trade on November 20, 1980 issued a memorandum addressed to the
Director of the Patents Office directing the latter —
xxx xxx xxx
". . . reject all pending applications for Philippine registration of signature and other world famous
trademarks by applicants other than its original owners or users.
"The conflicting claims over internationally known trademarks involve such name brands as Lacoste,
Jordache, Gloria Vanderbilt, Sasson, Fila, Pierre Cardin, Gucci, Christian Dior, Oscar de la Renta, Calvin
Klein, Givenchy, Ralph Lauren, Geoffrey Beene, Lanvin and Ted Lapidus.
"It is further directed that, in cases where warranted, Philippine registrants of such trademarks should be
asked to surrender their certificates of registration, if any, to avoid suits for damages and other legal action
by the trademarks' foreign or local owners or original users."
The memorandum is a clear manifestation of our avowed adherence to a policy of cooperation and amity with all
nations. It is not, as wrongly alleged by the private respondent, a personal policy of Minister Luis Villafuerte which expires
once he leaves the Ministry of Trade. For a treaty or convention is not a mere moral obligation to be enforced or not at the
whims of an incumbent head of a Ministry. It creates a legally binding obligation on the parties founded on the generally
accepted principle of international law of pacta sunt servanda which has been adopted as part of the law of our land.
(Constitution, Art. II, Sec. 3). The memorandum reminds the Director of Patents of his legal duty to obey both law and
treaty. It must also be obeyed.
Hemandas further contends that the respondent court did not commit grave abuse of discretion in issuing the
questioned order of April 22, 1983.
A review of the grounds invoked by Hemandas in his motion to quash the search warrants reveals the fact that they
are not appropriate for quashing a warrant. They are matters of defense which should be ventilated during the trial on the
merits of the case. For instance, on the basis of the facts before the Judge, we fail to understand how he could treat a bare
allegation that the respondent's trademark is different from the petitioner's trademark as a sufficient basis to grant the
motion to quash. We will treat the issue of prejudicial question later. Granting that respondent Hemandas was only trying to
show the absence of probable cause, we, nonetheless, hold the arguments to be untenable. cdll
As a mandatory requirement for the issuance of a valid search warrant, the Constitution requires in no uncertain
terms the determination of probable cause by the judge after examination under oath or affirmation of the complainant and
the witnesses he may produce (Constitution, Art IV, Sec. 3). Probable cause has traditionally meant such facts and
circumstances antecedent to the issuance of the warrant that are in themselves sufficient to induce a cautious man to rely
upon them and act in pursuance thereof (People v. Sy Juco, 64 Phil. 667).
This concept of probable cause was amplified and modified by our ruling in Stonehill v. Diokno, (20 SCRA 383)
that probable cause "presupposes the introduction of competent proof that the party against whom it is sought has
performed particular acts, or committed specific  omissions, violating a given provision of our criminal laws."
The question of whether or not probable cause exists is one which must be decided in the light of the conditions
obtaining in given situations (Central Bank v. Morfe, 20 SCRA 507). We agree that there is no general formula or fixed rule
for the determination of the existence of probable cause since, as we have recognized in Luna v. Plaza (26 SCRA 310), the
existence depends to a large degree upon the finding or opinion of the judge conducting the examination. However, the
findings of the judge should not disregard the facts before him nor run counter to the clear dictates of reason, More so it is
plain that our country's ability to abide by international commitments is at stake.
The records show that the NBI agents at the hearing of the application for the warrants before respondent court
presented three witnesses under oath, sworn statements, and various exhibits in the form of clothing apparels manufactured
by Hemandas but carrying the trademark Lacoste. The respondent court personally interrogated Ramon Esguerra, Samuel
Fiji, and Mamerto Espatero by means of searching questions. After hearing the testimonies and examining the documentary
evidence, the respondent court was convinced that there were good and sufficient reasons for the issuance of the warrant.
And it then issued the warrant. cdrep
The respondent court, therefore, complied with the constitutional and statutory requirements for the issuance of a
valid search warrant. At that point in time, it was fully convinced that there existed probable cause. But after hearing the
motion to quash and the oppositions thereto, the respondent court executed a complete turnabout and declared that there
was no probable cause to justify its earlier issuance of the warrants.
True, the lower court should be given the opportunity to correct its errors, if there be any, but the rectification must,
as earlier stated be based on sound and valid grounds. In this case, there was no compelling justification for the about face.
The allegation that vital facts were deliberately suppressed or concealed by the petitioner should have been assessed more
carefully because the object of the quashal was the return of items already seized and easily examined by the court. The
items were alleged to be fake and quite obviously would be needed as evidence in the criminal prosecution. Moreover, an
application for a search warrant is heard ex parte. It is neither a trial nor a part of the trial. Action on these applications must
be expedited for time is of the essence. Great reliance has to be accorded by the judge to the testimonies under oath of the
complainant and the witnesses. The allegation of Hemandas that the applicant withheld information from the respondent
court was clearly no basis to order the return of the seized items. cdrep
Hemandas relied heavily below and before us on the argument that it is the holder of a certificate of registration of
the trademark "CHEMISE LACOSTE & CROCODILE DEVICE". Significantly, such registration is only in the
Supplemental Register.
A certificate of registration in the Supplemental Register is not prima facie evidence of the validity of registration,
of the registrant's exclusive right to use the same in connection with the goods, business, or services specified in the
certificate. Such a certificate of registration cannot be filed, with effect, with the Bureau of Customs in order to exclude
from the Philippines, foreign goods bearing infringement marks or trade names (Rule 124, Revised Rules of Practice Before
the Phil. Pat. Off. in Trademark Cases; Martin, Philippine Commercial Laws, 1981, Vol. 2, pp. 513-515).
Section 19-A of Republic Act 166 as amended not only provides for the keeping of the supplemental register in
addition to the principal register but specifically directs that:
xxx xxx xxx
"The certificates of registration for marks and trade names registered on the supplemental register shall be
conspicuously different from certificates issued for marks and trade names registered on the principal
register."
xxx xxx xxx
The reason is explained by a leading commentator on Philippine Commercial Laws:
"'The registration of a mark upon the supplemental register is not, as in the case of the principal register,
prima facie evidence of (1) the validity of registration; (2) registrant's ownership of the mark; and (3)
registrant's exclusive right to use the mark. It is not subject to opposition, although it may be cancelled after
its issuance. Neither may it be the subject of interference proceedings. Registration on the supplemental
register is not constructive notice of registrant's claim of ownership. A supplemental register is provided for
the registration of marks which are not registrable on the principal register because of some defects
(conversely, defects which make a mark unregistrable on the principal register, yet do not bar them from the
supplemental register.)' (Agbayani, II Commercial Laws of the Philippines, 1978, p. 514, citing Uy Hong
Mo v. Titay & Co., et al., Dec. No. 254 of Director of Patents, Apr. 30, 1963;"
Registration in the Supplemental Register, therefore, serves as notice that the registrant is using or has appropriated
the trademark. By the very fact that the trademark cannot as yet be entered in the Principal Register, all who deal with it
should be on guard that there are certain defects, some obstacles which the user must still overcome before he can claim
legal ownership of the mark or ask the courts to vindicate his claims of an exclusive right to the use of the same. It would be
deceptive for a party with nothing more than a registration in the Supplemental Register to posture before courts of justice
as if the registration is in the Principal Register.
The reliance of the private respondent on the last sentence of the Patent office action on application Serial No.
30954 that "registrant is presumed to be the owner of the mark until after the registration is declared cancelled" is,
therefore, misplaced and grounded on shaky foundation. The supposed presumption not only runs counter to the precept
embodied in Rule 124 of the Revised Rules of Practice before the Philippine Patent Office in Trademark Cases but
considering all the facts ventilated before us in the four interrelated petitions involving the petitioner and the respondent, it
is devoid of factual basis. And even in cases where presumption and precept may factually be reconciled, we have held that
the presumption is rebuttable, not conclusive, (People v. Lim Hoa, G.R. No. 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). Cdpr
By the same token, the argument that the application was premature in view of the pending case before the Patent
Office is likewise without legal basis.
The proceedings pending before the Patent Office involving IPC Co. 1658 do not partake of the nature of a
prejudicial question which must first be definitely resolved.
Section 5 of Rule 111 of the Rules of Court provides that:
"A petition for the suspension of the criminal action based upon the pendency of a pre-judicial question in a
civil case, may only be presented by any party before or during the trial of the criminal action."
The case which suspends the criminal prosecution must be a civil case which is determinative of the innocence or,
subject to the availability of other defenses, the guilt of the accused. The pending case before the Patent Office is an
administrative proceeding and not a civil case. The decision of the Patent Office cannot be finally determinative of the
private respondent's innocence of the charges against him.
In Flordelis v. Castillo  (58 SCRA 301), we held that:
"As clearly delineated in the aforecited provisions of the new Civil Code and the Rules of Court, and as
uniformly applied in numerous decisions of this Court, (Berbari v. Concepcion, 40 Phil. 837 (1920); Aleria
v. Mendoza, 83 Phil. 427 (1949); People v. Aragon, 94 Phil. 357 (1954); Brito-Sy v. Malate Taxicab &
Garage, Inc., 102 Phil. 482 (1957); Mendiola v. Macadael, 1 SCRA 593; Benitez v. Concepcion, 2 SCRA
178; Zapante v. Montesa, 4 SCRA 510; Jimenez v. Averia, 22 SCRA 1380.) In Buenaventura v. Ocampo (55
SCRA 271) the doctrine of prejudicial question was held inapplicable because no criminal case but merely
an administrative case and a civil suit were involved. The Court, however, held that, in view of the peculiar
circumstances of that case, the respondents' suit for damages in the lower court was premature as it was filed
during the pendency of an administrative case against the respondents before the POLCOM. 'The possibility
cannot be overlooked,' said the Court, 'that the POLCOM may hand down a decision adverse to the
respondents, in which case the damage suit will become unfounded and baseless for wanting in cause of
action.') the doctrine of pre-judicial question comes into play generally in a situation where a civil action and
a criminal action both pend and there exists in the former an issue which must be preemptively resolved
before the criminal action may proceed, because howsoever the issue raised in the civil action is resolved
would be determinative juris et de jure  of the guilt or innocence of the accused in the criminal case."
In the present case, no civil action pends nor has any been instituted. What was pending was an administrative case
before the Patent Office.
Even assuming that there could be an administrative proceeding with exceptional or special circumstances which
render a criminal prosecution premature pending the promulgation of the administrative decision, no such peculiar
circumstances are present in this case.
Moreover, we take note of the action taken by the Patents Office and the Minister of Trade and affirmed by the
Intermediate Appellate Court in the case of La Chemise Lacoste S. A. v. Ram Sadhwani (AC-G.R. No. SP-13356, June 17,
1983).
The same November 20, 1980 memorandum of the Minister of Trade discussed in this decision was involved in the
appellate court's decision. The Minister as the "implementing authority" under Article 6bis of the Paris Convention for the
protection of Industrial Property instructed the Director of Patents to reject applications for Philippine registration of
signature and other world famous trademarks by applicants other than its original owners or users. The brand "Lacoste" was
specifically cited together with Jordache, Gloria Vanderbilt, Sasson, Fila, Pierre Cardin, Gucci, Christian Dior, Oscar dela
Renta, Calvin Klein, Givenchy, Ralph Laurence, Geoffrey Beene, Lanvin, and Ted Lapidus. The Director of Patents was
likewise ordered to require Philippine registrants of such trademarks to surrender their certificates of registration.
Compliance by the Director of Patents was challenged. LLpr
The Intermediate Appellate Court, in the La Chemise Lacoste S.A. v. Sadhwani decision which we cite with
approval sustained the power of the Minister of Trade to issue the implementing memorandum and, after going over the
evidence in the records, affirmed the decision of the Director of Patents declaring La Chemise Lacoste S.A. the owner of
the disputed trademark and crocodile or alligator device. The Intermediate Appellate Court speaking through Mr. Justice
Vicente V. Mendoza stated:
 "In the case at bar, the Minister of Trade, as 'the competent authority of the country of registration,' has
found that among other well-known trademarks 'Lacoste' is the subject of conflicting claims. For this reason,
applications for its registration must be rejected or refused, pursuant to the treaty obligation of the
Philippines.
"Apart from this finding, the annexes to the opposition, which La Chemise Lacoste S.A. filed in the Patent
Office, show that it is the owner of the trademark 'Lacoste' and the device consisting of a representation of a
crocodile or alligator by the prior adoption and use of such mark and device on clothing, sports apparel and
the like. La Chemise Lacoste S.A. obtained registration of these mark and device and was in fact issued
renewal certificates by the French National Industrial Property Office.
xxx xxx xxx
"Indeed, due process is a rule of reason. In the case at bar the order of the Patent Office is
based not only on the undisputed fact of ownership of the trademark by the appellee but on a prior
determination by the Minister of Trade, as the competent authority under the Paris Convention, that
the trademark and device sought to be registered by the appellant are well-known marks which the
Philippines, as party to the Convention, is bound to protect in favor of its owners. It would be to exalt
form over substance to say that under the circumstances, due process requires that a hearing should be
held before the application is acted upon.
"The appellant cites section 9 of Republic Act No. 166, which requires notice and hearing whenever an
opposition to the registration of a trademark is made. This provision does not apply, however, to situations
covered by the Paris Convention, where the appropriate authorities have determined that a well-known
trademark is already that of another person. In such cases, the countries signatories to the Convention are
obliged to refuse or to cancel the registration of the mark by any other person or authority. In this case, it is
not disputed that the trademark Lacoste is such a well-known mark that a hearing, such as that provided
in Republic Act No. 166, would be superfluous."
The issue of due process was raised and fully discussed in the appellate court's decision. The court ruled that due
process was not violated.
In the light of the foregoing it is quite plain that the prejudicial question argument is without merit.
We have carefully gone over the records of all the cases filed in this Court and find more than enough evidence to
sustain a finding that the petitioner is the owner of the trademarks "LACOSTE", "CHEMISE LACOSTE", the crocodile or
alligator device, and the composite mark of LACOSTE and the representation of the crocodile or alligator. Any pretensions
of the private respondent that he is the owner are absolutely without basis. Any further ventilation of the issue of ownership
before the Patent Office will be a superfluity and a dilatory tactic.
The issue of whether or not the trademark used by the private respondent is different from the petitioner's
trademark is a matter of defense and will be better resolved in the criminal proceedings before a court of justice instead of
raising it as a preliminary matter in an administrative proceeding.
The purpose of the law protecting a trademark cannot be overemphasized. They are to point out distinctly the
origin or ownership of the article to which it is affixed, to secure to him, who has been instrumental in bringing into market
a superior article of merchandise, the fruit of his industry and skill, and to prevent fraud and imposition (Etepha v. Director
of Patents, 16 SCRA 495).
The legislature has enacted laws to regulate the use of trademarks and provide for the protection thereof. Modern
trade and commerce demands that depredations on legitimate trade marks of non-nationals including those who have not
shown prior registration thereof should not be countenanced. The law against such depredations is not only for the
protection of the owner of the trademark but also, and more importantly, for the protection of purchasers from confusion,
mistake, or deception as to the goods they are buying. (Asari Yoko Co., Ltd. v. Kee Boc, 1 SCRA 1; General Garments
Corporation v. Director of Patents, 41 SCRA 50). cdphil
The law on trademarks and tradenames is based on the principle of business integrity and common justice. This
law, both in letter and spirit, is laid upon the premise that, while it encourages fair trade in every way and aims to foster,
and not to hamper, competition, no one, especially a trader, is justified in damaging or jeopardizing another's business by
fraud, deceipt, trickery or unfair methods of any sort. This necessarily precludes the trading by one dealer upon the good
name and reputation built up by another (Baltimore v. Moses, 182 Md 229, 34 A (2d) 338).
The records show that the goodwill and reputation of the petitioner's products bearing the trademark LACOSTE
date back even before 1964 when LACOSTE clothing apparels were first marketed in the Philippines. To allow Hemandas
to continue using the trademark Lacoste for the simple reason that he was the first registrant in the Supplemental Register of
a trademark used in international commerce and not belonging to him is to render nugatory the very essence of the law on
trademarks and tradenames.
We now proceed to the consideration of the petition in Gobindram Hemandas Sujanani v. Hon. Roberto V.
Ongpin, et al. (G.R. No. 65659).
Actually, three other petitions involving the same trademark and device have been filed with this Court.
In Hemandas & Co. v. Intermediate Appellate Court et al. (G.R. No. 63504), the petitioner asked for the following
relief:
"IN VIEW OF ALL THE FOREGOING, it is respectfully prayed (a) that the Resolutions of the respondent
Court of January 3, 1983 and February 24, 1983 be nullified; and that the Decision of the same respondent
Court of June 30, 1983 be declared to be the law on the matter: (b) that the Director of Patents be directed to
issue the corresponding registration certificate in the Principal Register; and (c) granting upon the petitioner
such other legal and equitable remedies as are justified by the premises."
On December 5, 1983, we issued the following resolution:
"Considering the allegations contained, issues raised and the arguments adduced in the petition for review,
the respondent's comment thereon, and petitioner's reply to said comment, the Court Resolved to DENY the
petition for lack of merit.
"The Court further Resolved to CALL the attention of the Philippine Patent Office to the pendency in this
Court of G.R. No. 563796-97 entitled 'La Chemise Lacoste, S.A. v. Hon. Oscar C. Fernandez and
Gobindram Hemandas' which was given due course on June 14, 1983 and to the fact that G.R. No. 63928-29
entitled 'Gobindram Hemandas v. La Chemise Lacoste, S.A., et al.' filed on May 9, 1983 was dismissed for
lack of merit on September 12, 1983. Both petitions involve the same dispute over the use of the trademark
'Chemise Lacoste'."
The second case of Gobindram Hemandas v. La Chemise Lacoste, S.A., et al. (G.R. No. 63928-29) prayed for the
following:
"I. On the petition for issuance of writ of preliminary injunction, an order be issued after due hearing:
"1. Enjoining and restraining respondents Company, attorneys-in-fact, and Estanislao
Granados from further proceedings in the unfair competition charges pending with the Ministry
of Justice filed against petitioner;
"2. Enjoining and restraining respondents Company and its attorneys-in-fact from
causing undue publication in newspapers of general circulation on their unwarranted claim that
petitioner's products are FAKE pending proceedings hereof; and
"3. Enjoining and restraining respondents Company and its attorneys-in-fact from
sending further threatening letters to petitioner's customers unjustly stating that petitioner's
products they are dealing in are FAKE and threatening them with confiscation and seizure
thereof.
"II. On the main petition, judgment be rendered:
"1. Awarding and granting the issuance of the Writ of Prohibition, prohibiting,
stopping, and restraining respondents from further committing the acts complained of;
"2. Awarding and granting the issuance of the Writ of Mandamus, ordering and
compelling respondents National Bureau of Investigation, its aforenamed agents, and State
Prosecutor Estanislao Granados to immediately comply with the Order of the Regional Trial
Court, National Capital Judicial Region, Branch XLIX, Manila, dated April 22, 1983, which
directs the immediate return of the seized items under Search Warrants Nos. 83-128 and 83-
129;
"3. Making permanent any writ of injunction that may have been previously issued by
this Honorable Court in the petition at bar; and
"4. Awarding such other and further relief as may be just and equitable in the
premises."
 As earlier stated, this petition was dismissed for lack of merit on September 12, 1983. Acting on a motion for
reconsideration, the Court on November 23, 1983 resolved to deny the motion for lack of merit and declared the denial to
be final.
Hemandas v. Hon. Roberto Ongpin (G.R. No. 65659) is the third petition.
In this last petition, the petitioner prays for the setting aside as null and void and for the prohibiting of the
enforcement of the following memorandum of respondent Minister Roberto Ongpin:
"MEMORANDUM:
FOR: THE DIRECTOR OF PATENTS
Philippine Patent Office
"Pursuant to Executive Order No. 913 dated 7 October 1983 which strengthens the rule making and
adjudicatory powers of the Minister of Trade and Industry and provides inter alia, that 'such rule-making and
adjudicatory powers should be revitalized in order that the Minister of Trade and Industry can . . . apply
more swift and effective solutions and remedies to old and new problems . . . such as the infringement of
internationally-known tradenames and trademarks . . .' and in view of the decision of the Intermediate
Appellate Court in the case of LA CHEMISE LACOSTE, S.A., versus RAM SADWHANI [AC-G.R. Sp.
No. 13359 (17) June 1983] which affirms the validity of the MEMORANDUM of then Minister Luis R.
Villafuerte dated 20 November 1980 confirming our obligations under the PARIS CONVENTION FOR
THE PROTECTION OF INDUSTRIAL PROPERTY to which the Republic of the Philippines is a
signatory, you are hereby directed to implement measures necessary to effect compliance with our
obligations under said convention in general, and, more specifically, to honor our commitment under Section
6 bis thereof, as follows:
"1. Whether the trademark under consideration is well-known in the Philippines or is a mark already
belonging to a person entitled to the benefits of the CONVENTION, this should be established, pursuant to
Philippine Patent Office procedures in inter partes and ex parte cases, according to any of the following
criteria or any combination thereof:
"(a) a declaration by the Minister of Trade and Industry that the trademark being
considered is already well-known in the Philippines such that permission for its use by other
than its original owner will constitute a reproduction, imitation, translation or other
infringement;
"(b) that the trademark is used in commerce internationally, supported by proof that
goods bearing the trademark are sold on an international scale, advertisements, the
establishment of factories, sales offices, distributorships, and the like, in different countries,
including volume or other measure of international trade and commerce;
"(c) that the trademark is duly registered in the industrial property office(s) of another
country or countries, taking into consideration the dates of such registration;
"(d) that the trademark has been long established and obtained goodwill and general
international consumer recognition as belonging to one owner or source;
"(e) that the trademark actually belongs to a party claiming ownership and has the right
to registration under the provisions of the aforestated PARIS CONVENTION.
"2. The word trademark, as used in this MEMORANDUM, shall include tradenames, service marks, logos,
signs, emblems, insignia or other similar devices used for identification and recognition by consumers.
"3. The Philippine Patent Office shall refuse all applications for, or cancel the registration of, trademarks
which constitute a reproduction, translation or imitation of a trademark owned by a person, natural or
corporate, who is a citizen of a country signatory to the PARIS CONVENTION FOR THE PROTECTION
OF INDUSTRIAL PROPERTY.
"4. The Philippine Patent Office shall give due course to the Opposition in cases already or hereafter filed
against the registration of trademarks entitled to protection of Section 6 bis  of said PARIS CONVENTION
as outlined above, by remanding applications filed by one not entitled to such protection for final
disallowance by the Examination Division.
"5. All pending applications for Philippine registration of signature and other world famous trademarks filed
by applicants other than their original owners or users shall be rejected forthwith. Where such applicants
 have already obtained registration contrary to the abovementioned PARIS CONVENTION and/or Philippine
Law, they shall be directed to surrender their Certificates of Registration to the Philippine Patent Office for
immediate cancellation proceedings.
"6. Consistent with the foregoing, you are hereby directed to expedite the hearing and to decide without
delay the following cases pending before your Office:
"1. INTER PARTES CASE NO. 1689 — Petition filed by La Chemise Lacoste, S.A.
for the cancellation of Certificate of Registration No. SR-2225 issued to Gobindram Hemandas,
assignee of Hemandas and Company;
"2. INTER PARTES CASE NO. 1658 — Opposition filed by Games and Garments
Co. against the registration of the trademark Lacoste sought by La Chemise Lacoste, S.A.;
"3. INTER PARTES CASE NO. 1786 — Opposition filed by La Chemise Lacoste,
S.A. against the registration of trademark Crocodile Device and Skiva sought by one Wilson
Chua.'"
Considering our discussions in G.R. Nos. 63796-97, we find the petition in G.R. No. 65659 to be patently without
merit and accordingly deny it due course.
In complying with the order to decide without delay the cases specified in the memorandum, the Director of
Patents shall limit himself to the ascertainment of facts in issues not resolved by this decision and apply the law as
expounded by this Court to those facts.
One final point. It is essential that we stress our concern at the seeming inability of law enforcement officials to
stem the tide of fake and counterfeit consumer items flooding the Philippine market or exported abroad from our country.
The greater victim is not so much the manufacturer whose product is being faked but the Filipino consuming public and in
the case of exportations, our image abroad. No less than the President, in issuing Executive Order No. 913 dated October 7,
1983 to strengthen the powers of the Minister of Trade and Industry for the protection of consumers, stated that, among
other acts, the dumping of substandard, imitated, hazardous, and cheap goods, the infringement of internationally known
tradenames and trademarks, and the unfair trade practices of business firms has reached such proportions as to constitute
economic sabotage. We buy a kitchen appliance, a household tool, perfume, face powder, other toilet articles, watches,
brandy or whisky, and items of clothing like jeans, T-shirts, neckties, etc. — the list is quite lengthy — and pay good
money relying on the brand name as guarantee of its quality and genuine nature only to explode in bitter frustration and
helpless anger because the purchased item turns out to be a shoddy imitation, albeit a clever looking counterfeit, of the
quality product. Judges all over the country are well advised to remember that court processes should not be used as
instruments to, unwittingly or otherwise, aid counterfeiters and intellectual pirates, tie the hands of the law as it seeks to
protect the Filipino consuming public and frustrate executive and administrative implementation of solemn commitments
pursuant to international conventions and treaties. LLphil
WHEREFORE, the petition in G.R. NOS. 63797-97 is hereby GRANTED. The order dated April 22, 1983 of the
respondent regional trial court is REVERSED and SET ASIDE. Our Temporary Restraining Order dated April 29, 1983 is
made PERMANENT. The petition in G.R. NO. 65659 is DENIED due course for lack of merit, Our Temporary Restraining
Order dated December 5, 1983 is LIFTED and SET ASIDE, effective immediately.
SO ORDERED.
|||  (La Chemise Lacoste, S.A. v. Fernandez, G.R. Nos. 63796-97, 65659, [May 21, 1984], 214 PHIL 332-362)

SECOND DIVISION

[G.R. No. 158589. June 27, 2006.]

PHILIP MORRIS, INC., BENSON & HEDGES (CANADA), INC., and FABRIQUES DE TABAC REUNIES, S.A., (now known as PHILIP MORRIS
PRODUCTS S.A.), petitioners, vs. FORTUNE TOBACCO CORPORATION, respondent.
 DECISION

GARCIA, J p:

Via this petition for review under Rule 45 of the Rules of Court, herein petitioners Philip Morris, Inc., Benson & Hedges
(Canada) Inc., and Fabriques de Tabac Reunies, S.A. (now Philip Morris Products S.A.) seek the reversal and setting aside of the
following issuances of the Court of Appeals (CA) in CA-G.R. CV No. 66619, to wit:
1. Decision dated January 21, 2003 1 affirming an earlier decision of the Regional Trial Court of Pasig City,
Branch 166, in its Civil Case No. 47374, which dismissed the complaint for trademark infringement and
damages thereat commenced by the petitioners against respondent Fortune Tobacco Corporation; and
2. Resolution dated May 30, 2003 2 denying petitioners' motion for reconsideration.
Petitioner Philip Morris, Inc., a corporation organized under the laws of the State of Virginia, United States of America, is,
per Certificate of Registration No. 18723 issued on April 26, 1973 by the Philippine Patents Office (PPO), the registered owner of the
trademark "MARK VII" for cigarettes. Similarly, petitioner Benson & Hedges (Canada), Inc., a subsidiary of Philip Morris, Inc., is the
registered owner of the trademark "MARK TEN" for cigarettes as evidenced by PPO Certificate of Registration No. 11147. And as
can be seen in Trademark Certificate of Registration No. 19053, another subsidiary of Philip Morris, Inc., the Swiss company
Fabriques de Tabac Reunies, S.A., is the assignee of the trademark "LARK," which was originally registered in 1964 by Ligget and
Myers Tobacco Company. On the other hand, respondent Fortune Tobacco Corporation, a company organized in the Philippines,
manufactures and sells cigarettes using the trademark "MARK."
The legal dispute between the parties started when the herein petitioners, on the claim that an infringement of their respective
trademarks had been committed, filed, on August 18, 1982, a Complaint for Infringement of Trademark and Damages against
respondent Fortune Tobacco Corporation, docketed as Civil Case No. 47374 of the Regional Trial Court of Pasig, Branch
166. DCHIAS
The decision under review summarized what happened next, as follows:
In the Complaint . . . with prayer for the issuance of a preliminary injunction, [petitioners] alleged that
they are foreign corporations not doing business in the Philippines and are suing on an isolated transaction. . . .
they averred that the countries in which they are domiciled grant . . . to corporate or juristic persons of the
Philippines the privilege to bring action for infringement, . . . without need of a license to do business in those
countries. [Petitioners] likewise manifested [being registered owners of the trademark "MARK VII" and "MARK
TEN" for cigarettes as evidenced by the corresponding certificates of registration and an applicant for the
registration of the trademark "LARK MILDS"]. . . . . [Petitioners] claimed that they have registered the
aforementioned trademarks in their respective countries of origin and that, by virtue of the long and extensive
usage of the same, these trademarks have already gained international fame and acceptance. Imputing bad faith on
the part of the [respondent], petitioners claimed that the [respondent], without any previous consent from any of
the [petitioners], manufactured and sold cigarettes bearing the identical and/or confusingly similar trademark
"MARK" . . . Accordingly, they argued that [respondent's] use of the trademark "MARK" in its cigarette products
have caused and is likely to cause confusion or mistake, or would deceive purchasers and the public in general
into buying these products under the impression and mistaken belief that they are buying [petitioners'] products.
Invoking the provisions of the Paris Convention for the Protection of Industrial and Intellectual
Property (Paris Convention, for brevity), to which the Philippines is a signatory . . ., [petitioners] pointed out that
upon the request of an interested party, a country of the Union may prohibit the use of a trademark which
constitutes a reproduction, imitation, or translation of a mark already belonging to a person entitled to the benefits
of the said Convention. They likewise argued that, in accordance with Section 21-A in relation to Section 23 of
Republic Act 166, as amended, they are entitled to relief in the form of damages . . . [and] the issuance of a writ of
preliminary injunction which should be made permanent to enjoin perpetually the [respondent] from violating
[petitioners'] right to the exclusive use of their aforementioned trademarks. ITAaCc
[Respondent] filed its Answer . . . denying [petitioners'] material allegations and . . . averred [among
other things] . . . that "MARK" is a common word, which cannot particularly identify a product to be the product
of the [petitioners] . . .
xxx xxx xxx
Meanwhile, after the [respondent] filed its Opposition (Records, Vo. I, p. 26), the matter of the
[petitioners'] prayer for the issuance of a writ of preliminary injunction was negatively resolved by the court in
an Order . . . dated March 28, 1973. [The incidental issue of the propriety of an injunction would eventually be
 elevated to the CA and would finally be resolved by the Supreme Court in its Decision dated July 16, 1993 in
G.R. No. 91332]. . . . .
xxx xxx xxx
After the termination of the trial on the merits . . . trial court rendered its Decision . . . dated November 3,
1999 dismissing the complaint and counterclaim after making a finding that the [respondent] did not commit
trademark infringement against the [petitioners]. Resolving first the issue of whether or not [petitioners] have
capacity to institute the instant action, the trial court opined that [petitioners'] failure to present evidence to
support their allegation that their respective countries indeed grant Philippine corporations reciprocal or similar
privileges by law . . . justifies the dismissal of the complaint . . . . It added that the testimonies of [petitioners']
witnesses . . . essentially declared that [petitioners] are in fact doing business in the Philippines, but [petitioners]
failed to establish that they are doing so in accordance with the legal requirement of first securing a license.
Hence, the court declared that [petitioners] are barred from maintaining any action in Philippine courts pursuant to
Section 133 of the Corporation Code.
The issue of whether or not there was infringement of the [petitioners'] trademarks by the [respondent]
was likewise answered . . . in the negative. It expounded that "in order for a name, symbol or device to constitute a
trademark, it must, either by itself or by association, point distinctly to the origin or ownership of the article to
which it is applied and be of such nature as to permit an exclusive appropriation by one person". Applying such
principle to the instant case, the trial court was of the opinion that the words "MARK", "TEN", "LARK" and the
Roman Numerals "VII", either alone or in combination of each other do not by themselves or by association point
distinctly to the origin or ownership of the cigarettes to which they refer, such that the buying public could not be
deceived into believing that [respondent's] "MARK" cigarettes originated either from the USA, Canada, or
Switzerland.
Emphasizing that the test in an infringement case is the likelihood of confusion or deception, the trial
court stated that the general rule is that an infringement exists if the resemblance is so close that it deceives or is
likely to deceive a customer exercising ordinary caution in his dealings and induces him to purchase the goods of
one manufacturer in the belief that they are those of another. . . . . The trial court ruled that the [petitioners] failed
to pass these tests as it neither presented witnesses or purchasers attesting that they have bought [respondent's]
product believing that they bought [petitioners'] "MARK VII", "MARK TEN" or "LARK", and have also failed to
introduce in evidence a specific magazine or periodical circulated locally, which promotes and popularizes their
products in the Philippines. It, moreover, elucidated that the words consisting of the trademarks allegedly
infringed by [respondent] failed to show that they have acquired a secondary meaning as to identify them as
[petitioners'] products. Hence, the court ruled that the [petitioners] cannot avail themselves of the doctrine of
secondary meaning.
As to the issue of damages, the trial court deemed it just not to award any to either party stating that,
since the [petitioners] filed the action in the belief that they were aggrieved by what they perceived to be an
infringement of their trademark, no wrongful act or omission can be attributed to them. . . . .  3 (Words in brackets
supplied)
Maintaining to have the standing to sue in the local forum and that respondent has committed trademark infringement,
petitioners went on appeal to the CA whereat their appellate recourse was docketed as CA-G.R. CV No. 66619.
Eventually, the CA, in its Decision dated January 21, 2003, while ruling for petitioners on the matter of their legal capacity
to sue in this country for trademark infringement, nevertheless affirmed the trial court's decision on the underlying issue of
respondent's liability for infringement as it found that:
. . . the appellants' [petitioners'] trademarks, i.e., "MARK VII", "MARK TEN" and "LARK", do not
qualify as well-known marks entitled to protection even without the benefit of actual use in the local market and
that the similarities in the trademarks in question are insufficient as to cause deception or confusion tantamount to
infringement. Consequently, as regards the third issue, there is likewise no basis for the award of damages prayed
for by the appellants herein. 4 (Word in bracket supplied)
 
With their motion for reconsideration having been denied by the CA in its equally challenged Resolution of May 30, 2003,
petitioners are now with this Court via this petition for review essentially raising the following issues: (1) whether or not petitioners,
as Philippine registrants of trademarks, are entitled to enforce trademark rights in this country; and (2) whether or not respondent has
committed trademark infringement against petitioners by its use of the mark "MARK" for its cigarettes, hence liable for damages.
In its Comment, 5 respondent, aside from asserting the correctness of the CA's finding on its liability for trademark
infringement and damages, also puts in issue the propriety of the petition as it allegedly raises questions of fact.
 The petition is bereft of merit.
Dealing first with the procedural matter interposed by respondent, we find that the petition raises both questions of fact and
law contrary to the prescription against raising factual questions in a petition for review on certiorari filed before the Court. A
question of law exists when the doubt or difference arises as to what the law is on a certain state of facts; there is a question of fact
when the doubt or difference arises as to the truth or falsity of alleged facts. 6
Indeed, the Court is not the proper venue to consider factual issues as it is not a trier of facts.  7 Unless the factual findings of
the appellate court are mistaken, absurd, speculative, conflicting, tainted with grave abuse of discretion, or contrary to the findings
culled by the court of origin, 8 we will not disturb them. SCETHa
It is petitioners' posture, however, that their contentions should be treated as purely legal since they are assailing erroneous
conclusions deduced from a set of undisputed facts.
Concededly, when the facts are undisputed, the question of whether or not the conclusion drawn therefrom by the CA is
correct is one of law. 9 But, even if we consider and accept as pure questions of law the issues raised in this petition, still, the Court is
not inclined to disturb the conclusions reached by the appellate court, the established rule being that all doubts shall be resolved in
favor of the correctness of such conclusions. 10
Be that as it may, we shall deal with the issues tendered and determine whether the CA ruled in accordance with law and
established jurisprudence in arriving at its assailed decision.
A "trademark" is any distinctive word, name, symbol, emblem, sign, or device, or any combination thereof adopted and used
by a manufacturer or merchant on his goods to identify and distinguish them from those manufactured, sold, or dealt in by
others. 11 Inarguably, a trademark deserves protection. For, as Mr. Justice Frankfurter observed in Mishawaka Mfg. Co. v. Kresge
Co.: 12
The protection of trademarks is the law's recognition of the psychological function of symbols. If it is
true that we live by symbols, it is no less true that we purchase goods by them. A trade-mark is a merchandising
short-cut which induces a purchaser to select what he wants, or what he has been led to believe what he wants.
The owner of a mark exploits this human propensity by making every effort to impregnate the atmosphere of the
market with the drawing power of a congenial symbol. Whatever the means employed, the aim is the same — to
convey through the mark, in the minds of potential customers, the desirability of the commodity upon which it
appears. Once this is attained, the trade-mark owner has something of value. If another poaches upon the
commercial magnetism of the symbol he has created, the owner can obtain legal redress.
It is thus understandable for petitioners to invoke in this recourse their entitlement to enforce trademark rights in this country,
specifically, the right to sue for trademark infringement in Philippine courts and be accorded protection against unauthorized use of
their Philippine-registered trademarks.
In support of their contention respecting their right of action, petitioners assert that, as corporate nationals of member-
countries of the Paris Union, they can sue before Philippine courts for infringement of trademarks, or for unfair competition,  without
need of obtaining registration or a license to do business in the Philippines, and without necessity of actually doing business in
the Philippines. To petitioners, these grievance right and mechanism are accorded not only by Section 21-A of Republic Act (R.A.)
No. 166, as amended, or the Trademark Law, but also by Article 2 of the Paris Convention for the Protection of Industrial Property,
otherwise known as the Paris Convention.
In any event, petitioners point out that there is actual use of their trademarks in the Philippines as evidenced by the
certificates of registration of their trademarks. The marks "MARK TEN" and "LARK" were registered on the basis of actual use in
accordance with Sections 2-A 13 and 5(a) 14 of R.A. No. 166, as amended, providing for a 2-month pre-registration use in local
commerce and trade while the registration of "MARK VII" was on the basis of registration in the foreign country of origin pursuant to
Section 37 of the same law wherein it is explicitly provided that prior use in commerce need not be alleged. 15
Besides, petitioners argue that their not doing business in the Philippines, if that be the case, does not mean that cigarettes
bearing their trademarks are not available and sold locally. Citing Converse Rubber Corporation v. Universal Rubber Products,
Inc., 16 petitioners state that such availability and sale may be effected through the acts of importers and distributors. ITCHSa
Finally, petitioners would press on their entitlement to protection even in the absence of actual use of trademarks in the
country in view of the Philippines' adherence to the Trade Related Aspects of Intellectual Property Rights or the TRIPS Agreement
and the enactment of R.A. No. 8293, or the Intellectual Property Code (hereinafter the "IP Code"), both of which provide that the fame
of a trademark may be acquired through promotion or advertising with no explicit requirement of actual use in local trade or
commerce.
Before discussing petitioners' claimed entitlement to enforce trademark rights in the Philippines, it must be emphasized that
their standing to sue in Philippine courts had been recognized, and rightly so, by the CA. It ought to be pointed out, however, that the
appellate court qualified its holding with a statement, following G.R. No. 91332, entitled Philip Morris, Inc., et al. v. The Court of
Appeals and Fortune Tobacco Corporation, 17 that such right to sue does not necessarily mean protection of their registered marks in
the absence of actual use in the Philippines.
Thus clarified, what petitioners now harp about is their entitlement to protection on the strength of registration of their
trademarks in the Philippines.
As we ruled in G.R. No. 91332, 18 supra, so it must be here.
Admittedly, the registration of a trademark gives the registrant, such as petitioners, advantages denied non-registrants or
ordinary users, like respondent. But while petitioners enjoy the statutory presumptions arising from such registration, 19 i.e., as to the
validity of the registration, ownership and the exclusive right to use the registered marks, they may not successfully sue on the basis
alone of their respective certificates of registration of trademarks. For, petitioners are still foreign corporations. As such, they ought, as
a condition to availment of the rights and privileges vis-à-vis their trademarks in this country, to show proof that, on top of
Philippine registration, their country grants substantially similar rights and privileges to Filipino citizens pursuant to Section
21-A 20 of R.A. No. 166.
In Leviton Industries v. Salvador, 21 the Court further held that the aforementioned reciprocity requirement is a
condition sine qua non to filing a suit by a foreign corporation which, unless alleged in the complaint, would justify dismissal thereof,
a mere allegation that the suit is being pursued under Section 21-A of R.A. No. 166 not being sufficient. In a subsequent
case, 22 however, the Court held that where the complainant is a national of a Paris Convention- adhering country, its allegation that it
is suing under said Section 21-A would suffice, because the reciprocal agreement between the two countries is embodied and supplied
by the Paris Convention which, being considered part of Philippine municipal laws, can be taken judicial notice of in infringement
suits. 23
As well, the fact that their respective home countries, namely, the United States, Switzerland and Canada, are, together with
the Philippines, members of the Paris Union does not automatically entitle petitioners to the protection of their trademarks in this
country absent actual use of the marks in local commerce and trade. CaDSHE
True, the Philippines' adherence to the Paris Convention 24 effectively obligates the country to honor and enforce its
provisions 25 as regards the protection of industrial property of foreign nationals in this country. However, any protection accorded
has to be made subject to the limitations of Philippine laws. 26 Hence, despite Article 2 of the Paris Convention which substantially
provides that (1) nationals of member-countries shall have in this country rights specially provided by the Convention as are consistent
with Philippine laws, and enjoy the privileges that Philippine laws now grant or may hereafter grant to its nationals, and (2) while no
domicile requirement in the country where protection is claimed shall be required of persons entitled to the benefits of the Union for
the enjoyment of any industrial property rights, 27 foreign nationals must still observe and comply with the conditions imposed by
Philippine law on its nationals.
 
Considering that R.A. No. 166, as amended, specifically Sections 2 28 and 2-A 29 thereof, mandates actual use of the marks
and/or emblems in local commerce and trade before they may be registered and ownership thereof acquired, the petitioners cannot,
therefore, dispense with the element of actual use. Their being nationals of member-countries of the Paris Union does not alter the
legal situation.
In Emerald Garment Mfg. Corporation v. Court of Appeals, 30 the Court reiterated its rulings in Sterling Products
International, Inc. v. Farbenfabriken Bayer Aktiengesellschaft, 31 Kabushi Kaisha Isetan v. Intermediate Appellate
Court, 32 and Philip Morris v. Court of Appeals and Fortune Tobacco Corporation 33 on the importance of actual commercial use of
a trademark in the Philippines notwithstanding the Paris Convention:
The provisions of the 1965 Paris Convention . . . relied upon by private respondent and Sec. 21-A of the
Trademark Law were sufficiently expounded upon and qualified in the recent case of Philip Morris, Inc., et al. vs.
Court of Appeals:
xxx xxx xxx
Following universal acquiescence and comity, our municipal law on trademarks regarding the
requirements of actual use in the Philippines must subordinate an international agreement inasmuch as the
apparent clash is being decided by a municipal tribunal. . . . . Withal, the fact that international law has been made
part of the law of the land does not by any means imply the primacy of international law over national law in the
municipal sphere. Under the doctrine of incorporation as applied in most countries, rules of International Law are
given a standing equal, not superior, to national legislative enactments.
xxx xxx xxx
In other words, (a foreign corporation) may have the capacity to sue for infringement . . . but the question
of whether they have an exclusive right over their symbol as to justify issuance of the controversial writ will
depend on actual use of their trademarks in the Philippines in line with Sections 2 and 2-A of the same law. It is
 thus incongruous for petitioners to claim that when a foreign corporation not licensed to do business in the
Philippines files a complaint for infringement, the entity need not be actually using its trademark in commerce in
the Philippines. Such a foreign corporation may have the personality to file a suit for infringement but it may not
necessarily be entitled to protection due to absence of actual use of the emblem in the local market.
Contrary to what petitioners suggest, the registration of trademark cannot be deemed conclusive as to the actual use of such
trademark in local commerce. As it were, registration does not confer upon the registrant an absolute right to the registered mark. The
certificate of registration merely constitutes prima facie evidence that the registrant is the owner of the registered mark. Evidence of
non-usage of the mark rebuts the presumption of trademark ownership, 34 as what happened here when petitioners no less admitted
not doing business in this country. 35
Most importantly, we stress that registration in the Philippines of trademarks does not ipso facto convey an absolute right or
exclusive ownership thereof. To borrow from Shangri-La International Hotel Management, Ltd. v. Development Group of
Companies, Inc. 36 trademark is a creation of use and, therefore, actual use is a pre-requisite to exclusive ownership; registration is
only an administrative confirmation of the existence of the right of ownership of the mark, but does not perfect such right; actual use
thereof is the perfecting ingredient. 37
Petitioners' reliance on Converse Rubber Corporation 38 is quite misplaced, that case being cast in a different factual milieu.
There, we ruled that a foreign owner of a Philippine trademark, albeit not licensed to do, and not so engaged in, business in the
Philippines, may actually earn reputation or goodwill for its goods in the country. But unlike in the instant case, evidence of actual
sales of Converse rubber shoes, such as sales invoices, receipts and the testimony of a legitimate trader, was presented in Converse.
This Court also finds the IP Code and the TRIPS Agreement to be inapplicable, the infringement complaint herein having
been filed in August 1982 and tried under the aegis of R.A. No. 166, as amended. The IP Code, however, took effect only on January
1, 1998 without a provision as to its retroactivity. 39 In the same vein, the TRIPS Agreement was inexistent when the suit for
infringement was filed, the Philippines having adhered thereto only on December 16, 1994.
With the foregoing perspective, it may be stated right off that the registration of a trademark unaccompanied by actual use
thereof in the country accords the registrant only the standing to sue for infringement in Philippine courts. Entitlement to protection of
such trademark in the country is entirely a different matter.
This brings us to the principal issue of infringement.
Section 22 of R.A. No. 166, as amended, defines what constitutes trademark infringement, as follows:
Sec. 22. Infringement, what constitutes. — Any person who shall use, without the consent of the
registrant, any reproduction, counterfeit, copy or colorable imitation of any registered mark or tradename in
connection with the sale, offering for sale, or advertising of any goods, business or services on or in connection
with which such use is likely to cause confusion or mistake or to deceive purchasers or others as to the source or
origin of such goods or services, or identity of such business; or reproduce, counterfeit, copy of color ably imitate
any such mark or tradename and apply such reproduction, counterfeit, copy or colorable imitation to labels, signs,
prints, packages, wrappers, receptacles or advertisements intended to be used upon or in connection with such
goods, business, or services, shall be liable to a civil action by the registrant for any or all of the remedies herein
provided.
Petitioners would insist on their thesis of infringement since respondent's mark "MARK" for cigarettes is confusingly or
deceptively similar with their duly registered "MARK VII," "MARK TEN" and "LARK" marks likewise for cigarettes. To them, the
word "MARK" would likely cause confusion in the trade, or deceive purchasers, particularly as to the source or origin of respondent's
cigarettes.
The "likelihood of confusion" is the gravamen of trademark infringement. 40 But likelihood of confusion is a relative
concept, the particular, and sometimes peculiar, circumstances of each case being determinative of its existence. Thus, in trademark
infringement cases, more than in other kinds of litigation, precedents must be evaluated in the light of each particular case. 41
In determining similarity and likelihood of confusion, jurisprudence has developed two tests: the dominancy test and
the holistic test. 42 The dominancy test 43 sets sight on the similarity of the prevalent features of the competing trademarks that might
cause confusion and deception, thus constitutes infringement. Under this norm, the question at issue turns on whether the use of the
marks involved would be likely to cause confusion or mistake in the mind of the public or deceive purchasers. 44
In contrast, the holistic test 45 entails a consideration of the entirety of the marks as applied to the products, including the
labels and packaging, in determining confusing similarity.
Upon consideration of the foregoing in the light of the peculiarity of this case, we rule against the likelihood of confusion
resulting in infringement arising from the respondent's use of the trademark "MARK" for its particular cigarette product.
For one, as rightly concluded by the CA after comparing the trademarks involved in their entirety as they appear on the
products, 46 the striking dissimilarities are significant enough to warn any purchaser that one is different from the other. Indeed,
although the perceived offending word "MARK" is itself prominent in petitioners' trademarks "MARK VII" and "MARK TEN," the
entire marking system should be considered as a whole and not dissected, because a discerning eye would focus not only on the
predominant word but also on the other features appearing in the labels. Only then would such discerning observer draw his
conclusion whether one mark would be confusingly similar to the other and whether or not sufficient differences existed between the
marks. 47
This said, the CA then, in finding that respondent's goods cannot be mistaken as any of the three cigarette brands of the
petitioners, correctly relied on the holistic test.
But, even if the dominancy test were to be used, as urged by the petitioners, but bearing in mind that a trademark serves as a
tool to point out distinctly the origin or ownership of the goods to which it is affixed,  48 the likelihood of confusion tantamount to
infringement appears to be farfetched. The reason for the origin and/or ownership angle is that unless the words or devices do so point
out the origin or ownership, the person who first adopted them cannot be injured by any appropriation or imitation of them by others,
nor can the public be deceived. 49
Since the word "MARK," be it alone or in combination with the word "TEN" and the Roman numeral "VII," does not point to
the origin or ownership of the cigarettes to which they apply, the local buying public could not possibly be confused or deceived that
respondent's "MARK" is the product of petitioners and/or originated from the U.S.A., Canada or Switzerland. And lest it be
overlooked, no actual commercial use of petitioners' marks in local commerce was proven. There can thus be no occasion for the
public in this country, unfamiliar in the first place with petitioners' marks, to be confused.
 
For another, a comparison of the trademarks as they appear on the goods is just one of the appreciable circumstances in
determining likelihood of confusion. Del Monte Corp. v. CA 50 dealt with another, where we instructed to give due regard to the
"ordinary purchaser," thus:
The question is not whether the two articles are distinguishable by their label when set side by side but
whether the general confusion made by the article upon the eye of the casual purchaser who is unsuspicious and
off his guard, is such as to likely result in his confounding it with the original. As observed in several cases, the
general impression of the ordinary purchaser, buying under the normally prevalent conditions in trade and giving
the attention such purchasers usually give in buying that class of goods is the touchstone.
When we spoke of an "ordinary purchaser," the reference was not to the "completely unwary customer" but to the "ordinarily
intelligent buyer" considering the type of product involved. 51
It cannot be over-emphasized that the products involved are addicting cigarettes purchased mainly by those who are already
predisposed to a certain brand. Accordingly, the ordinary buyer thereof would be all too familiar with his brand and discriminating as
well. We, thus, concur with the CA when it held, citing a definition found in  Dy Buncio v. Tan Tiao Bok, 52 that the "ordinary
purchaser" in this case means "one accustomed to buy, and therefore to some extent familiar with, the goods in question."
Pressing on with their contention respecting the commission of trademark infringement, petitioners finally point to Section 22
of R.A. No. 166, as amended. As argued, actual use of trademarks in local commerce is, under said section, not a requisite before an
aggrieved trademark owner can restrain the use of his trademark upon goods manufactured or dealt in by another, it being sufficient
that he had registered the trademark or trade-name with the IP Office. In fine, petitioners submit that respondent is liable for
infringement, having manufactured and sold cigarettes with the trademark "MARK" which, as it were, are identical and/or confusingly
similar with their duly registered trademarks "MARK VII," "MARK TEN" and "LARK".
This Court is not persuaded.
In Mighty Corporation v. E & J Gallo Winery, 53 the Court held that the following constitute the elements of trademark
infringement in accordance not only with Section 22 of R.A. No. 166, as amended, but also Sections 2, 2-A, 9-A 54 and 20 thereof:
(a) a trademark actually used in commerce in the Philippines and registered in the principal register of the
Philippine Patent Office, aASEcH
(b) is used by another person in connection with the sale, offering for sale, or advertising of any goods,
business or services or in connection with which such use is likely to cause confusion or mistake or to deceive
purchasers or others as to the source or origin of such goods or services, or identity of such business; or such
trademark is reproduced, counterfeited, copied or colorably imitated by another person and such reproduction,
counterfeit, copy or colorable imitation is applied to labels, signs, prints, packages, wrappers, receptacles or
advertisements intended to be used upon or in connection with such goods, business or services as to likely cause
confusion or mistake or to deceive purchasers,
(c) the trademark is used for identical or similar goods, and
(d) such act is done without the consent of the trademark registrant or assignee.
 As already found herein, while petitioners have registered the trademarks "MARK VII," "MARK TEN" and "LARK" for
cigarettes in the Philippines, prior actual commercial use thereof had not been proven. In fact, petitioners' judicial admission of not
doing business in this country effectively belies any pretension to the contrary.
Likewise, we note that petitioners even failed to support their claim that their respective marks are well-known and/or have
acquired goodwill in the Philippines so as to be entitled to protection even without actual use in this country in accordance with
Article 6bis 55 of the Paris Convention. As correctly found by the CA, affirming that of the trial court:
. . . the records are bereft of evidence to establish that the appellants' [petitioners'] products are indeed
well-known in the Philippines, either through actual sale of the product or through different forms of advertising.
This finding is supported by the fact that appellants admit in their Complaint that they are not doing business in
the Philippines, hence, admitting that their products are not being sold in the local market. We likewise see no
cogent reason to disturb the trial court's finding that the appellants failed to establish that their products are widely
known by local purchasers as "(n)o specific magazine or periodical published in the Philippines, or in other
countries but circulated locally" have been presented by the appellants during trial. The appellants also were not
able to show the length of time or the extent of the promotion or advertisement made to popularize their products
in the Philippines. 56
Last, but not least, we must reiterate that the issue of trademark infringement is factual, with both the trial and appellate
courts having peremptorily found allegations of infringement on the part of respondent to be without basis. As we said time and time
again, factual determinations of the trial court, concurred in by the CA, are final and binding on this Court. 57
For lack of convincing proof on the part of the petitioners of actual use of their registered trademarks prior to respondent's
use of its mark and for petitioners' failure to demonstrate confusing similarity between said trademarks, the dismissal of their basic
complaint for infringement and the concomitant plea for damages must be affirmed. The law, the surrounding circumstances and the
equities of the situation call for this disposition.
WHEREFORE, the petition is hereby DENIED. Accordingly, the assailed decision and resolution of the Court of Appeals are
AFFIRMED.
Costs against the petitioners.
SO ORDERED.
||| (Philip Morris, Inc. v. Fortune Tobacco Corp., G.R. No. 158589, [June 27, 2006], 526 PHIL 300-324)
 SECOND DIVISION

[G.R. No. 154491. November 14, 2008.]

COCA-COLA BOTTLERS, PHILS., INC. (CCBPI), Naga Plant, petitioner, vs. QUINTIN J. GOMEZ, a.k.a. "KIT" GOMEZ and DANILO E. GALICIA,
a.k.a. "DANNY GALICIA", respondents.

DECISION

BRION, J p:

Is the hoarding of a competitor's product containers punishable as unfair competition under the Intellectual Property
Code (IP Code, Republic Act No. 8293) that would entitle the aggrieved party to a search warrant against the hoarder? This is the
issue we grapple with in this petition for review on certiorari involving two rival multinational softdrink giants; petitioner Coca-
Cola Bottlers, Phils., Inc. (Coca-Cola) accuses Pepsi Cola Products Phils., Inc. (Pepsi), represented by the respondents, of
hoarding empty Coke bottles in bad faith to discredit its business and to sabotage its operation in Bicolandia. IAaCST
BACKGROUND
The facts, as culled from the records, are summarized below.
On July 2, 2001, Coca-Cola applied for a search warrant against Pepsi for hoarding Coke empty bottles in Pepsi's yard in
Concepcion Grande, Naga City, an act allegedly penalized as unfair competition under the IP Code. Coca-Cola claimed that the
bottles must be confiscated to preclude their illegal use, destruction or concealment by the respondents. 1 In support of the
application, Coca-Cola submitted the sworn statements of three witnesses: Naga plant representative Arnel John Ponce said he
was informed that one of their plant security guards had gained access into the Pepsi compound and had seen empty Coke bottles;
acting plant security officer Ylano A. Regaspi said he investigated reports that Pepsi was hoarding large quantities of Coke
bottles by requesting their security guard to enter the Pepsi plant and he was informed by the security guard that Pepsi hoarded
several Coke bottles; security guard Edwin Lirio stated that he entered Pepsi's yard on July 2, 2001 at 4 p.m. and saw empty
Coke bottles inside Pepsi shells or cases. 2
Municipal Trial Court (MTC) Executive Judge Julian C. Ocampo of Naga City, after taking the joint deposition of the
witnesses, issued Search Warrant No. 2001-01 3 to seize 2,500 Litro and 3,000 eight and 12 ounces empty Coke bottles at Pepsi's
Naga yard for violation of Section 168.3 (c) of the IP Code. 4 The local police seized and brought to the MTC's custody 2,464
Litro and 4,036 eight and 12 ounces empty Coke bottles, 205 Pepsi shells for Litro, and 168 Pepsi shells for smaller (eight and 12
ounces) empty Coke bottles, and later filed with the Office of the City Prosecutor of Naga a complaint against two Pepsi officers
for violation of Section 168.3 (c) in relation to Section 170 of the IP Code. 5 The named respondents, also the respondents in this
petition, were Pepsi regional sales manager Danilo E. Galicia (Galicia) and its Naga general manager Quintin J. Gomez,
Jr. (Gomez). aEHTSc
In their counter-affidavits, Galicia and Gomez claimed that the bottles came from various Pepsi retailers and wholesalers
who included them in their return to make up for shortages of empty Pepsi bottles; they had no way of ascertaining beforehand
the return of empty Coke bottles as they simply received what had been delivered; the presence of the bottles in their yard was not
intentional nor deliberate; Ponce and Regaspi's statements are hearsay as they had no personal knowledge of the alleged crime;
there is no mention in the IP Code of the crime of possession of empty bottles; and that the ambiguity of the law, which has a
penal nature, must be construed strictly against the State and liberally in their favor. Pepsi security guards Eduardo E. Miral and
Rene Acebuche executed a joint affidavit stating that per their logbook, Lirio did not visit or enter the plant premises in the
afternoon of July 2, 2001.
The respondents also filed motions for the return of their shells and to quash the search warrant. They contended that no
probable cause existed to justify the issuance of the search warrant; the facts charged do not constitute an offense; and their Naga
plant was in urgent need of the shells.
Coca-Cola opposed the motions as the shells were part of the evidence of the crime, arguing that Pepsi used the shells in
hoarding the bottles. It insisted that the issuance of warrant was based on probable cause for unfair competition under the IP
Code, and that the respondents violated R.A. 623, the law regulating the use of stamped or marked bottles, boxes, and other
similar containers.
THE MTC RULINGS
On September 19, 2001, the MTC issued the first assailed order 6 denying the twin motions. It explained there was an
exhaustive examination of the applicant and its witnesses through searching questions and that the Pepsi shells are  prima
facie evidence that the bottles were placed there by the respondents.
In their motion for reconsideration, the respondents argued for the quashal of the warrant as the MTC did not conduct a
probing and exhaustive examination; the applicant and its witnesses had no personal knowledge of facts surrounding the
hoarding; the court failed to order the return of the "borrowed" shells; there was no crime involved; the warrant was issued based
on hearsay evidence; and the seizure of the shells was illegal because they were not included in the warrant. ITScHa
On November 14, 2001, the MTC denied the motion for reconsideration in the second assailed order,  7 explaining that
the issue of whether there was unfair competition can only be resolved during trial.
The respondents responded by filing a petition for certiorari under Rule 65 of the Revised Rules of Court before the
Regional Trial Court (RTC) of Naga City on the ground that the subject search warrant was issued without probable cause and
that the empty shells were neither mentioned in the warrant nor the objects of the perceived crime.
THE RTC RULINGS
On May 8, 2002, the RTC voided the warrant for lack of probable cause and the non-commission of the crime of unfair
competition, even as it implied that other laws may have been violated by the respondents. The RTC, though, found no grave
abuse of discretion on the part of the issuing MTC judge. 8 Thus,
Accordingly, as prayed for, Search Warrant No. 2001-02 issued by the Honorable Judge Julian C.
Ocampo III on July 2, 2001 is ANNULLED and SET ASIDE. The Orders issued by the Pairing Judge of Br. 1,
MTCC of Naga City dated September 19, 2001 and November 14, 2001 are also declared VOID and SET
ASIDE. The City Prosecutor of Naga City and SPO1 Ernesto Paredes are directed to return to the Petitioner the
properties seized by virtue of Search Warrant No. 2001-02. No costs.
SO ORDERED. 9
In a motion for reconsideration, which the RTC denied on July 12, 2002, the petitioner stressed that the decision of the
RTC was contradictory because it absolved Judge Ocampo of grave abuse of discretion in issuing the search warrant, but at the
same time nullified the issued warrant. The MTC should have dismissed the petition when it found out that Judge Ocampo did not
commit any grave abuse of discretion.
Bypassing the Court of Appeals, the petitioner asks us through this petition for review on certiorari under Rule 45 of the
Rules of Court to reverse the decision of the RTC. Essentially, the petition raises questions against the RTC's nullification of the
warrant when it found no grave abuse of discretion committed by the issuing judge. IEAaST
THE PETITION and THE PARTIES' POSITIONS
In its petition, the petitioner insists the RTC should have dismissed the respondents' petition for  certiorari because it
found no grave abuse of discretion by the MTC in issuing the search warrant. The petitioner further argues that the IP Code was
enacted into law to remedy various forms of unfair competition accompanying globalization as well as to replace the inutile
provision of unfair competition under Article 189 of the Revised Penal Code. Section 168.3 (c) of the  IP Code does not limit the
scope of protection on the particular acts enumerated as it expands the meaning of unfair competition to include "other acts
contrary to good faith of a nature calculated to discredit the goods, business or services of another". The inherent element of
unfair competition is fraud or deceit, and that hoarding of large quantities of a competitor's empty bottles is necessarily
characterized by bad faith. It claims that its Bicol bottling operation was prejudiced by the respondents' hoarding and destruction
of its empty bottles.
 The petitioner also argues that the quashal of the search warrant was improper because it complied with all the essential
requisites of a valid warrant. The empty bottles were concealed in Pepsi shells to prevent discovery while they were
systematically being destroyed to hamper the petitioner's bottling operation and to undermine the capability of its bottling
operations in Bicol.
The respondents counter-argue that although Judge Ocampo conducted his own examination, he gravely erred and
abused his discretion when he ignored the rule on the need of sufficient evidence to establish probable cause; satisfactory and
convincing evidence is essential to hold them guilty of unfair competition; the hoarding of empty Coke bottles did not cause
actual or probable deception and confusion on the part of the general public; the alleged criminal acts do not show conduct aimed
at deceiving the public; there was no attempt to use the empty bottles or pass them off as the respondents' goods.
The respondents also argue that the IP Code does not criminalize bottle hoarding, as the acts penalized must always
involve fraud and deceit. The hoarding does not make them liable for unfair competition as there was no deception or fraud on the
end-users.
THE ISSUE
Based on the parties' positions, the basic issue submitted to us for resolution is whether the Naga MTC was correct in
issuing Search Warrant No. 2001-01 for the seizure of the empty Coke bottles from Pepsi's yard for probable violation of Section
168.3 (c) of the IP Code. This basic issue involves two sub-issues, namely, the substantive issue of whether the application for
search warrant effectively charged an offense, i.e., a violation of Section 168.3 (c) of the IP Code; and the procedural issue of
whether the MTC observed the procedures required by the Rules of Court in the issuance of search warrants.
OUR RULING
We resolve to deny the petition for lack of merit.
We clarify at the outset that while we agree with the RTC decision, our agreement is more  in the result than in the
reasons that supported it. The decision is correct in nullifying the search warrant because it was issued on an invalid substantive
basis — the acts imputed on the respondents do not violate Section 168.3 (c) of the IP Code. For this reason, we deny the present
petition. CcAITa
The issuance of a search warrant 10 against a personal property 11 is governed by Rule 126 of the Revised Rules of
Court whose relevant sections state:
Section 4. Requisites for issuing search warrant. — A search warrant shall not issue except
upon probable cause in connection with one specific offense to be determined personally by the judge after
examination under oath or affirmation of the complainant and the witnesses he may produce, and particularly
describing the place to be searched and the things to be seized which may be anywhere in the Philippines.
Section 5. Examination of complainant; record. — The judge must, before issuing the
warrant, personally examine in the form of searching questions and answers, in writing and under oath,
the complainant and the witnesses he may produce on facts personally known to them and attach to the record
their sworn statements together with the affidavits submitted.
Section 6. Issuance and form of search warrant. — If the judge is satisfied of the existence of facts
upon which the application is based or that there is probable cause to believe that they exist, he shall issue the
warrant, which must be substantially in the form prescribed by these Rules. [Emphasis supplied]
To paraphrase this rule, a search warrant may be issued only if there is probable cause in connection with a specific
offense alleged in an application based on the personal knowledge of the applicant and his or her witnesses. This is the
substantive requirement in the issuance of a search warrant. Procedurally, the determination of probable cause is a personal task
of the judge before whom the application for search warrant is filed, as he has to examine under oath or affirmation the applicant
and his or her witnesses in the form of "searching questions and answers" in writing and under oath. The warrant, if issued, must
particularly describe the place to be searched and the things to be seized. DHcSIT
We paraphrase these requirements to stress that they have substantive and procedural aspects. Apparently, the RTC
recognized this dual nature of the requirements and, hence, treated them separately; it approved of the way the MTC handled the
procedural aspects of the issuance of the search warrant but found its action on the substantive aspect wanting. It therefore
resolved to nullify the warrant, without however expressly declaring that the MTC gravely abused its discretion when it issued the
warrant applied for. The RTC's error, however, is in the form rather than the substance of the decision as the nullification of the
issued warrant for the reason the RTC gave was equivalent to the declaration that grave abuse of discretion was committed. In
fact, we so rule as the discussions below will show.
Jurisprudence teaches us that probable cause, as a condition for the issuance of a search warrant, is such reasons
supported by facts and circumstances as will warrant a cautious man in the belief that his action and the means taken in
prosecuting it are legally just and proper. Probable cause requires facts and circumstances that would lead a reasonably prudent
man to believe that an offense has been committed and the objects sought in connection with that offense are in the place to be
searched. 12 Implicit in this statement is the recognition that an underlying offense must, in the first place, exist. In other words,
the acts alleged, taken together, must constitute an offense and that these acts are imputable to an offender in relation with whom
a search warrant is applied for. DcITHE
In the context of the present case, the question is whether the act charged — alleged to be hoarding of empty Coke
bottles — constitutes an offense under Section 168.3 (c) of the IP Code. Section 168 in its entirety states:
SEC. 168. Unfair Competition, Rights, Regulation and Remedies. —
168.1. 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 registered mark 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.
168.2. Any person who shall employ deception or any other means contrary to good faith by which he
shall pass off the goods manufactured by him or in which he deals, or his business, or services for those of the
one having established such goodwill, or who shall commit any acts calculated to produce said result, shall be
guilty of unfair competition, and shall be subject to an action therefor.
168.3. In particular, and without in any way limiting the scope of protection against unfair competition,
the following shall be deemed guilty of unfair competition:
(a) Any person, who is selling his goods and gives them the general appearance of goods of another
manufacturer or dealer, either as to the goods themselves or in the wrapping of the packages in which they are
contained, or the devices or words thereon, or in any other feature of their appearance, which would be likely to
influence purchasers to believe that the goods offered are those of a manufacturer or dealer, other than the
actual manufacturer or dealer, or who otherwise clothes the goods with such appearance as shall deceive the
public and defraud another of his legitimate trade, or any subsequent vendor of such goods or any agent of any
vendor engaged in selling such goods with a like purpose;
(b) Any person who by any artifice, or device, or who employs any other means calculated to induce
the false belief that such person is offering the services of another who has identified such services in the mind
of the public; or
(c) Any person who shall make any false statement in the course of trade or who shall commit any
other act contrary to good faith of a nature calculated to discredit the goods, business or services of another.
168.4. The remedies provided by Sections 156, 157 and 161 shall apply mutatis mutandis. (Sec. 29,
R.A. No. 166a)
The petitioner theorizes that the above section does not limit the scope of protection on the particular acts enumerated as
it expands the meaning of unfair competition to include "other acts contrary to good faith of a nature calculated to discredit the
goods, business or services of another". Allegedly, the respondents' hoarding of Coca Cola empty bottles is one such act.
We do not agree with the petitioner's expansive interpretation of Section 168.3 (c).
"Unfair competition", previously defined in Philippine jurisprudence in relation with R.A. No. 166 and Articles 188 and
189 of the Revised Penal Code, is now covered by Section 168 of the IP Code as this Code has expressly repealed R.A. No.
165 and R.A. No. 166, and Articles 188 and 189 of the Revised Penal Code. IHaECA
Articles 168.1 and 168.2, as quoted above, provide the concept and general rule on the definition of unfair competition.
The law does not thereby cover every unfair act committed in the course of business; it covers only acts characterized by
"deception or any other means contrary to good faith" in the passing off of goods and services as those of another who has
established goodwill in relation with these goods or services, or any other act calculated to produce the same result.
What unfair competition is, is further particularized under Section 168.3 when it provides specifics of what unfair
competition is "without in any way limiting the scope of protection against unfair competition". Part of these particulars is
provided under Section 168.3 (c) which provides the general "catch-all" phrase that the petitioner cites. Under this phrase, a
person shall be guilty of unfair competition "who shall commit any other act contrary to good faith of a nature calculated to
discredit the goods, business or services of another".
From jurisprudence, unfair competition has been defined as the passing off (or palming off) or attempting to pass off
upon the public the goods or business of one person as the goods or business of another with the end and probable effect of
deceiving the public. It formulated the "true test" of unfair competition: whether the acts of defendant are such as are calculated to
deceive the ordinary buyer making his purchases under the ordinary conditions which prevail in the particular trade to which the
controversy relates. 13 One of the essential requisites in an action to restrain unfair competition is proof of fraud; the intent to
deceive must be shown before the right to recover can exist. 14 The advent of the IP Code has not significantly changed these
rulings as they are fully in accord with what Section 168 of the Code in its entirety provides.  Deception, passing off and fraud
upon the public are still the key elements that must be present for unfair competition to exist.
 The act alleged to violate the petitioner's rights under Section 168.3 (c) is hoarding which we gather to be the collection
of the petitioner's empty bottles so that they can be withdrawn from circulation and thus impede the circulation of the petitioner's
bottled products. This, according to the petitioner, is an act contrary to good faith — a conclusion that, if true, is indeed an unfair
act on the part of the respondents. The critical question, however, is not the intrinsic unfairness of the act of hoarding; what is
critical for purposes of Section 168.3 (c) is to determine if the hoarding, as charged, "is of a nature calculated to discredit the
goods, business or services" of the petitioner. DcSTaC
We hold that it is not. Hoarding as defined by the petitioner is not even an act within the contemplation of the IP Code.
The petitioner's cited basis is a provision of the IP Code, a set of rules that refer to a very specific subject — intellectual
property. Aside from the IP Code's actual substantive contents (which relate specifically to patents, licensing, trademarks, trade
names, service marks, copyrights, and the protection and infringement of the intellectual properties that these protective measures
embody), the coverage and intent of the Code is expressly reflected in its "Declaration of State Policy" which states:
Section 2. Declaration of State Policy. — The State recognizes that an effective intellectual and
industrial property system is vital to the development of domestic and creative activity, facilitates transfer of
technology, attracts foreign investments, and ensures market access for our products. It shall protect and secure
the exclusive rights of scientists, inventors, artists and other gifted citizens to their intellectual property and
creations, particularly when beneficial to the people, for such periods as provided in this Act.
The use of intellectual property bears a social function. To this end, the State shall promote the
diffusion of knowledge and information for the promotion of national development and progress and the
common good.
It is also the policy of the State to streamline administrative procedures of registering patents,
trademarks and copyright, to liberalize the registration on the transfer of technology, and to enhance the
enforcement of intellectual property rights in the Philippines. (n)
"Intellectual property rights" have furthermore been defined under Section 4 of the Code to consist of: a) Copyright and Related
Rights; b) Trademarks and Service Marks; c) Geographic Indications; d) Industrial Designs; e) Patents; f) Layout-Designs
(Topographies) of Integrated Circuits; and g) Protection of Undisclosed Information.
Given the IP Code's specific focus, a first test that should be made when a question arises on whether a matter is covered
by the Code is to ask if it refers to an intellectual property as defined in the Code. If it does not, then coverage by the Code may
be negated. THaAEC
A second test, if a disputed matter does not expressly refer to an intellectual property right as defined above, is whether it
falls under the general "unfair competition" concept and definition under Sections 168.1 and 168.2 of the Code. The question then
is whether there is "deception" or any other similar act in "passing off" of goods or services to be those of another who enjoys
established goodwill.
Separately from these tests is the application of the principles of statutory construction giving particular attention, not so
much to the focus of the IP Code generally, but to the terms of Section 168 in particular. Under the principle of "noscitur a
sociis", when a particular word or phrase is ambiguous in itself or is equally susceptible of various meanings, its correct
construction may be made clear and specific by considering the company of words in which it is found or with which it is
associated. 15
As basis for this interpretative analysis, we note that Section 168.1 speaks of a person who has earned goodwill with
respect to his goods and services and who is entitled to protection under the Code, with or without a registered mark.  Section
168.2, as previously discussed, refers to the general definition of unfair competition. Section 168.3, on the other hand, refers to
the specific instances of unfair competition, with Section 168.1 referring to the sale of goods given the appearance of the goods of
another; Section 168.2, to the inducement of belief that his or her goods or services are that of another who has earned goodwill;
while the disputed Section 168.3 being a "catch all" clause whose coverage the parties now dispute.
Under all the above approaches, we conclude that the "hoarding" — as defined and charged by the petitioner — does not
fall within the coverage of the IP Code and of Section 168 in particular. It does not relate to any patent, trademark, trade name or
service mark that the respondents have invaded, intruded into or used without proper authority from the petitioner. Nor are the
respondents alleged to be fraudulently "passing off" their products or services as those of the petitioner. The respondents are not
also alleged to be undertaking any representation or misrepresentation that would confuse or tend to confuse the goods of the
petitioner with those of the respondents, or vice versa. What in fact the petitioner alleges is an act foreign to the Code, to the
concepts it embodies and to the acts it regulates; as alleged, hoarding inflicts unfairness by seeking to limit the opposition's sales
by depriving it of the bottles it can use for these sales. cHDAIS
In this light, hoarding for purposes of destruction is closer to what another law — R.A. No. 623 — covers, to wit:
SEC. 1. Persons engaged or licensed to engage in the manufacture, bottling or selling of soda water,
mineral or aerated waters, cider, milk, cream, or other lawful beverages in bottles, boxes, casks, kegs, or barrels,
and other similar containers, with their names or the names of their principals or products, or other marks of
 ownership stamped or marked thereon, may register with the Philippine Patent Office a description of the names
or are used by them, under the same conditions, rules, and regulations, made applicable by law or regulation to
the issuance of trademarks. ScCEIA
SEC. 2. It shall be unlawful for any person, without the written consent of the manufacturer, bottler or
seller who has successfully registered the marks of ownership in accordance with the provisions of the next
preceding section, to fill such bottles, boxes, kegs, barrels, or other similar containers so marked or stamped,
for the purpose of sale, or to sell, dispose of, buy, or traffic in, or wantonly destroy the same, whether filled
or not, or to use the same for drinking vessels or glasses or for any other purpose than that registered by the
manufacturer, bottler or seller. Any violation of this section shall be punished by a fine or not more than one
hundred pesos or imprisonment of not more than thirty days or both.
As its coverage is defined under Section 1, the Act appears to be a measure that may overlap or be affected by the
provisions of Part II of the IP Code on "The Law on Trademarks, Service Marks and Trade Names". What is certain is that the  IP
Code has not expressly repealed this Act. The Act appears, too, to have specific reference to a special type of registrants — the
manufacturers, bottlers or sellers of soda water, mineral or aerated waters, cider, milk, cream, or other lawful beverages in bottles,
boxes, casks, kegs, or barrels, and other similar containers — who are given special protection with respect to the containers they
use. In this sense, it is in fact a law of specific coverage and application, compared with the general terms and application of
the IP Code. Thus, under its Section 2, it speaks specifically of unlawful use of containers and even of the unlawfulness of their
wanton destruction — a matter that escapes the IP Code's generalities unless linked with the concepts of "deception" and "passing
off" as discussed above.
Unfortunately, the Act is not the law in issue in the present case and one that the parties did not consider at all in the
search warrant application. The petitioner in fact could not have cited it in its search warrant application since the "one specific
offense" that the law allows and which the petitioner used was Section 168.3 (c). If it serves any purpose at all in our discussions,
it is to show that the underlying factual situation of the present case is in fact covered by another law, not by the  IP Code that the
petitioner cites. Viewed in this light, the lack of probable cause to support the disputed search warrant at once becomes apparent.
Where, as in this case, the imputed acts do not violate the cited offense, the ruling of this Court penned by Mr. Justice
Bellosillo is particularly instructive:
In the issuance of search warrants, the Rules of Court requires a finding of probable cause in
connection with one specific offense to be determined personally by the judge after examination of the
complainant and the witnesses he may produce, and particularly describing the place to be searched and the
things to be seized. Hence, since there is no crime to speak of, the search warrant does not even begin to
fulfill these stringent requirements and is therefore defective on its face. The nullity of the warrant renders
moot and academic the other issues raised in petitioners' Motion to Quash and Motion for Reconsideration.
Since the assailed search warrant is null and void, all property seized by virtue thereof should be returned to
petitioners in accordance with established jurisprudence. 16
Based on the foregoing, we conclude that the RTC correctly ruled that the petitioner's search warrant should properly be
quashed for the petitioner's failure to show that the acts imputed to the respondents do not violate the cited offense. There could
not have been any probable cause to support the issuance of a search warrant because no crime in the first place was effectively
charged. This conclusion renders unnecessary any further discussion on whether the search warrant application properly alleged
that the imputed act of holding Coke empties was in fact a "hoarding" in bad faith aimed to prejudice the petitioner's operations,
or whether the MTC duly complied with the procedural requirements for the issuance of a search warrant under Rule 126 of the
Rules of Court. DHEaTS
WHEREFORE, we hereby DENY the petition for lack of merit. Accordingly, we confirm that Search Warrant No. 2001-
01, issued by the Municipal Trial Court, Branch 1, Naga City, is NULL and VOID. Costs against the petitioner.
SO ORDERED.

SECOND DIVISION

[G.R. No. 170891. November 24, 2009.]

MANUEL C. ESPIRITU, JR., AUDIE LLONA, FREIDA F. ESPIRITU, CARLO F. ESPIRITU, RAFAEL F. ESPIRITU, ROLANDO M. MIRABUNA,
HERMILYN A. MIRABUNA, KIM ROLAND A. MIRABUNA, KAYE ANN A. MIRABUNA, KEN RYAN A. MIRABUNA, JUANITO P. DE CASTRO,
GERONIMA A. ALMONITE and MANUEL C. DEE, who are the officers and directors of BICOL GAS REFILLING PLANT
CORPORATION, petitioners, vs. PETRON CORPORATION and CARMEN J. DOLOIRAS, doing business under the name "KRISTINA PATRICIA
ENTERPRISES", respondents.

DECISION
ABAD, J p:

This case is about the offense or offenses that arise from the reloading of the liquefied petroleum gas cylinder container
of one brand with the liquefied petroleum gas of another brand.
The Facts and the Case
Respondent Petron Corporation (Petron) sold and distributed liquefied petroleum gas (LPG) in cylinder tanks that carried
its trademark "Gasul". 1 Respondent Carmen J. Doloiras owned and operated Kristina Patricia Enterprises (KPE), the exclusive
distributor of Gasul LPGs in the whole of Sorsogon. 2 Jose Nelson Doloiras (Jose) served as KPE's manager.
Bicol Gas Refilling Plant Corporation (Bicol Gas) was also in the business of selling and distributing LPGs in Sorsogon
but theirs carried the trademark "Bicol Savers Gas". Petitioner Audie Llona managed Bicol Gas.
In the course of trade and competition, any given distributor of LPGs at times acquired possession of LPG cylinder tanks
belonging to other distributors operating in the same area. They called these "captured cylinders". According to Jose, KPE's
manager, in April 2001 Bicol Gas agreed with KPE for the swapping of "captured cylinders" since one distributor could not refill
captured cylinders with its own brand of LPG. At one time, in the course of implementing this arrangement, KPE's Jose visited
the Bicol Gas refilling plant. While there, he noticed several Gasul tanks in Bicol Gas' possession. He requested a swap but Audie
Llona of Bicol Gas replied that he first needed to ask the permission of the Bicol Gas owners. That permission was given and they
had a swap involving around 30 Gasul tanks held by Bicol Gas in exchange for assorted tanks held by KPE. TCASIH
KPE's Jose noticed, however, that Bicol Gas still had a number of Gasul tanks in its yard. He offered to make a swap for
these but Llona declined, saying the Bicol Gas owners wanted to send those tanks to Batangas. Later Bicol Gas told Jose that it
had no more Gasul tanks left in its possession. Jose observed on almost a daily basis, however, that Bicol Gas' trucks which plied
the streets of the province carried a load of Gasul tanks. He noted that KPE's volume of sales dropped significantly from June to
July 2001.
On August 4, 2001 KPE's Jose saw a particular Bicol Gas truck on the Maharlika Highway. While the truck carried
mostly Bicol Savers LPG tanks, it had on it one unsealed 50-kg Gasul tank and one 50-kg Shellane tank. Jose followed the truck
and when it stopped at a store, he asked the driver, Jun Leorena, and the Bicol Gas sales representative, Jerome Misal, about the
Gasul tank in their truck. They said it was empty but, when Jose turned open its valve, he noted that it was not. Misal and Leorena
then admitted that the Gasul and Shellane tanks on their truck belonged to a customer who had them filled up by Bicol Gas. Misal
then mentioned that his manager was a certain Rolly Mirabena.
Because of the above incident, KPE filed a complaint 3 for violations of Republic Act (R.A.) 623 (illegally filling up
registered cylinder tanks), as amended, and Sections 155 (infringement of trade marks) and 169.1 (unfair competition) of
the Intellectual Property Code (R.A. 8293). The complaint charged the following: Jerome Misal, Jun Leorena, Rolly Mirabena,
Audie Llona, and several John and Jane Does, described as the directors, officers, and stockholders of Bicol Gas. These directors,
officers, and stockholders were eventually identified during the preliminary investigation.
Subsequently, the provincial prosecutor ruled that there was probable cause only for violation of  R.A. 623 (unlawfully
filling up registered tanks) and that only the four Bicol Gas employees, Mirabena, Misal, Leorena, and petitioner Llona, could be
charged. The charge against the other petitioners who were the stockholders and directors of the company was dismissed.
Dissatisfied, Petron and KPE filed a petition for review with the Office of the Regional State Prosecutor, Region V,
which initially denied the petition but partially granted it on motion for reconsideration. The Office of the Regional State
Prosecutor ordered the filing of additional informations against the four employees of Bicol Gas for unfair competition. It ruled,
however, that no case for trademark infringement was present. The Secretary of Justice denied the appeal of Petron and KPE and
their motion for reconsideration.
Undaunted, Petron and KPE filed a special civil action for certiorari with the Court of Appeals 4 but the Bicol Gas
employees and stockholders concerned opposed it, assailing the inadequacy in its certificate of non-forum shopping, given that
only Atty. Joel Angelo C. Cruz signed it on behalf of Petron. In its Decision 5 dated October 17, 2005, the Court of Appeals
ruled, however, that Atty. Cruz's certification constituted sufficient compliance. As to the substantive aspect of the case, the Court
of Appeals reversed the Secretary of Justice's ruling. It held that unfair competition does not necessarily absorb trademark
infringement. Consequently, the court ordered the filing of additional charges of trademark infringement against the concerned
Bicol Gas employees as well. CcAHEI
Since the Bicol Gas employees presumably acted under the direct order and control of its owners, the Court of Appeals
also ordered the inclusion of the stockholders of Bicol Gas in the various charges, bringing to 16 the number of persons to be
charged, now including petitioners Manuel C. Espiritu, Jr., Freida F. Espiritu, Carlo F. Espiritu, Rafael F. Espiritu, Rolando M.
Mirabuna, Hermilyn A. Mirabuna, Kim Roland A. Mirabuna, Kaye Ann A. Mirabuna, Ken Ryan A. Mirabuna, Juanito P. de
Castro, Geronima A. Almonite, and Manuel C. Dee (together with Audie Llona), collectively, petitioners Espiritu, et al. The court
denied the motion for reconsideration of these employees and stockholders in its Resolution dated January 6, 2006, hence, the
present petition for review 6 before this Court.
The Issues Presented
 The petition presents the following issues:
1. Whether or not the certificate of non-forum shopping that accompanied the petition filed with the
Court of Appeals, signed only by Atty. Cruz on behalf of Petron, complied with what the rules require;
2. Whether or not the facts of the case warranted the filing of charges against the Bicol Gas people for:
a) Filling up the LPG tanks registered to another manufacturer without the latter's consent in
violation of R.A. 623, as amended;
b) Trademark infringement consisting in Bicol Gas' use of a trademark that is confusingly
similar to Petron's registered "Gasul" trademark in violation of section 155 also of R.A. 8293; and
c) Unfair competition consisting in passing off Bicol Gas-produced LPGs for Petron-produced
Gasul LPG in violation of Section 168.3 of R.A. 8293.
The Court's Rulings
First. Petitioners Espiritu, et al. point out that the certificate of non-forum shopping that respondents KPE and Petron
attached to the petition they filed with the Court of Appeals was inadequate, having been signed only by Petron, through Atty.
Cruz.
But, while procedural requirements such as that of submittal of a certificate of non-forum shopping cannot be totally
disregarded, they may be deemed substantially complied with under justifiable circumstances. 7 One of these circumstances is
where the petitioners filed a collective action in which they share a common interest in its subject matter or raise a common cause
of action. In such a case, the certification by one of the petitioners may be deemed sufficient. 8
Here, KPE and Petron shared a common cause of action against petitioners Espiritu, et al., namely, the violation of their
proprietary rights with respect to the use of Gasul tanks and trademark. Furthermore, Atty. Cruz said in his certification that he
was executing it "for and on behalf of the Corporation, and co-petitioner Carmen J. Doloiras". 9 Thus, the object of the
requirement — to ensure that a party takes no recourse to multiple forums — was substantially achieved. Besides, the failure of
KPE to sign the certificate of non-forum shopping does not render the petition defective with respect to Petron which signed it
through Atty. Cruz. 10 The Court of Appeals, therefore, acted correctly in giving due course to the petition before it. DaCTcA
Second. The Court of Appeals held that under the facts of the case, there is probable cause that petitioners Espiritu,  et
al. committed all three crimes: (a) illegally filling up an LPG tank registered to Petron without the latter's consent in violation
of R.A. 623, as amended; (b) trademark infringement which consists in Bicol Gas' use of a trademark that is confusingly similar
to Petron's registered "Gasul" trademark in violation of Section 155 of R.A. 8293; and (c) unfair competition which consists in
petitioners Espiritu, et al. passing off Bicol Gas-produced LPGs for Petron-produced Gasul LPG in violation of Section 168.3
of R.A. 8293.
Here, the complaint adduced at the preliminary investigation shows that the one 50-kg Petron Gasul LPG tank found on
the Bicol Gas' truck "belonged to [a Bicol Gas] customer who had the same filled up by BICOL GAS". 11 In other words, the
customer had that one Gasul LPG tank brought to Bicol Gas for refilling and the latter obliged.
R.A. 623, as amended, 12 punishes any person who, without the written consent of the manufacturer or seller of gases
contained in duly registered steel cylinders or tanks, fills the steel cylinder or tank, for the purpose of sale, disposal or trafficking,
other than the purpose for which the manufacturer or seller registered the same. This was what happened in this case, assuming
the allegations of KPE's manager to be true. Bicol Gas employees filled up with their firm's gas the tank registered to Petron and
bearing its mark without the latter's written authority. Consequently, they may be prosecuted for that offense.
But, as for the crime of trademark infringement, Section 155 of R.A. 8293 (in relation to Section 170) 13 provides that it
is committed by any person who shall, without the consent of the owner of the registered mark:
1. Use in commerce any reproduction, counterfeit, copy or colorable imitation of a registered mark or the
same container or a dominant feature thereof in connection with the sale, offering for sale, distribution,
advertising of any goods or services including other preparatory steps necessary to carry out the sale of any goods
or services on or in connection with which such use is likely to cause confusion, or to cause mistake, or to
deceive; or
2. Reproduce, counterfeit, copy or colorably imitate a registered mark or a dominant feature thereof and
apply such reproduction, counterfeit, copy or colorable imitation to labels, signs, prints, packages, wrappers,
receptacles or advertisements intended to be used in commerce upon or in connection with the sale, offering for
sale, distribution, or advertising of goods or services on or in connection with which such use is likely to cause
confusion, or to cause mistake, or to deceive.
KPE and Petron have to show that the alleged infringer, the responsible officers and staff of Bicol Gas, used Petron's
Gasul trademark or a confusingly similar trademark on Bicol Gas tanks with intent to deceive the public and defraud its
competitor as to what it is selling. 14 Examples of this would be the acts of an underground shoe manufacturer in Malabon
producing "Nike" branded rubber shoes or the acts of a local shirt company with no connection to La Coste, producing and selling
shirts that bear the stitched logos of an open-jawed alligator. IHTASa
Here, however, the allegations in the complaint do not show that Bicol Gas painted on its own tanks Petron's Gasul
trademark or a confusingly similar version of the same to deceive its customers and cheat Petron. Indeed, in this case, the one tank
bearing the mark of Petron Gasul found in a truck full of Bicol Gas tanks was a genuine Petron Gasul tank, more of a captured
cylinder belonging to competition. No proof has been shown that Bicol Gas has gone into the business of distributing imitation
Petron Gasul LPGs.
As to the charge of unfair competition, Section 168.3 (a) of R.A. 8293 (also in relation to Section 170) describes the acts
constituting the offense as follows:
168.3. In particular, and without in any way limiting the scope of protection against unfair competition,
the following shall be deemed guilty of unfair competition:
(a) Any person, who is selling his goods and gives them the general appearance of goods of
another manufacturer or dealer, either as to the goods themselves or in the wrapping of the packages in
which they are contained, or the devices or words thereon, or in any other feature of their appearance,
which would be likely to influence purchasers to believe that the goods offered are those of a
manufacturer or dealer, other than the actual manufacturer or dealer, or who otherwise clothes the goods
with such appearance as shall deceive the public and defraud another of his legitimate trade, or any
subsequent vendor of such goods or any agent of any vendor engaged in selling such goods with a like
purpose;
Essentially, what the law punishes is the act of giving one's goods the general appearance of the goods of another, which
would likely mislead the buyer into believing that such goods belong to the latter. Examples of this would be the act of
manufacturing or selling shirts bearing the logo of an alligator, similar in design to the open-jawed alligator in La Coste shirts,
except that the jaw of the alligator in the former is closed, or the act of a producer or seller of tea bags with red tags showing the
shadow of a black dog when his competitor is producing or selling popular tea bags with red tags showing the shadow of a black
cat.
Here, there is no showing that Bicol Gas has been giving its LPG tanks the general appearance of the tanks of Petron's
Gasul. As already stated, the truckfull of Bicol Gas tanks that the KPE manager arrested on a road in Sorsogon just happened to
have mixed up with them one authentic Gasul tank that belonged to Petron.
The only point left is the question of the liability of the stockholders and members of the board of directors of Bicol Gas
with respect to the charge of unlawfully filling up a steel cylinder or tank that belonged to Petron. The Court of Appeals ruled that
they should be charged along with the Bicol Gas employees who were pointed to as directly involved in overt acts constituting the
offense.
Bicol Gas is a corporation. As such, it is an entity separate and distinct from the persons of its officers, directors, and
stockholders. It has been held, however, that corporate officers or employees, through whose act, default or omission the
corporation commits a crime, may themselves be individually held answerable for the crime. 15 IATSHE
Jose claimed in his affidavit that, when he negotiated the swapping of captured cylinders with Bicol Gas, its manager,
petitioner Audie Llona, claimed that he would be consulting with the owners of Bicol Gas about it. Subsequently, Bicol Gas
declined the offer to swap cylinders for the reason that the owners wanted to send their captured cylinders to Batangas. The Court
of Appeals seized on this as evidence that the employees of Bicol Gas acted under the direct orders of its owners and that "the
owners of Bicol Gas have full control of the operations of the business". 16
The "owners" of a corporate organization are its stockholders and they are to be distinguished from its directors and
officers. The petitioners here, with the exception of Audie Llona, are being charged in their capacities as stockholders of Bicol
Gas. But the Court of Appeals forgets that in a corporation, the management of its business is generally vested in its board of
directors, not its stockholders. 17 Stockholders are basically investors in a corporation. They do not have a hand in running the
day-to-day business operations of the corporation unless they are at the same time directors or officers of the corporation. Before
a stockholder may be held criminally liable for acts committed by the corporation, therefore, it must be shown that he had
knowledge of the criminal act committed in the name of the corporation and that he took part in the same or gave his consent to
its commission, whether by action or inaction.
The finding of the Court of Appeals that the employees "could not have committed the crimes without the consent,
[abetment], permission, or participation of the owners of Bicol Gas" 18 is a sweeping speculation especially since, as
demonstrated above, what was involved was just one Petron Gasul tank found in a truck filled with Bicol Gas tanks. Although the
KPE manager heard petitioner Llona say that he was going to consult the owners of Bicol Gas regarding the offer to swap
additional captured cylinders, no indication was given as to which Bicol Gas stockholders Llona consulted. It would be unfair to
charge all the stockholders involved, some of whom were proved to be minors. 19 No evidence was presented establishing the
 names of the stockholders who were charged with running the operations of Bicol Gas. The complaint even failed to allege who
among the stockholders sat in the board of directors of the company or served as its officers.
The Court of Appeals of course specifically mentioned petitioner stockholder Manuel C. Espiritu, Jr. as the registered
owner of the truck that the KPE manager brought to the police for investigation because that truck carried a tank of Petron Gasul.
But the act that R.A. 623 punishes is the unlawful filling up of registered tanks of another. It does not punish the act of
transporting such tanks. And the complaint did not allege that the truck owner connived with those responsible for filling up that
Gasul tank with Bicol Gas LPG.
WHEREFORE, the Court REVERSES and SETS ASIDE the Decision of the Court of Appeals in CA-G.R. SP 87711
dated October 17, 2005 as well as its Resolution dated January 6, 2006, the Resolutions of the Secretary of Justice dated March
11, 2004 and August 31, 2004, and the Order of the Office of the Regional State Prosecutor, Region V, dated February 19, 2003.
The Court REINSTATES the Resolution of the Office of the Provincial Prosecutor of Sorsogon in I.S. 2001-9231 (inadvertently
referred in the Resolution itself as I.S. 2001-9234), dated February 26, 2002. The names of petitioners Manuel C. Espiritu, Jr.,
Freida F. Espititu, Carlo F. Espiritu, Rafael F. Espiritu, Rolando M. Mirabuna, Hermilyn A. Mirabuna, Kim Roland A. Mirabuna,
Kaye Ann A. Mirabuna, Ken Ryan A. Mirabuna, Juanito P. De Castro, Geronima A. Almonite and Manuel C. Dee
are ORDERED excluded from the charge.
SO ORDERED. DaEcTC
||| (Espiritu v. Petron Corp., G.R. No. 170891, [November 24, 2009], 620 PHIL 254-268)

FIRST DIVISION

[G.R. No. 160191. June 8, 2006.]

TWIN ACE HOLDINGS CORPORATION, petitioner, vs. RUFINA AND COMPANY, respondent.

DECISION

CHICO-NAZARIO, J p:

From the records, it appears that on 3 December 1991, Twin Ace Holdings Corporation (Twin Ace) filed a Complaint 1 for
recovery of possession of personal property, permanent injunction and damages with prayer for the issuance of a writ of replevin,
temporary restraining order and a writ of preliminary injunction against Rufina and Company (Rufina).
As alleged in the complaint, Twin Ace is a private domestic corporation engaged in the manufacture of rhum, wines and
liquor under the name and style "Tanduay Distillers." It has registered its mark of ownership of its bottles with the Bureau of Patent,
Trademarks and Technology Transfer under Republic Act No. 623. In the conduct of its business, it sells its products to the public
excluding the bottles. It makes substantial investments in brand new bottles which it buys from glass factories and which they use for
about five times in order to recover the cost of acquisition. Twin Ace thus retrieves its used empty bottles, washes and uses them over
and over again as containers for its products.
On the other hand, Rufina is engaged in the production, extraction, fermentation and manufacture of  patis and other food
seasonings and is engaged in the buying and selling of all kinds of foods, merchandise and products for domestic use or for export to
other countries. In producing patis and other food seasonings, Rufina uses as containers bottles owned by Twin Ace without any
authority or permission from the latter. In the process, Rufina is unduly benefited from the use of the bottles.
Upon the posting of Twin Ace of the required bond, the Regional Trial Court (RTC) of Manila, Branch 26, issued an Order
dated 5 February 1992 granting the application for the issuance of a writ of replevin. 2 Upon the implementation of the said writ,
Deputy Sheriff Amado P. Sevilla was able to seize a total of 26,241 empty bottles marked "TANDUAY DISTILLERY, INC.,"  3 at the
address of Rufina.
In its Answer with counter-application for a Writ of Preliminary Injunction, Rufina claimed that the marked bottles it used as
containers for its products were purchased from junk dealers; hence, it became the owner thereof. DcCASI
 After hearing, the trial court rendered its decision dated 20 May 1995 the dispositive portion of which states:
WHEREFORE, PREMISES CONSIDERED, judgment is hereby rendered in favor of the defendant as
follows:
a) dismissing the complaint for lack of merit;
b) dissolving the order of replevin;
c) ordering the plaintiff to return 26,241 bottles to the defendant in the place where the bottles were
seized at the expense of the plaintiff within 48 hours from receipt hereof;
d) ordering the plaintiff to pay the defendant the sum of P100,000.00 as actual damages sustained by the
latter to be taken from the replevin bond;
e) ordering the plaintiff to pay the defendant the sum of P1,000,000.00 as damages for besmirched
reputation;
f) ordering the plaintiff to pay the sum of P100,000.00 as nominal damages;
g) ordering the plaintiff to pay the defendant the sum of P50,000.00 as attorney's fee; and
h) ordering the plaintiff to pay the cost of the suit. 4
Twin Ace appealed to the Court of Appeals. On 27 September 2002, the appellate court rendered its decision 5 modifying the
decision of the trial court as follows:
WHEREFORE, in view of all the foregoing, the appealed decision dated May 20, 1995 of Branch 26,
Regional Trial Court, Manila, in Civil Case No. 92-59862 is MODIFIED, in that the award of damages, except
nominal damages, and attorney's fees is DELETED for lack of legal and factual basis. The award of nominal
damages is reduced to P50,000.00. In all other respects, the assailed decision is AFFIRMED.
Costs against plaintiff-appellant. 6
A motion for reconsideration dated 19 October 2002 7 filed by Twin Ace was denied in a resolution of the Court of Appeals
dated 29 September 2003. 8 Hence, this Petition for Review.
For resolution are the following issues:
I.
THE HONORABLE COURT OF APPEALS ERRED IN HOLDING THAT RESPONDENT RUFINA IS NOT
COVERED WITHIN THE EXEMPTION PROVIDED BY SECTION 6 OF R.A. 623, AS AMENDED BY R.A.
5700.
II.
THE HONORABLE COURT OF APPEALS ERRED IN AWARDING NOMINAL DAMAGES AGAINST
PETITIONER TWIN ACE CONSIDERING THAT IT WAS THE ONE WHOSE RIGHTS HAVE BEEN
VIOLATED OR INVADED BY RESPONDENT RUFINA.
III.
THE HONORABLE COURT OF APPEALS ERRED IN NOT FINDING THAT PETITIONER AS OWNER OF
THE SUBJECT BOTTLES IS ENTITLED TO COMPENSATION FOR ITS UNAUTHORIZED USE BY
RESPONDENT RUFINA. 9
Pertinent provision of Republic Act No. 623, 10 as amended by Republic Act No. 5700, 11 is quoted hereunder for clarity:
Sec. 2. It shall be unlawful for any person, without the written consent of the manufacturer, bottler, or
seller, who has successfully registered the marks of ownership in accordance with the provisions of the next
preceding section, to fill such bottles, boxes, kegs, barrels, steel cylinders, tanks, flasks, accumulators, or other
similar containers so marked or stamped, for the purpose of sale, or to sell, dispose of, buy or traffic in, or
wantonly destroy the same, whether filled or not to use the same for drinking vessels or glasses or drain pipes,
foundation pipes, for any other purpose than that registered by the manufacturer, bottler or seller. Any violation of
this section shall be punished by a fine of not more than one thousand pesos or imprisonment of not more than one
year or both. cASTED
Sec. 3. The use by any person other than the registered manufacturer, bottler or seller, without written
permission of the latter of any such bottle, cask, barrel, keg, box, steel cylinders, tanks, flasks, accumulators, or
 other similar containers, or the possession thereof without written permission of the manufacturer, by any junk
dealer or dealer in casks, barrels, kegs, boxes, steel cylinders, tanks, flasks, accumulators, or other similar
containers, the same being duly marked or stamped and registered as herein provided, shall give rise to a prima
facie presumption that such use or possession is unlawful. 12
Sec. 4. The criminal action provided in this Act shall in no way affect any civil action to which the
registered manufacturer, bottler, or seller, may be entitled by law or contract.
Sec. 5. No action shall be brought under this Act against any person to whom the registered
manufacturer, bottler, or seller, has transferred by way of sale, any of the containers herein referred to, but the sale
of the beverage contained in the said containers shall not include the sale of the containers unless specifically so
provided.
Sec. 6. The provisions of this Act shall not be interpreted as prohibiting the use of bottles as containers
for "sisi," "bagoong," "patis," and similar native products. 13
In sum, Twin Ace asserts that the provision under the law affords protection only to small scale producers/manufacturers who
do not have the capacity to buy new bottles for use in their products and cannot extend to Rufina which had unequivocably admitted in
its Answer 14 and affirmed in the decision of the trial court that it is engaged, on a large scale basis, in the production and
manufacture of food seasonings.
For its part, Rufina counters that the law did not really distinguish between large scale manufacturers and small time
producers.
The petition is not meritorious.
The earlier case of Twin Ace Holdings Corporation v. Court of Appeals, 15 applies to the present petition. In said case, Twin
Ace filed a Complaint for Replevin against Lorenzana Food Corporation to recover three hundred eighty thousand bottles allegedly
owned by Twin Ace but detained and used by Lorenzana Food Corporation as containers for its native products without its express
permission, in violation of the law. In that case, this Court acknowledged that the exemption under the law is unqualified as the law
did not make a distinction that it only applies to small scale industries but not to large scale manufacturers. Thus, even if the court in
said case held that the exemption is primarily meant to give protection to small scale industries, it did not qualify that the protection
therein was intended and limited only to such. The Court held:
Petitioner itself alleges that respondent LORENZANA uses the subject 350 ml., 375 ml. and 750 ml.
bottles as containers for processed foods and other related products such as patis, toyo, bagoong, vinegar and
other food seasonings. Hence, Sec. 6 squarely applies in private respondent's favor. Obviously, the contention of
TWIN ACE that the exemption refers only to criminal liability but not to civil liability is without merit. It is
inconceivable that an act specifically allowed by law, in other words legal, can be the subject of injunctive relief
and damages. Besides, the interpretation offered by petitioner defeats the very purpose for which the exemption
was provided.
Republic Act No. 623, "An Act to Regulate the Use of Duly Stamped or Marked Bottles, Boxes, Casks,
Kegs, Barrels and Other Similar Containers," as amended by RA No. 5700, was meant to protect the intellectual
property rights of the registrants of the containers and prevent unfair trade practices and fraud on the public.
However, the exemption granted in Sec. 6 thereof was deemed extremely necessary to provide assistance and
incentive to the backyard, cottage and small-scale manufacturers of indigenous native products such as patis,
sisi and toyo who do not have the capital to buy brand new bottles as containers nor afford to pass the added cost
to the majority of poor Filipinos who use the products as their daily condiments or viands. If the contention of
petitioner is accepted, i.e., to construe the exemption as to apply to criminal liability only but not to civil liability,
the very purpose for which the exemption was granted will be defeated. None of the small-scale manufacturers of
the indigenous native products protected would possibly wish to use the registered bottles if they are vulnerable to
civil suits. The effect is a virtual elimination of the clear and unqualified exemption embodied in Sec. 6. It is
worthy to note that House Bill No. 20585 was completely rejected because it sought to expressly and directly
eliminate that which petitioner indirectly proposes to do with this petition. 16 (Emphasis supplied.) SHECcT
 
It is worth noting that Lorenzana Food Corporation which prevailed in the case filed by Twin Ace against it is certainly not a
small scale industry. Just like Rufina, Lorenzana Food Corporation also manufactures and exports processed foods and other related
products, e.g., patis, toyo, bagoong, vinegar and other food seasonings.
It is a basic rule in statutory construction that when the law is clear and free from any doubt or ambiguity, there is no room
for construction or interpretation. As has been our consistent ruling, where the law speaks in clear and categorical language, there is no
occasion for interpretation; there is only room for application. 17
 Notably, attempts to amend the protection afforded by Section 6 of Republic Act No. 623, by giving protection only to small
scale manufacturers or those with a capitalization of five hundred thousand pesos or less (P500,000.00), through then House Bill No.
20585, 18 and subsequently through House Bill No. 30400, 19 proved unsuccessful as the amendment proposed in both Bills was
never passed.
In view of these considerations, we find and so hold that the exemption contained in Section 6 of Rep. Act No. 623 applies to
all manufacturers of sisi, bagoong, patis and similar native products without distinction or qualification as to whether they are small,
medium or large scale.
On the issue of nominal damages, Article 2222 of the Civil Code 20 states that the court may award nominal damages in
every obligation arising from any source enumerated in Article 1157, 21 or in every other case where any property right has been
invaded. 22 Nominal damages are given in order that a right of the plaintiff, which has been violated or invaded by the defendant, may
be vindicated or recognized, and not for the purpose of indemnifying the plaintiff for any loss suffered by him.  23 In another
case, 24 this Court held that when plaintiff suffers some species of injury not enough to warrant an award of actual damages, the court
may award nominal damages. Considering the foregoing, we find that the award of nominal damages to Rufina in the amount of fifty
thousand pesos (P50,000.00) is reasonable, warranted and justified.
As to the third issue, Rule 60, Section 2(a), of the Revised Rules of Court mandates that a party praying for the recovery of
possession of personal property must show by his own affidavit or that of some other person who personally knows the facts that he is
the owner of the property claimed, particularly describing it, or is entitled to the possession thereof.  25 It must be borne in mind that
replevin is a possessory action the gist of which focuses on the right of possession that, in turn, is dependent on a legal basis that, not
infrequently, looks to the ownership of the object sought to be replevied. 26 Wrongful detention by the defendant of the properties
sought in an action for replevin must be satisfactorily established. If only a mechanistic averment thereof is offered, the writ should
not be issued. 27 In this case, Twin Ace has not shown that it is entitled to the possession of the bottles in question and consequently
there is thus no basis for the demand by it of due compensation. As stated by the court in the earlier case of Twin Ace Holdings
Corporation v. Court of Appeals 28 :
Petitioner cannot seek refuge in Sec. 5 of RA No. 623 to support its claim of continuing ownership over
the subject bottles. In United States v. Manuel [7 Phil. 221 (1906)] we held that since the purchaser at his
discretion could either retain or return the bottles, the transaction must be regarded as a sale of the bottles when
the purchaser actually exercised that discretion and decided not to return them to the vendor. We also take judicial
notice of the standard practice today that the cost of the container is included in the selling price of the product
such that the buyer of liquor or any such product from any store is not required to return the bottle nor is the liquor
placed in a plastic container that possession of the bottle is retained by the store. cDCSTA
WHEREFORE, premises considered, the instant petition is DENIED for lack of merit and the decision dated 27 September
2002 and resolution dated 29 September 2003, in CA-G.R. CV No. 52852, both of the Court of Appeals are Affirmed.
SO ORDERED.
||| (Twin Ace Holdings Corp. v. Rufina & Co., G.R. No. 160191, [June 8, 2006], 523 PHIL 766-780)
 FIRST DIVISION

[G.R. No. 160191. June 8, 2006.]

TWIN ACE HOLDINGS CORPORATION, petitioner, vs. RUFINA AND COMPANY, respondent.

DECISION

CHICO-NAZARIO, J p:

From the records, it appears that on 3 December 1991, Twin Ace Holdings Corporation (Twin Ace) filed a Complaint 1 for
recovery of possession of personal property, permanent injunction and damages with prayer for the issuance of a writ of replevin,
temporary restraining order and a writ of preliminary injunction against Rufina and Company (Rufina).
As alleged in the complaint, Twin Ace is a private domestic corporation engaged in the manufacture of rhum, wines and
liquor under the name and style "Tanduay Distillers." It has registered its mark of ownership of its bottles with the Bureau of Patent,
Trademarks and Technology Transfer under Republic Act No. 623. In the conduct of its business, it sells its products to the public
excluding the bottles. It makes substantial investments in brand new bottles which it buys from glass factories and which they use for
about five times in order to recover the cost of acquisition. Twin Ace thus retrieves its used empty bottles, washes and uses them over
and over again as containers for its products.
On the other hand, Rufina is engaged in the production, extraction, fermentation and manufacture of  patis and other food
seasonings and is engaged in the buying and selling of all kinds of foods, merchandise and products for domestic use or for export to
other countries. In producing patis and other food seasonings, Rufina uses as containers bottles owned by Twin Ace without any
authority or permission from the latter. In the process, Rufina is unduly benefited from the use of the bottles.
Upon the posting of Twin Ace of the required bond, the Regional Trial Court (RTC) of Manila, Branch 26, issued an Order
dated 5 February 1992 granting the application for the issuance of a writ of replevin. 2 Upon the implementation of the said writ,
Deputy Sheriff Amado P. Sevilla was able to seize a total of 26,241 empty bottles marked "TANDUAY DISTILLERY, INC.,"  3 at the
address of Rufina.
In its Answer with counter-application for a Writ of Preliminary Injunction, Rufina claimed that the marked bottles it used as
containers for its products were purchased from junk dealers; hence, it became the owner thereof. DcCASI
After hearing, the trial court rendered its decision dated 20 May 1995 the dispositive portion of which states:
WHEREFORE, PREMISES CONSIDERED, judgment is hereby rendered in favor of the defendant as
follows:
a) dismissing the complaint for lack of merit;
b) dissolving the order of replevin;
c) ordering the plaintiff to return 26,241 bottles to the defendant in the place where the bottles were
seized at the expense of the plaintiff within 48 hours from receipt hereof;
d) ordering the plaintiff to pay the defendant the sum of P100,000.00 as actual damages sustained by the
latter to be taken from the replevin bond;
 e) ordering the plaintiff to pay the defendant the sum of P1,000,000.00 as damages for besmirched
reputation;
f) ordering the plaintiff to pay the sum of P100,000.00 as nominal damages;
g) ordering the plaintiff to pay the defendant the sum of P50,000.00 as attorney's fee; and
h) ordering the plaintiff to pay the cost of the suit. 4
Twin Ace appealed to the Court of Appeals. On 27 September 2002, the appellate court rendered its decision 5 modifying the
decision of the trial court as follows:
WHEREFORE, in view of all the foregoing, the appealed decision dated May 20, 1995 of Branch 26,
Regional Trial Court, Manila, in Civil Case No. 92-59862 is MODIFIED, in that the award of damages, except
nominal damages, and attorney's fees is DELETED for lack of legal and factual basis. The award of nominal
damages is reduced to P50,000.00. In all other respects, the assailed decision is AFFIRMED.
Costs against plaintiff-appellant. 6
A motion for reconsideration dated 19 October 2002 7 filed by Twin Ace was denied in a resolution of the Court of Appeals
dated 29 September 2003. 8 Hence, this Petition for Review.
For resolution are the following issues:
I.
THE HONORABLE COURT OF APPEALS ERRED IN HOLDING THAT RESPONDENT RUFINA IS NOT
COVERED WITHIN THE EXEMPTION PROVIDED BY SECTION 6 OF R.A. 623, AS AMENDED BY R.A.
5700.
II.
THE HONORABLE COURT OF APPEALS ERRED IN AWARDING NOMINAL DAMAGES AGAINST
PETITIONER TWIN ACE CONSIDERING THAT IT WAS THE ONE WHOSE RIGHTS HAVE BEEN
VIOLATED OR INVADED BY RESPONDENT RUFINA.
III.
THE HONORABLE COURT OF APPEALS ERRED IN NOT FINDING THAT PETITIONER AS OWNER OF
THE SUBJECT BOTTLES IS ENTITLED TO COMPENSATION FOR ITS UNAUTHORIZED USE BY
RESPONDENT RUFINA. 9
Pertinent provision of Republic Act No. 623, 10 as amended by Republic Act No. 5700, 11 is quoted hereunder for clarity:
Sec. 2. It shall be unlawful for any person, without the written consent of the manufacturer, bottler, or
seller, who has successfully registered the marks of ownership in accordance with the provisions of the next
preceding section, to fill such bottles, boxes, kegs, barrels, steel cylinders, tanks, flasks, accumulators, or other
similar containers so marked or stamped, for the purpose of sale, or to sell, dispose of, buy or traffic in, or
wantonly destroy the same, whether filled or not to use the same for drinking vessels or glasses or drain pipes,
foundation pipes, for any other purpose than that registered by the manufacturer, bottler or seller. Any violation of
this section shall be punished by a fine of not more than one thousand pesos or imprisonment of not more than one
year or both. cASTED
Sec. 3. The use by any person other than the registered manufacturer, bottler or seller, without written
permission of the latter of any such bottle, cask, barrel, keg, box, steel cylinders, tanks, flasks, accumulators, or
other similar containers, or the possession thereof without written permission of the manufacturer, by any junk
dealer or dealer in casks, barrels, kegs, boxes, steel cylinders, tanks, flasks, accumulators, or other similar
containers, the same being duly marked or stamped and registered as herein provided, shall give rise to a prima
facie presumption that such use or possession is unlawful. 12
Sec. 4. The criminal action provided in this Act shall in no way affect any civil action to which the
registered manufacturer, bottler, or seller, may be entitled by law or contract.
Sec. 5. No action shall be brought under this Act against any person to whom the registered
manufacturer, bottler, or seller, has transferred by way of sale, any of the containers herein referred to, but the sale
of the beverage contained in the said containers shall not include the sale of the containers unless specifically so
provided.
 Sec. 6. The provisions of this Act shall not be interpreted as prohibiting the use of bottles as containers
for "sisi," "bagoong," "patis," and similar native products. 13
In sum, Twin Ace asserts that the provision under the law affords protection only to small scale producers/manufacturers who
do not have the capacity to buy new bottles for use in their products and cannot extend to Rufina which had unequivocably admitted in
its Answer 14 and affirmed in the decision of the trial court that it is engaged, on a large scale basis, in the production and
manufacture of food seasonings.
For its part, Rufina counters that the law did not really distinguish between large scale manufacturers and small time
producers.
The petition is not meritorious.
The earlier case of Twin Ace Holdings Corporation v. Court of Appeals, 15 applies to the present petition. In said case, Twin
Ace filed a Complaint for Replevin against Lorenzana Food Corporation to recover three hundred eighty thousand bottles allegedly
owned by Twin Ace but detained and used by Lorenzana Food Corporation as containers for its native products without its express
permission, in violation of the law. In that case, this Court acknowledged that the exemption under the law is unqualified as the law
did not make a distinction that it only applies to small scale industries but not to large scale manufacturers. Thus, even if the court in
said case held that the exemption is primarily meant to give protection to small scale industries, it did not qualify that the protection
therein was intended and limited only to such. The Court held:
Petitioner itself alleges that respondent LORENZANA uses the subject 350 ml., 375 ml. and 750 ml.
bottles as containers for processed foods and other related products such as patis, toyo, bagoong, vinegar and
other food seasonings. Hence, Sec. 6 squarely applies in private respondent's favor. Obviously, the contention of
TWIN ACE that the exemption refers only to criminal liability but not to civil liability is without merit. It is
inconceivable that an act specifically allowed by law, in other words legal, can be the subject of injunctive relief
and damages. Besides, the interpretation offered by petitioner defeats the very purpose for which the exemption
was provided.
Republic Act No. 623, "An Act to Regulate the Use of Duly Stamped or Marked Bottles, Boxes, Casks,
Kegs, Barrels and Other Similar Containers," as amended by RA No. 5700, was meant to protect the intellectual
property rights of the registrants of the containers and prevent unfair trade practices and fraud on the public.
However, the exemption granted in Sec. 6 thereof was deemed extremely necessary to provide assistance and
incentive to the backyard, cottage and small-scale manufacturers of indigenous native products such as patis,
sisi and toyo who do not have the capital to buy brand new bottles as containers nor afford to pass the added cost
to the majority of poor Filipinos who use the products as their daily condiments or viands. If the contention of
petitioner is accepted, i.e., to construe the exemption as to apply to criminal liability only but not to civil liability,
the very purpose for which the exemption was granted will be defeated. None of the small-scale manufacturers of
the indigenous native products protected would possibly wish to use the registered bottles if they are vulnerable to
civil suits. The effect is a virtual elimination of the clear and unqualified exemption embodied in Sec. 6. It is
worthy to note that House Bill No. 20585 was completely rejected because it sought to expressly and directly
eliminate that which petitioner indirectly proposes to do with this petition. 16 (Emphasis supplied.) SHECcT
 
It is worth noting that Lorenzana Food Corporation which prevailed in the case filed by Twin Ace against it is certainly not a
small scale industry. Just like Rufina, Lorenzana Food Corporation also manufactures and exports processed foods and other related
products, e.g., patis, toyo, bagoong, vinegar and other food seasonings.
It is a basic rule in statutory construction that when the law is clear and free from any doubt or ambiguity, there is no room
for construction or interpretation. As has been our consistent ruling, where the law speaks in clear and categorical language, there is no
occasion for interpretation; there is only room for application. 17
Notably, attempts to amend the protection afforded by Section 6 of Republic Act No. 623, by giving protection only to small
scale manufacturers or those with a capitalization of five hundred thousand pesos or less (P500,000.00), through then House Bill No.
20585, 18 and subsequently through House Bill No. 30400, 19 proved unsuccessful as the amendment proposed in both Bills was
never passed.
In view of these considerations, we find and so hold that the exemption contained in Section 6 of Rep. Act No. 623 applies to
all manufacturers of sisi, bagoong, patis and similar native products without distinction or qualification as to whether they are small,
medium or large scale.
On the issue of nominal damages, Article 2222 of the Civil Code 20 states that the court may award nominal damages in
every obligation arising from any source enumerated in Article 1157, 21 or in every other case where any property right has been
invaded. 22 Nominal damages are given in order that a right of the plaintiff, which has been violated or invaded by the defendant, may
be vindicated or recognized, and not for the purpose of indemnifying the plaintiff for any loss suffered by him.  23 In another
case, 24 this Court held that when plaintiff suffers some species of injury not enough to warrant an award of actual damages, the court
may award nominal damages. Considering the foregoing, we find that the award of nominal damages to Rufina in the amount of fifty
thousand pesos (P50,000.00) is reasonable, warranted and justified.
As to the third issue, Rule 60, Section 2(a), of the Revised Rules of Court mandates that a party praying for the recovery of
possession of personal property must show by his own affidavit or that of some other person who personally knows the facts that he is
the owner of the property claimed, particularly describing it, or is entitled to the possession thereof.  25 It must be borne in mind that
replevin is a possessory action the gist of which focuses on the right of possession that, in turn, is dependent on a legal basis that, not
infrequently, looks to the ownership of the object sought to be replevied. 26 Wrongful detention by the defendant of the properties
sought in an action for replevin must be satisfactorily established. If only a mechanistic averment thereof is offered, the writ should
not be issued. 27 In this case, Twin Ace has not shown that it is entitled to the possession of the bottles in question and consequently
there is thus no basis for the demand by it of due compensation. As stated by the court in the earlier case of Twin Ace Holdings
Corporation v. Court of Appeals 28 :
Petitioner cannot seek refuge in Sec. 5 of RA No. 623 to support its claim of continuing ownership over
the subject bottles. In United States v. Manuel [7 Phil. 221 (1906)] we held that since the purchaser at his
discretion could either retain or return the bottles, the transaction must be regarded as a sale of the bottles when
the purchaser actually exercised that discretion and decided not to return them to the vendor. We also take judicial
notice of the standard practice today that the cost of the container is included in the selling price of the product
such that the buyer of liquor or any such product from any store is not required to return the bottle nor is the liquor
placed in a plastic container that possession of the bottle is retained by the store. cDCSTA
WHEREFORE, premises considered, the instant petition is DENIED for lack of merit and the decision dated 27 September
2002 and resolution dated 29 September 2003, in CA-G.R. CV No. 52852, both of the Court of Appeals are Affirmed.
SO ORDERED.
||| (Twin Ace Holdings Corp. v. Rufina & Co., G.R. No. 160191, [June 8, 2006], 523 PHIL 766-780)

THIRD DIVISION
 [G.R. No. 156041. February 21, 2007.]

PEST MANAGEMENT ASSOCIATION OF THE PHILIPPINES (PMAP), represented by its President, MANUEL J. CHAVEZ, petitioner, vs.
FERTILIZER AND PESTICIDE AUTHORITY (FPA), SECRETARY OF THE DEPARTMENT OF AGRICULTURE, FPA OFFICER-IN-CHARGE
CESAR M. DRILON, AND FPA DEPUTY DIRECTOR DARIO C. SALUBARSE, respondents.

DECISION

AUSTRIA-MARTINEZ, J p:

This resolves the Petition for Review on Certiorari seeking to set aside the Decision 1 of the Regional Trial Court of Quezon
City, Branch 90 (RTC) dated November 5, 2002.
The case commenced upon petitioner's filing of a Petition For Declaratory Relief With Prayer For Issuance Of A Writ Of
Preliminary Injunction And/Or Temporary Restraining Order with the RTC on January 4, 2002. Petitioner, a non-stock corporation
duly organized and existing under the laws of the Philippines, is an association of pesticide handlers duly licensed by respondent
Fertilizer and Pesticide Authority (FPA). It questioned the validity of Section 3.12 of the 1987 Pesticide Regulatory Policies and
Implementing Guidelines, which provides thus:
3.12 Protection of Proprietary Data
Data submitted to support the first full or conditional registration of a pesticide active ingredient
in the Philippines will be granted proprietary protection for a period of seven years from the date of such
registration. During this period subsequent registrants may rely on these data only with third party
authorization or otherwise must submit their own data. After this period, all data may be freely cited in
support of registration by any applicant, provided convincing proof is submitted that the product being registered
is identical or substantially similar to any current registered pesticide, or differs only in ways that would not
significantly increase the risk of unreasonable adverse effects.
Pesticides granted provisional registration under P.D. 1144 will be considered first registered in 1977, the
date of the Decree.
Pesticide products in which data is still under protection shall be referred to as proprietary pesticides, and
all others as commodity pesticides. (Emphasis supplied) HcSETI
Petitioner argued that the specific provision on the protection of the proprietary data in FPA's Pesticide Regulatory Policies
and Implementing Guidelines is unlawful for going counter to the objectives of Presidential Decree No. 1144 (P.D. No. 1144); for
exceeding the limits of delegated authority; and for encroaching on the exclusive jurisdiction of the Intellectual Property Office.
On November 5, 2002, the RTC dismissed the petition for declaratory relief for lack of merit. The RTC held that "the FPA
did not exceed the limits of its delegated authority in issuing the aforecited Section 3.12 of the Guidelines granting protection to
proprietary data . . . because the issuance of the aforecited Section was a valid exercise of its power to regulate, control and develop
the pesticide industry under P.D. 1144" 2 and the assailed provision does "not encroach on one of the functions of the Intellectual
Properly Office (IPO)." 3
Dissatisfied with the RTC Decision, petitioner resorted to filing this petition for review on certiorari where the following
issues are raised:
I
WHETHER OR NOT RESPONDENT FPA HAS ACTED BEYOND THE SCOPE OF ITS
DELEGATED POWER WHEN IT GRANTED A SEVEN-YEAR PROPRIETARY PROTECTION TO DATA
SUBMITTED TO SUPPORT THE FIRST FULL OR CONDITIONAL REGISTRATION OF A PESTICIDE
INGREDIENT IN THE PHILIPPINES;
II
WHETHER OR NOT RESPONDENT FPA IS ENCROACHING ON THE EXCLUSIVE
JURISDICTION OF THE INTELLECTUAL PROPERTY OFFICE (IPO) WHEN IT INCLUDED IN ITS
PESTICIDE REGULATORY POLICIES AND IMPLEMENTING GUIDELINES THE SUBJECT SEVEN-
YEAR PROPRIETARY DATA PROTECTION;
III
 WHETHER OR NOT SAID PROPRIETARY DATA PROTECTION IS AN UNLAWFUL
RESTRAINT OF FREE TRADE;
IV
WHETHER OR NOT SAID PROPRIETARY DATA PROTECTION RUNS COUNTER TO THE
OBJECTIVES OF P.D. NO. 1144;
V
WHETHER OR NOT THE REGIONAL TRIAL COURT OF QUEZON CITY, BRANCH 90,
COMMITTED A REVERSIBLE ERROR WHEN IT UPHELD THE VALIDITY OF SECTION 3.12 OF THE
PESTICIDE REGULATORY POLICIES AND IMPLEMENTING GUIDELINES ISSUED BY RESPONDENT
FPA.
Respondents, on the other hand, maintain that the provision on the protection of proprietary data in the FPA's Pesticide
Regulatory Policies and Implementing Guidelines is valid and legal as it does not violate the objectives of  P.D. No. 1144; the
proprietary data are a substantial asset which must be protected; the protection for a limited number of years does not constitute
unlawful restraint of free trade; and such provision does not encroach upon the jurisdiction of the Intellectual Property Office.
Respondents expound that since under P.D. No. 1144, the FPA is mandated to regulate, control and develop the pesticide
industry, it was necessary to provide for such protection of proprietary data, otherwise, pesticide handlers will proliferate to the the
detriment of the industry and the public since the inherent toxicity of pesticides are hazardous and are potential environmental
contaminants.
They also pointed out that the protection under the assailed Pesticide Regulatory Policies and Implementing Guidelines is
warranted, considering that the development of proprietary data involves an investment of many years and large sums of money, thus,
the data generated by an applicant in support of his application for registration are owned and proprietary to him. Moreover, since the
protection accorded to the proprietary data is limited in time, then such protection is reasonable and does not constitute unlawful
restraint of trade.
Lastly, respondents emphasize that the provision on protection of proprietary data does not usurp the functions of the
Intellectual Property Office (IPO) since a patent and data protection are two different matters. A patent prohibits all unlicensed
making, using and selling of a particular product, while data protection accorded by the FPA merely prevents copying or unauthorized
use of an applicant's data, but any other party may independently generate and use his own data. It is further argued that
under Republic Act No. 8293 (R.A. No. 8293), the grant of power to the IPO to administer and implement State policies on
intellectual property is not exclusionary as the IPO is even allowed to coordinate with other government agencies to formulate and
implement plans and policies to strengthen the protection of intellectual property rights. EADSIa
The petition is devoid of merit.
The law being implemented by the assailed Pesticide Regulatory Policies and Implementing Guidelines is P.D. No. 1144,
entitled Creating the Fertilizer and Pesticide Authority and Abolishing the Fertilizer Industry Authority. As stated in the Preamble of
said decree, "there is an urgent need to create a technically-oriented government authority equipped with the required expertise
to regulate, control and develop both the fertilizer and the pesticide industries." (Underscoring supplied) The decree further provided
as follows:
Section 6. Powers and Functions. The FPA shall have jurisdiction, over all existing handlers of
pesticides, fertilizers and other agricultural chemical inputs. The FPA shall have the following powers and
functions:
I. Common to Fertilizers, Pesticides and other Agricultural Chemicals
xxx xxx xxx
4. To promulgate rules and regulations for the registration and licensing of handlers of these products,
collect fees pertaining thereto, as well as the renewal, suspension, revocation, or cancellation of such
registration or licenses and such other rules and regulations as may be necessary to implement this
Decree;
xxx xxx xxx
Section 7. Power to Issue Rules and Regulations to Implement Decree. The FPA is hereby authorized to
issue or promulgate rules and regulations to implement, and carry out the purposes and provisions of this Decree.
Did the FPA go beyond its delegated power and undermine the objectives of P.D. No. 1144 by issuing regulations that
provide for protection of proprietary data? The answer is in the negative.
 Under P.D. No. 1144, the FPA is given the broad power to issue rules and regulations to implement and carry out the
purposes and provisions of said decree, i.e., to regulate, control and develop the pesticide industry. In furtherance of such ends, the
FPA sees the protection of proprietary data as one way of fulfilling its mandate. In Republic v. Sandiganbayan, 4 the Court
emphasized that:
. . . [t]he interpretation of an administrative government agency, which is tasked to implement a
statute is generally accorded great respect and ordinarily controls the construction of the courts. The reason
behind this rule was explained in Nestle Philippines, Inc. vs. Court of Appeals in this wise:
The rationale for this rule relates not only to the emergence of the multifarious needs of a modern or
modernizing society and the establishment of diverse administrative agencies for addressing and satisfying those
needs; it also relates to the accumulation of experience and growth of specialized capabilities by the
administrative agency charged with implementing a particular statute. In Asturias Sugar Central, Inc. vs.
Commissioner of Customs, the Court stressed that executive officials are presumed to have familiarized
themselves with all the considerations pertinent to the meaning and purpose of the law, and to have formed
an independent, conscientious and competent expert opinion thereon. The courts give much weight to the
government agency officials charged with the implementation of the law, their competence, expertness,
experience and informed judgment, and the fact that they frequently are the drafters of the law they
interpret."
xxx xxx xxx. 5 [Emphasis supplied]
Verily, in this case, the Court acknowledges the experience and expertise of FPA officials who are best qualified to formulate
ways and means of ensuring the quality and quantity of pesticides and handlers thereof that should enter the Philippine market, such as
giving limited protection to proprietary data submitted by applicants for registration. The Court ascribes great value and will not
disturb the FPA's determination that one way of attaining the purposes of its charter is by granting such protection, specially where
there is nothing on record which shows that said administrative agency went beyond its delegated powers. HCSEIT
Moreover, petitioner has not succeeded in convincing the Court that the provision in question has legal infirmities.
There is no encroachment upon the powers of the IPO granted under R.A. No. 8293, otherwise known as the Intellectual
Property Code of the Philippines. Section 5 thereof enumerates the functions of the IPO. Nowhere in said provision does it state nor
can it be inferred that the law intended the IPO to have the exclusive authority to protect or promote intellectual property rights in the
Philippines. On the contrary, paragraph (g) of said Section even provides that the IPO shall "[c]oordinate with other government
agencies and the private sector efforts to formulate and implement plans and policies to strengthen the protection of intellectual
property rights in the country." Clearly, R.A. No. 8293 recognizes that efforts to fully protect intellectual property rights cannot be
undertaken by the IPO alone. Other agencies dealing with intellectual property rights are, therefore, not precluded from issuing
policies, guidelines and regulations to give protection to such rights.
There is also no evidence whatsoever to support petitioner's allegation that the grant of protection to proprietary data would
result in restraining free trade. Petitioner did not adduce any reliable data to prove its bare allegation that the protection of proprietary
data would unduly restrict trade on pesticides. Furthermore, as held in Association of Philippine Coconut Desiccators v. Philippine
Coconut Authority, 6 despite the fact that "our present Constitution enshrines free enterprise as a policy, it nonetheless reserves to the
government the power to intervene whenever necessary to promote the general welfare." There can be no question that the unregulated
use or proliferation of pesticides would be hazardous to our environment. Thus, in the aforecited case, the Court declared that "free
enterprise does not call for removal of 'protective regulations'." 7 More recently, in Coconut Oil Refiners Association, Inc. v.
Torres, 8 the Court held that "[t]he mere fact that incentives and privileges are granted to certain enterprises to the exclusion of others
does not render the issuance unconstitutional for espousing unfair competition." It must be clearly explained and proven by competent
evidence just exactly how such protective regulation would result in the restraint of trade.
In sum, the assailed provision in the 1987 Pesticide Regulatory Policies and Implementing Guidelines granting protection to
proprietary data is well within the authority of the FPA to issue so as to carry out its purpose of controlling, regulating and developing
the pesticide industry.
WHEREFORE, the petition is DENIED. The Decision of the Regional Trial Court of Quezon City, Branch 90, in SP. Civil
Case No. Q-01-42790 is AFFIRMED.
SO ORDERED.
||| (Pest Management Association of the Philippines v. Fertilizer and Pesticide Authority, G.R. No. 156041, [February 21, 2007], 545
PHIL 258-267)