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1. Sasot v. People GR No.

14193
2. Pearl and dean v. Shoemart GR no. 148222
3. Kho v. CA GR. No. 115758
4. Tanada v. Angara GR. No. 118295
5. Mighty Corporation v. Gallo winery Gr. No.
154342
6. Phil Pharma wealth v. Pfizer Gr. NO. 167715
7. In n Out Burger v. Sehwawi inc Gr. No.
179127
8. Roma drug v. Bfad Gr. No. 14997

SECOND DIVISION

Consulate General of the Philippines, New York,


authenticated the certification.[4] Welts also executed a
Complaint-Affidavit on February 12, 1998, before
Notary Public Nicole J. Brown of the State of New York.[5]

[G.R. No. 143193. June 29, 2005]

Thereafter, in a Resolution dated July 15, 1998,


Prosecution Attorney Aileen Marie S. Gutierrez
recommended the filing of an Information against
petitioners for violation of Article 189 of the Revised
Penal Code.[6] The accusatory portion of the Information
reads:

MELBAROSE R. SASOT AND ALLANDALE R.


SASOT, petitioners, vs. PEOPLE OF THE
PHILIPPINES, THE HONORABLE COURT OF
OF APPEALS, and REBECCA G. SALVADOR,
Presiding
Judge,
RTC,
Branch
1,
Manila, respondents.
DECISION
AUSTRIA-MARTINEZ, J.:
The case subject of the present special civil action
for certiorari is
a
criminal
prosecution
against
petitioners for unfair competition under Article 189 of
the Revised Penal Code, filed before the Regional Trial
Court (RTC) of Manila (Branch 1), and docketed as
Criminal Case No. 98-166147. [1]
Some time in May 1997, the National Bureau of
Investigation
(NBI) conducted
an
investigation
pursuant to a complaint by the NBA Properties, Inc.,
against petitioners for possible violation of Article 189
of the Revised Penal Code on unfair competition. In its
Report dated June 4, 1997, the NBI stated that NBA
Properties, Inc., is a foreign corporation organized
under the laws of the United States of America, and is
the registered owner of NBA trademarks and names of
NBA basketball teams such as USA BASKETBALL,
CHICAGO BULLS, ORLANDO MAGIC, LOS ANGELES
LAKERS, ROCKETS, PHOENIX SUNS, BULLETS, PACERS,
CHARLOTTE HORNETS, BLAZERS, DENVER NUGGETS,
SACRAMENTO KINGS, MIAMI HEAT, UTAH JAZZ,
DETROIT PISTONS, MILWAUKEE BUCKS, SEATTLE
SONICS, TORONTO RAPTORS, ATLANTA HAWKS, CAVS,
DALLAS
MAVERICKS,
MINNESOTA
TIMBERWOLVES, and LOS ANGELES CLIPPERS. These
names are used on hosiery, footwear, t-shirts,
sweatshirts, tank tops, pajamas, sport shirts, and other
garment products, which are allegedly registered with
the Bureau of Patents, Trademarks and Technology
Transfer. The Report further stated that during the
investigation, it was discovered that petitioners are
engaged in the manufacture, printing, sale, and
distribution of counterfeit NBA garment products.
Hence, it recommended petitioners prosecution for
unfair competition under Article 189 of the Revised
Penal Code.[2]
In a Special Power of Attorney dated October 7,
1997, Rick Welts, as President of NBA Properties, Inc.,
constituted the law firm of Ortega, Del Castillo,
Bacorro, Odulio, Calma & Carbonell, as the companys
attorney-in-fact, and to act for and on behalf of the
company, in the filing of criminal, civil and
administrative complaints, among others.[3] The Special
Power of Attorney was notarized by Nicole Brown of
New York County and certified by Norman Goodman,
County Clerk and Clerk of the Supreme Court of the
State of New York. Consul Cecilia B. Rebong of the

That on or about May 9, 1997 and on dates prior


thereto, in the City of Manila, Philippines, and within
the jurisdiction of this Honorable Court, above named
accused ALLANDALE SASOT and MELBAROSE SASOT of
Allandale Sportslines, Inc., did then and there willfully,
unlawfully and feloniously manufacture and sell various
garment products bearing the appearance of NBA
names, symbols and trademarks, inducing the public to
believe that the goods offered by them are those of
NBA to the damage and prejudice of the NBA
Properties, Inc., the trademark owner of the NBA.
CONTRARY TO LAW.[7]
Before arraignment, petitioners filed a Motion to
Quash the Information on the following grounds:
I. THAT THE FACTS CHARGED DO NOT
CONSTITUTE AN OFFENSE
II. AND THIS HONORABLE COURT HAD NO
JURISDICTION OVER THE OFFENSE
CHARGED OR THE PERSON OF THE
ACCUSED[8]
In support of the foregoing, petitioners argue that
the fiscal should have dismissed Weltss complaint
because under the rules, the complaint must be sworn
to before the prosecutor and the copy on record
appears to be only a fax transmittal. [9] They also
contend that complainant is a foreign corporation not
doing business in the Philippines, and cannot be
protected by Philippine patent laws since it is not a
registered patentee. Petitioners aver that they have
been
using
the
business
name
ALLANDALE
SPORTSLINE, INC. since 1972, and their designs are
original and do not appear to be similar to
complainants, and they do not use complainants logo
or design.[10]
The trial prosecutor of the RTC-Manila (Branch 1),
Jaime M. Guray, filed his Comment/Opposition to the
motion to quash, stating that he has the original copy
of the complaint, and that complainant has an
attorney-in-fact to represent it. Prosecutor Guray also
contended that the State is entitled to prosecute the
offense even without the participation of the private
offended party, as the crime charged is a public crime.
[11]

The trial court sustained the prosecutions


arguments and denied petitioners motion to quash in
its Order dated March 5, 1999.[12]

Petitioners
filed
a
special
civil
action
for certiorari with the Court of Appeals (CA) docketed
as CA-G.R. SP No. 52151 which was dismissed per its
Decision dated January 26, 2000. [13]According to the
CA, the petition is not the proper remedy in assailing a
denial of a motion to quash, and that the grounds
raised therein should be raised during the trial of the
case on the merits.[14] The dispositive portion of the
assailed Decision reads:
WHEREFORE, premises considered, the petition for
certiorari is hereby DISMISSED. Respondent court is
hereby ordered to conduct further proceedings with
dispatch in Criminal Case No. 98-166147.
SO ORDERED.[15]
Petitioners sought reconsideration of the Decision
but this was denied by the CA.[16]
Hence,
the
present
petition
for
review
on certiorari under Rule 45 of the Rules of Court, with
issues raised as follows:
1. WHETHER A FOREIGN CORPORATION NOT
ENGAGED AND LICENSE (sic) TO DO
BUSINESS IN THE PHILIPPINES MAY
MAINTAIN A CAUSE OF ACTION FOR
UNFAIR COMPETITION.
2. WHETHER AN OFFICER OF A FOREIGN
CORPORATION MAY ACT IN BEHALF OF A
CORPORATION WITHOUT AUTHORITY
FROM ITS BOARD OF DIRECTORS.
3. WHETHER A FOREIGN CORPORATION NOT
ENGAGED IN BUSINESS AND WHOSE
EMBLEM IT SOUGHT TO PROTECT IS
NOT IN ACTUAL USE IS ENTITLED TO
THE PROTECTION OF THE PHILIPPINE
LAW.
4. WHETHER THE RESPONDENT REGIONAL
TRIAL COURT CORRECTLY ASSUMED
JURISDICTION OVER THE CASE AND THE
PERSONS OF THE ACCUSED.
5. WHETHER THE COURT OF APPEALS
COMMITTED GRAVE ABUSE OF
DISCRETION AMOUNTING TO LACK OF
JURISDICTION WHEN IT DISMISSED THE
PETITION.[17]
Petitioners reiterate the argument that the
complaint filed by Rick Welts of the NBA Properties,
Inc., is defective and should have been dismissed by
the fiscal because it should have been personally
sworn to by the complainant before the investigating
prosecutor. They also reiterate the claim that Welts
failed to show any board resolution showing his
authority to institute any action in behalf of the
company, and that the NBAs trademarks are not being
actually used in the Philippines, hence, they are of
public dominion and cannot be protected by Philippine

patent laws. Petitioners further contend that they have


not committed acts amounting to unfair competition.[18]
The Office of the Solicitor General appeared in
behalf of the People, and filed its Amended Comment
to the petition, praying for its dismissal, arguing that
the CA did not commit any grave abuse of discretion in
dismissing the petition for reasons stated in its
Decision dated January 26, 2000.[19]
The petition must be denied.
The Court has consistently held that a special civil
action for certiorari is not the proper remedy to assail
the denial of a motion to quash an information. [20] The
proper procedure in such a case is for the accused to
enter a plea, go to trial without prejudice on his part to
present the special defenses he had invoked in his
motion to quash and, if after trial on the merits, an
adverse decision is rendered, to appeal therefrom in
the manner authorized by law.[21] Thus, petitioners
should not have forthwith filed a special civil action
for certiorari with the CA and instead, they should have
gone to trial and reiterate the special defenses
contained in their motion to quash. There are no
special or exceptional circumstances [22] in the present
case such that immediate resort to a filing of a petition
for certiorari should be permitted. Clearly, the CA did
not commit any grave abuse of discretion in dismissing
the petition.
Moreover, the Court does not find any justification
for the quashal of the Information filed against
petitioners.
For one, while petitioners raise in their motion to
quash the grounds that the facts charged do not
constitute an offense and that the trial court has no
jurisdiction over the offense charged or the person of
the accused,[23] their arguments focused on an alleged
defect in the complaint filed before the fiscal,
complainants capacity to sue and petitioners
exculpatory defenses against the crime of unfair
competition.
Section 3, Rule 117 of the 1985 Rules of Criminal
Procedure, which was then in force at the time the
alleged criminal acts were committed, enumerates the
grounds for quashing an information, to wit:
a) That the facts charged do not constitute an
offense;
b) That the court trying the case has no
jurisdiction over the offense charged
or the person of the accused;
c) That the officer who filed the information
had no authority to do so;
d) That it does not conform substantially to
the prescribed form;
e) That more than one offense is charged
except in those cases in which
existing laws prescribe a single
punishment for various offenses;

f) That the criminal action or liability has been


extinguished;
g) That it contains averments which, if true,
would constitute a legal excuse or
justification; and
h) That the accused has been previously
convicted or in jeopardy of being
convicted, or acquitted of the offense
charged.
Nowhere in the foregoing provision is there any
mention of the defect in the complaint filed before the
fiscal and the complainants capacity to sue as grounds
for a motion to quash.
For another, under Section 3, Rule 112 of the 1985
Rules of Criminal Procedure, a complaint is
substantially sufficient if it states the known address of
the respondent, it is accompanied by complainants
affidavit and his witnesses and supporting documents,
and the affidavits are sworn to before any fiscal, state
prosecutor or government official authorized to
administer oath, or in their absence or unavailability, a
notary public who must certify that he personally
examined the affiants and that he is satisfied that they
voluntarily executed and understood their affidavits. All
these have been duly satisfied in the complaint filed
before Prosecution Attorney Aileen Marie S. Gutierrez.
It must be noted that even the absence of an oath in
the complaint does not necessarily render it invalid.
[24]
Want of oath is a mere defect of form, which does
not affect the substantial rights of the defendant on the
merits.[25]
In this case, Weltss Complaint-Affidavit contains
an acknowledgement by Notary Public Nicole Brown of
the State of New York that the same has been
subscribed and sworn to before her on February 12,
1998,[26] duly
authenticated
by
the
Philippine
Consulate. While the copy on record of the complaintaffidavit appears to be merely a photocopy thereof,
Prosecution
Attorney
Gutierrez
stated
that
complainants
representative
will
present
the
authenticated notarized original in court,[27] and
Prosecutor Guray manifested that the original copy is
already on hand.[28] It is apt to state at this point that
the prosecutor enjoys the legal presumption of
regularity in the performance of his duties and
functions, which in turn gives his report the
presumption of accuracy.[29]
Moreover, records show that there are other
supporting documents from which the prosecutor
based his recommendation, to wit:
(1) The NBI Report dated June 4, 1997,
containing an account of the
investigation conducted from April 30,
1997 to May 9, 1997, and the
subsequent search and seizure of
several items from petitioners
establishment;[30]
(2) The letter dated May 8, 1997 from the law
firm of Ortega, Del Castillo, Bacorro,

Odulio, Calma & Carbonell to the NBI,


seeking assistance in stopping the
illegal manufacture, distribution and
sale of fake products bearing the NBA
trademark, and in prosecuting the
proprietors of aforesaid factory;[31] and
(3) The Joint Affidavit executed by Rechie D.
Malicse and Dalisay P. Bal-ot of the
Pinkerton Consulting Services (Phils.)
Inc., which was certified to by
Prosecution Attorney Gutierrez,
attesting to their findings that
petitioners were found to be
manufacturing, printing, selling, and
distributing counterfeit NBA garment
products.[32]
Consequently, if the information is valid on its
face, and there is no showing of manifest error, grave
abuse of discretion and prejudice on the part of public
prosecutor, as in the present case, the trial court
should respect such determination.[33]
More importantly, the crime of Unfair Competition
punishable under Article 189 of the Revised Penal
Code[34] is a public crime. It is essentially an act against
the State and it is the latter which principally stands as
the injured party. The complainants capacity to sue in
such case becomes immaterial.
In La Chemise Lacoste, S.A. vs. Fernandez,[35] a
case akin to the present dispute, as it involved the
crime of Unfair Competition under Article 189 of the
Revised Penal Code, and the quashal of search
warrants issued against manufacturers of garments
bearing the same trademark as that of the petitioner,
the Court succinctly ruled that:
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.[36] (Emphasis supplied)
Lastly, with regard to petitioners arguments that
the NBA Properties, Inc., is not entitled to protection
under Philippine patent laws since it is not a registered
patentee, that they have not committed acts
amounting to unfair competition for the reason that
their designs are original and do not appear to be
similar to complainants, and they do not use
complainants logo or design, the Court finds that these
are matters of defense that are better ventilated and
resolved during trial on the merits of the case.
WHERFORE, the petition is DENIED for lack of
merit. Let the records of this case be REMANDED to the
Regional Trial Court of Manila (Branch 24) where
Criminal Case No. 98-166147 is presently assigned, for
further proceedings with reasonable dispatch.
SO ORDERED.
Puno, (Chairman), Callejo, Sr., Tinga, and ChicoNazario, JJ., concur.

THIRD DIVISION
[G.R. No. 148222. August 15, 2003]
PEARL

&
DEAN
(PHIL.), INCORPORATED, petitioner, vs. SH
OEMART,
INCORPORATED, and
NORTH
EDSA
MARKETING, INCORPORATED, respondent
s.
DECISION

CORONA, J.:
In
the
instant
petition
for
review
on certiorari under Rule 45 of the Rules of Court,
petitioner Pearl & Dean (Phil.) Inc. (P & D) assails the
May 22, 2001 decision[1] of the Court of Appeals
reversing the October 31, 1996 decision [2] of the
Regional Trial Court of Makati, Branch 133, in Civil Case
No. 92-516 which declared private respondents
Shoemart Inc. (SMI) and North Edsa Marketing Inc.
(NEMI) liable for infringement of trademark and
copyright, and unfair competition.
FACTUAL ANTECEDENTS
The May 22, 2001 decision of the Court of
Appeals[3] contained a summary of this dispute:
Plaintiff-appellant Pearl and Dean (Phil.), Inc. is a
corporation engaged in the manufacture of advertising
display units simply referred to as light boxes. These
units utilize specially printed posters sandwiched
between plastic sheets and illuminated with back
lights. Pearl and Dean was able to secure a Certificate
of Copyright Registration dated January 20, 1981 over
these illuminated display units. The advertising light
boxes were marketed under the trademark Poster
Ads. The application for registration of the trademark
was filed with the Bureau of Patents, Trademarks and
Technology Transfer on June 20, 1983, but was
approved only on September 12, 1988, per Registration
No. 41165. From 1981 to about 1988, Pearl and Dean
employed the services of Metro Industrial Services to
manufacture its advertising displays.
Sometime in 1985, Pearl and Dean negotiated with
defendant-appellant Shoemart, Inc. (SMI) for the lease
and installation of the light boxes in SM City North
Edsa. Since SM City North Edsa was under construction
at that time, SMI offered as an alternative, SM Makati
and SM Cubao, to which Pearl and Dean agreed. On
September 11, 1985, Pearl and Deans General
Manager, Rodolfo Vergara, submitted for signature the
contracts covering SM Cubao and SM Makati to SMIs
Advertising Promotions and Publicity Division Manager,
Ramonlito Abano. Only the contract for SM Makati,

however, was returned signed. On October 4, 1985,


Vergara wrote Abano inquiring about the other contract
and reminding him that their agreement for installation
of light boxes was not only for its SM Makati branch,
but also for SM Cubao. SMI did not bother to reply.
Instead, in a letter dated January 14, 1986, SMIs house
counsel informed Pearl and Dean that it was rescinding
the contract for SM Makati due to non-performance of
the terms thereof. In his reply dated February 17, 1986,
Vergara protested the unilateral action of SMI, saying it
was without basis. In the same letter, he pushed for
the signing of the contract for SM Cubao.
Two years later, Metro Industrial Services, the company
formerly contracted by Pearl and Dean to fabricate its
display units, offered to construct light boxes for
Shoemarts chain of stores. SMI approved the proposal
and ten (10) light boxes were subsequently fabricated
by Metro Industrial for SMI. After its contract with Metro
Industrial was terminated, SMI engaged the services of
EYD Rainbow Advertising Corporation to make the light
boxes. Some 300 units were fabricated in 1991. These
were delivered on a staggered basis and installed at
SM Megamall and SM City.
Sometime in 1989, Pearl and Dean, received reports
that exact copies of its light boxes were installed at SM
City and in the fastfood section of SM Cubao. Upon
investigation, Pearl and Dean found out that aside from
the two (2) reported SM branches, light boxes similar to
those it manufactures were also installed in two (2)
other SM stores. It further discovered that defendantappellant North Edsa Marketing Inc. (NEMI), through its
marketing arm, Prime Spots Marketing Services, was
set up primarily to sell advertising space in lighted
display units located in SMIs different branches. Pearl
and Dean noted that NEMI is a sister company of SMI.
In the light of its discoveries, Pearl and Dean sent a
letter dated December 11, 1991 to both SMI and NEMI
enjoining them to cease using the subject light boxes
and to remove the same from SMIs establishments.It
also demanded the discontinued use of the trademark
Poster Ads, and the payment to Pearl and Dean of
compensatory damages in the amount of Twenty
Million Pesos (P20,000,000.00).
Upon receipt of the demand letter, SMI suspended the
leasing of two hundred twenty-four (224) light boxes
and NEMI took down its advertisements for Poster Ads
from the lighted display units in SMIs stores.Claiming
that both SMI and NEMI failed to meet all its demands,
Pearl and Dean filed this instant case for infringement
of trademark and copyright, unfair competition and
damages.
In denying the charges hurled against it, SMI
maintained that it independently developed its poster
panels using commonly known techniques and
available technology, without notice of or reference to
Pearl and Deans copyright. SMI noted that the

registration of the mark Poster Ads was only for


stationeries such as letterheads, envelopes, and the
like. Besides, according to SMI, the word Poster Ads is a
generic term which cannot be appropriated as a
trademark, and, as such, registration of such mark is
invalid. It also stressed that Pearl and Dean is not
entitled to the reliefs prayed for in its complaint since
its advertising display units contained no copyright
notice, in violation of Section 27 of P.D. 49. SMI alleged
that Pearl and Dean had no cause of action against it
and that the suit was purely intended to malign SMIs
good name. On this basis, SMI, aside from praying for
the dismissal of the case, also counterclaimed for
moral, actual and exemplary damages and for the
cancellation of Pearl and Deans Certification of
Copyright Registration No. PD-R-2558 dated January
20, 1981 and Certificate of Trademark Registration No.
4165 dated September 12, 1988.
NEMI, for its part, denied having manufactured,
installed or used any advertising display units, nor
having engaged in the business of advertising. It
repleaded SMIs averments, admissions and denials and
prayed for similar reliefs and counterclaims as SMI.

(e) costs of suit;


(2) to deliver, under oath, for impounding in
the National Library, all light boxes of
SMI which were fabricated by Metro
Industrial Services and EYD Rainbow
Advertising Corporation;
(3) to deliver, under oath, to the National
Library, all filler-posters using the
trademark Poster Ads, for destruction;
and
(4) to permanently refrain from infringing the
copyright on plaintiffs light boxes and
its trademark Poster Ads.
Defendants counterclaims are hereby ordered
dismissed for lack of merit.
SO ORDERED.[4]
On appeal, however,
reversed the trial court:

the

Court

of

Appeals

The RTC of Makati City decided in favor of P & D:


Wherefore, defendants SMI and NEMI are found jointly
and severally liable for infringement of copyright under
Section 2 of PD 49, as amended, and infringement of
trademark under Section 22 of RA No. 166, as
amended, and are hereby penalized under Section 28
of PD 49, as amended, and Sections 23 and 24 of RA
166, as amended. Accordingly, defendants are hereby
directed:
(1) to pay plaintiff the following damages:
(a) actual damages - P16,600,000.00,
representing profits
derived by
defendants
as a result of infringement of plaintiffs
copyright
from 1991 to 1992
(b) moral damages - P1,000.000.00
(c) exemplary damages - P1,000,000.00
(d) attorneys fees - P1,000,000.00
plus

Since the light boxes cannot, by any stretch of the


imagination, be considered as either prints, pictorial
illustrations, advertising copies, labels, tags or box
wraps, to be properly classified as a copyrightable
class O work, we have to agree with SMI when it
posited that what was copyrighted were the technical
drawings only, and not the light boxes themselves,
thus:
42. When a drawing is technical and depicts a
utilitarian object, a copyright over the drawings like
plaintiff-appellants will not extend to the actual
object. It has so been held under jurisprudence, of
which the leading case is Baker vs. Selden (101 U.S.
841 (1879). In that case, Selden had obtained a
copyright protection for a book entitled Seldens
Condensed Ledger or Bookkeeping Simplified which
purported to explain a new system of bookkeeping.
Included as part of the book were blank forms and
illustrations consisting of ruled lines and headings,
specially designed for use in connection with the
system explained in the work.These forms showed the
entire operation of a day or a week or a month on a
single page, or on two pages following each other. The
defendant Baker then produced forms which were
similar to the forms illustrated in Seldens copyrighted
books. The Court held that exclusivity to the actual
forms is not extended by a copyright. The reason was
that to grant a monopoly in the underlying art when no
examination of its novelty has ever been made would
be a surprise and a fraud upon the public; that is the
province of letters patent, not of copyright. And that is
precisely the point. No doubt aware that its alleged
original design would never pass the rigorous
examination of a patent application, plaintiff-appellant
fought to foist a fraudulent monopoly on the public by

conveniently resorting to a copyright registration which


merely employs a recordal system without the benefit
of an in-depth examination of novelty.
The principle in Baker vs. Selden was likewise applied
in Muller vs. Triborough Bridge Authority [43 F. Supp.
298 (S.D.N.Y. 1942)]. In this case, Muller had obtained a
copyright over an unpublished drawing entitled Bridge
Approach the drawing showed a novel bridge approach
to unsnarl traffic congestion. The defendant
constructed a bridge approach which was alleged to be
an infringement of the new design illustrated in
plaintiffs drawings. In this case it was held that
protection of the drawing does not extend to the
unauthorized duplication of the object drawn because
copyright extends only to the description or expression
of the object and not to the object itself. It does not
prevent one from using the drawings to construct the
object portrayed in the drawing.
In two other cases, Imperial Homes Corp. v. Lamont,
458 F. 2d 895 and Scholtz Homes, Inc. v. Maddox, 379
F. 2d 84, it was held that there is no copyright
infringement when one who, without being authorized,
uses a copyrighted architectural plan to construct a
structure. This is because the copyright does not
extend to the structures themselves.
In fine, we cannot find SMI liable for infringing Pearl
and Deans copyright over the technical drawings of the
latters advertising display units.
xxx xxx xxx
The Supreme Court trenchantly held in Faberge,
Incorporated vs. Intermediate Appellate Court that the
protective mantle of the Trademark Law extends only
to the goods used by the first user as specified in the
certificate of registration, following the clear mandate
conveyed by Section 20 of Republic Act 166, as
amended, otherwise known as the Trademark Law,
which reads:
SEC. 20. Certification of registration prima facie
evidence of validity.- A certificate of registration of a
mark or trade-name shall be prima facie evidence of
the validity of the registration, the registrants
ownership of the mark or trade-name, and of the
registrants exclusive right to use the same in
connection with the goods, business or
services specified in the certificate, subject to any
conditions and limitations stated therein. (underscoring
supplied)
The records show that on June 20, 1983, Pearl and
Dean applied for the registration of the trademark
Poster Ads with the Bureau of Patents, Trademarks, and
Technology Transfer. Said trademark was recorded in
the Principal Register on September 12, 1988 under
Registration No. 41165 covering the following
products: stationeries such as letterheads, envelopes
and calling cards and newsletters.

With this as factual backdrop, we see no legal basis to


the finding of liability on the part of the defendantsappellants for their use of the words Poster Ads, in the
advertising display units in suit. Jurisprudence has
interpreted Section 20 of the Trademark Law as an
implicit permission to a manufacturer to venture into
the production of goods and allow that producer to
appropriate the brand name of the senior registrant on
goods other than those stated in the certificate of
registration. The Supreme Court further emphasized
the restrictive meaning of Section 20 when it stated,
through Justice Conrado V. Sanchez, that:
Really, if the certificate of registration were to be
deemed as including goods not specified therein, then
a situation may arise whereby an applicant may be
tempted to register a trademark on any and all goods
which his mind may conceive even if he had never
intended to use the trademark for the said goods. We
believe that such omnibus registration is not
contemplated by our Trademark Law.
While we do not discount the striking similarity
between Pearl and Deans registered trademark and
defendants-appellants Poster Ads design, as well as the
parallel use by which said words were used in the
parties respective advertising copies, we cannot find
defendants-appellants liable for infringement of
trademark. Poster Ads was registered by Pearl and
Dean for specific use in its stationeries, in contrast to
defendants-appellants who used the same words in
their advertising display units. Why Pearl and Dean
limited the use of its trademark to stationeries is
simply beyond us. But, having already done so, it must
stand by the consequence of the registration which it
had caused.
xxx xxx xxx
We are constrained to adopt the view of defendantsappellants that the words Poster Ads are a simple
contraction of the generic term poster advertising. In
the absence of any convincing proof that Poster Ads
has acquired a secondary meaning in this jurisdiction,
we find that Pearl and Deans exclusive right to the use
of Poster Ads is limited to what is written in its
certificate of registration, namely, stationeries.
Defendants-appellants cannot thus be held liable for
infringement of the trademark Poster Ads.
There being no finding of either copyright or trademark
infringement on the part of SMI and NEMI, the
monetary award granted by the lower court to Pearl
and Dean has no leg to stand on.
xxx xxx xxx
WHEREFORE, premises considered, the assailed
decision is REVERSED and SET ASIDE, and another is

rendered DISMISSING the complaint and counterclaims


in the above-entitled case for lack of merit.[5]
Dissatisfied with the above decision, petitioner P &
D filed the instant petition assigning the following
errors for the Courts consideration:
A. THE HONORABLE COURT OF APPEALS
ERRED IN RULING THAT NO COPYRIGHT
INFRINGEMENT WAS COMMITTED BY
RESPONDENTS SM AND NEMI;
B. THE HONORABLE COURT OF APPEALS
ERRED IN RULING THAT NO
INFRINGEMENT OF PEARL & DEANS
TRADEMARK POSTER ADS WAS
COMMITTED BY RESPONDENTS SM AND
NEMI;
C. THE HONORABLE COURT OF APPEALS
ERRED IN DISMISSING THE AWARD OF
THE TRIAL COURT, DESPITE THE
LATTERS FINDING, NOT DISPUTED BY
THE HONORABLE COURT OF APPEALS,
THAT SM WAS GUILTY OF BAD FAITH IN
ITS NEGOTIATION OF ADVERTISING
CONTRACTS WITH PEARL & DEAN.
D. THE HONORABLE COURT OF APPEALS
ERRED IN NOT HOLDING
RESPONDENTS SM AND NEMI LIABLE
TO PEARL & DEAN FOR ACTUAL, MORAL
& EXEMPLARY DAMAGES, ATTORNEYS
FEES AND COSTS OF SUIT.[6]

trademark if it is a mere abbreviation of a


term descriptive of his goods, services or
business?
ON THE ISSUE OF COPYRIGHT INFRINGEMENT
Petitioner P & Ds complaint was that SMI infringed
on its copyright over the light boxes when SMI had the
units manufactured by Metro and EYD Rainbow
Advertising for its own account.Obviously, petitioners
position was premised on its belief that its copyright
over the engineering drawings extended ipso facto to
the light boxes depicted or illustrated in said
drawings. In ruling that there was no copyright
infringement, the Court of Appeals held that the
copyright was limited to the drawings alone and not to
the light box itself. We agree with the appellate court.
First, petitioners application for a copyright
certificate as well as Copyright Certificate No. PDR2588 issued by the National Library on January 20,
1981 clearly stated that it was for a class O work under
Section 2 (O) of PD 49 (The Intellectual Property
Decree) which was the statute then prevailing. Said
Section 2 expressly enumerated the works subject to
copyright:
SEC. 2. The rights granted by this Decree shall, from
the moment of creation, subsist with respect to any of
the following works:
xxxxxxxxx
(O) Prints, pictorial illustrations, advertising copies,
labels, tags, and box wraps;

ISSUES
xxxxxxxxx
In resolving this very interesting case, we are
challenged once again to put into proper perspective
four main concerns of intellectual property law patents,
copyrights, trademarks and unfair competition arising
from infringement of any of the first three. We shall
focus then on the following issues:

Although petitioners copyright certificate was


entitled Advertising Display Units (which depicted the
box-type electrical devices), its claim of copyright
infringement cannot be sustained.

(1) if the engineering or technical drawings of


an advertising display unit (light box) are
granted copyright protection (copyright
certificate of registration) by the National
Library, is the light box depicted in such
engineering drawings ipso facto also
protected by such copyright?

Copyright, in the strict sense of the term, is purely


a statutory right. Being a mere statutory grant, the
rights are limited to what the statute confers. It may be
obtained and enjoyed only with respect to the subjects
and by the persons, and on terms and conditions
specified in the statute. [7] Accordingly, it can cover only
the works falling within the statutory enumeration or
description.[8]

(2) or should the light box be registered


separately and protected by a patent issued
by the Bureau of Patents Trademarks and
Technology Transfer (now Intellectual
Property Office) in addition to the copyright
of the engineering drawings?
(3) can the owner of a registered trademark
legally prevent others from using such

P & D secured its copyright under the


classification class O work. This being so, petitioners
copyright protection extended only to the technical
drawings and not to the light box itself because the
latter was not at all in the category of prints, pictorial
illustrations, advertising copies, labels, tags and box
wraps. Stated otherwise, even as we find that P & D
indeed owned a valid copyright, the same could have
referred only to the technical drawings within the

category of pictorial illustrations. It could not have


possibly stretched out to include the underlying light
box. The strict application[9] of the laws enumeration in
Section 2 prevents us from giving petitioner even a
little leeway, that is, even if its copyright certificate
was entitled Advertising Display Units. What the law
does not include, it excludes, and for the good reason:
the light box was not a literary or artistic piece which
could be copyrighted under the copyright law. And no
less clearly, neither could the lack of statutory
authority to make the light box copyrightable be
remedied by the simplistic act of entitling the copyright
certificate issued by the National Library as Advertising
Display Units.
In fine, if SMI and NEMI reprinted P & Ds technical
drawings for sale to the public without license from P &
D, then no doubt they would have been guilty of
copyright infringement. But this was not the case. SMIs
and NEMIs acts complained of by P & D were to have
units similar or identical to the light box illustrated in
the technical drawings manufactured by Metro and EYD
Rainbow Advertising, for leasing out to different
advertisers. Was this an infringement of petitioners
copyright over the technical drawings? We do not think
so.
During the trial, the president of P & D himself
admitted that the light box was neither a literary not
an artistic work but an engineering or marketing
invention.[10] Obviously, there appeared to be some
confusion regarding what ought or ought not to be the
proper
subjects
of
copyrights,
patents
and
trademarks. In the leading case of Kho vs. Court of
Appeals,[11] we ruled that these three legal rights are
completely distinct and separate from one another,
and the protection afforded by one cannot be used
interchangeably to cover items or works that
exclusively pertain to the others:
Trademark, copyright and patents are different
intellectual property rights that cannot be interchanged
with one another. A trademark is any visible sign
capable of distinguishing the goods (trademark) or
services (service mark) of an enterprise and shall
include a stamped or marked container of goods. In
relation thereto, a trade name means the name or
designation identifying or distinguishing an enterprise.
Meanwhile, the scope of a copyright is confined to
literary and artistic works which are original intellectual
creations in the literary and artistic domain protected
from the moment of their creation. Patentable
inventions, on the other hand, refer to any technical
solution of a problem in any field of human
activity which is new, involves an inventive step and is
industrially applicable.
ON THE ISSUE OF PATENT INFRINGEMENT
This brings us to the next point: if, despite its
manufacture and commercial use of the light
boxes without
license
from
petitioner,
private

respondents cannot be held legally liable for


infringement of P & Ds copyright over its technical
drawings of the said light boxes, should they be liable
instead for infringement of patent? We do not think so
either.
For some reason or another, petitioner never
secured a patent for the light boxes. It therefore
acquired no patent rights which could have protected
its invention, if in fact it really was. And because it had
no patent, petitioner could not legally prevent anyone
from manufacturing or commercially using the
contraption. In Creser Precision Systems, Inc. vs. Court
of Appeals,[12] we held that there can be no
infringement of a patent until a patent has been
issued, since whatever right one has to the invention
covered by the patent arises alone from the grant of
patent. x x x (A)n inventor has no common law right to
a monopoly of his invention. He has the right to make
use of and vend his invention, but if he voluntarily
discloses it, such as by offering it for sale, the world is
free to copy and use it with impunity. A patent,
however, gives the inventor the right to exclude all
others. As a patentee, he has the exclusive right of
making, selling or using the invention.[13]On the
assumption that petitioners advertising units were
patentable inventions, petitioner revealed them fully to
the public by submitting the engineering drawings
thereof to the National Library.
To be able to effectively and legally preclude
others from copying and profiting from the invention, a
patent is a primordial requirement. No patent, no
protection. The ultimate goal of a patent system is to
bring new designs and technologies into the public
domain through disclosure.[14] Ideas, once disclosed to
the public without the protection of a valid patent, are
subject to appropriation without significant restraint. [15]
On one side of the coin is the public which will
benefit from new ideas; on the other are the inventors
who must be protected. As held in Bauer & Cie vs.
ODonnel,[16] The act secured to the inventor the
exclusive right to make use, and vend the thing
patented, and consequently to prevent others from
exercising like privileges without the consent of the
patentee. It was passed for the purpose of encouraging
useful invention and promoting new and useful
inventions by the protection and stimulation given to
inventive genius, and was intended to secure to the
public, after the lapse of the exclusive privileges
granted the benefit of such inventions and
improvements.
The law attempts to strike an ideal balance
between the two interests:
(The p)atent system thus embodies a carefully crafted
bargain for encouraging the creation and disclosure of
new useful and non-obvious advances in technology
and design, in return for the exclusive right to practice
the invention for a number of years. The inventor may

keep his invention secret and reap its fruits


indefinitely. In consideration of its disclosure and the
consequent benefit to the community, the patent is
granted. An exclusive enjoyment is guaranteed him for
17 years, but upon the expiration of that period, the
knowledge of the invention inures to the people, who
are thus enabled to practice it and profit by its use. [17]
The patent law has a three-fold purpose: first,
patent law seeks to foster and reward invention;
second, it promotes disclosures of inventions to
stimulate further innovation and to permit the public to
practice the invention once the patent expires; third,
the stringent requirements for patent protection seek
to ensure that ideas in the public domain remain there
for the free use of the public.[18]
It is only after an exhaustive examination by the
patent office that a patent is issued. Such an in-depth
investigation is required because in rewarding a useful
invention, the rights and welfare of the community
must be fairly dealt with and effectively guarded. To
that end, the prerequisites to obtaining a patent are
strictly observed and when a patent is issued, the
limitations on its exercise are equally strictly
enforced. To begin with, a genuine invention or
discovery must be demonstrated lest in the constant
demand for new appliances, the heavy hand of tribute
be laid on each slight technological advance in art. [19]
There is no such scrutiny in the case of copyrights
nor any notice published before its grant to the effect
that a person is claiming the creation of a work. The
law confers the copyright from the moment of
creation[20] and the copyright certificate is issued upon
registration with the National Library of a sworn exparte claim of creation.
Therefore, not having gone through the arduous
examination for patents, the petitioner cannot exclude
others from the manufacture, sale or commercial use
of the light boxes on the sole basis of its copyright
certificate over the technical drawings.
Stated otherwise, what petitioner seeks is
exclusivity without any opportunity for the patent office
(IPO) to scrutinize the light boxs eligibility as a
patentable invention. The irony here is that, had
petitioner secured a patent instead, its exclusivity
would have been for 17 years only. But through the
simplified procedure of copyright-registration with the
National Library without undergoing the rigor of
defending the patentability of its invention before the
IPO and the public the petitioner would be protected
for 50 years. This situation could not have been the
intention of the law.
In the oft-cited case of Baker vs. Selden[21], the
United States Supreme Court held that only the
expression of an idea is protected by copyright, not the
idea itself. In that case, the plaintiff held the copyright
of a book which expounded on a new accounting

system he had developed. The publication illustrated


blank forms of ledgers utilized in such a system. The
defendant reproduced forms similar to those illustrated
in the plaintiffs copyrighted book. The US Supreme
Court ruled that:
There is no doubt that a work on the subject of bookkeeping, though only explanatory of well known
systems, may be the subject of a copyright; but, then,
it is claimed only as a book. x x x. But there is a clear
distinction between the books, as such, and the art,
which it is, intended to illustrate. The mere statement
of the proposition is so evident that it requires hardly
any argument to support it. The same distinction may
be predicated of every other art as well as that of
bookkeeping. A treatise on the composition and use of
medicines, be they old or new; on the construction and
use of ploughs or watches or churns; or on the mixture
and application of colors for painting or dyeing; or on
the mode of drawing lines to produce the effect of
perspective, would be the subject of copyright; but no
one would contend that the copyright of the treatise
would give the exclusive right to the art or
manufacture described therein. The copyright of the
book, if not pirated from other works, would be valid
without regard to the novelty or want of novelty of its
subject matter. The novelty of the art or thing
described or explained has nothing to do with the
validity of the copyright. To give to the author of
the book an exclusive property in the art
described therein, when no examination of its
novelty has ever been officially made, would be
a surprise and a fraud upon the public. That is
the province of letters patent, not of
copyright. The claim to an invention of discovery
of an art or manufacture must be subjected to
the examination of the Patent Office before an
exclusive right therein can be obtained; and a
patent from the government can only secure it.
The difference between the two things, letters patent
and copyright, may be illustrated by reference to the
subjects just enumerated. Take the case of
medicines. Certain mixtures are found to be of great
value in the healing art. If the discoverer writes and
publishes a book on the subject (as regular
physicians generally do), he gains no exclusive
right to the manufacture and sale of the
medicine; he gives that to the public. If he
desires to acquire such exclusive right, he must
obtain a patent for the mixture as a new art,
manufacture or composition of matter. He may
copyright his book, if he pleases; but that only
secures to him the exclusive right of printing and
publishing his book. So of all other inventions or
discoveries.
The copyright of a book on perspective, no matter how
many drawings and illustrations it may contain, gives
no exclusive right to the modes of drawing described,
though they may never have been known or used
before. By publishing the book without getting a patent
for the art, the latter is given to the public.

xxx
Now, whilst no one has a right to print or publish his
book, or any material part thereof, as a book intended
to convey instruction in the art, any person may
practice and use the art itself which he has described
and illustrated therein. The use of the art is a
totally different thing from a publication of the
book explaining it. The copyright of a book on
bookkeeping cannot secure the exclusive right to
make, sell and use account books prepared upon the
plan set forth in such book. Whether the art might or
might not have been patented, is a question, which is
not before us. It was not patented, and is open and free
to the use of the public. And, of course, in using the
art, the ruled lines and headings of accounts must
necessarily be used as incident to it.
The plausibility of the claim put forward by the
complainant in this case arises from a confusion of
ideas produced by the peculiar nature of the art
described in the books, which have been made the
subject of copyright. In describing the art, the
illustrations and diagrams employed happened to
correspond more closely than usual with the actual
work performed by the operator who uses the
art. x x x The description of the art in a book,
though entitled to the benefit of copyright, lays
no foundation for an exclusive claim to the art
itself. The object of the one is explanation; the
object of the other is use. The former may be
secured by copyright. The latter can only be
secured, if it can be secured at all, by letters
patent. (underscoring supplied)
ON THE ISSUE OF TRADEMARK INFRINGEMENT
This issue concerns the use by respondents of the
mark Poster Ads which petitioners president said was a
contraction of poster advertising. P & D was able to
secure a trademark certificate for it, but one where the
goods specified were stationeries such as letterheads,
envelopes, calling cards and newsletters. [22] Petitioner
admitted it did not commercially engage in or market
these goods. On the contrary, it dealt in electrically
operated backlit advertising units and the sale of
advertising spaces thereon, which, however, were not
at all specified in the trademark certificate.
Under the circumstances, the Court of Appeals
correctly cited Faberge Inc. vs. Intermediate Appellate
Court,[23] where we, invoking Section 20 of the old
Trademark Law, ruled that the certificate of registration
issued by the Director of Patents can confer (upon
petitioner) the exclusive right to use its own
symbol only to those goods specified in the certificate,
subject to any conditions and limitations specified in
the certificate x x x. One who has adopted and used a
trademark on his goods does not prevent the adoption
and use of the same trademark by others for products
which are of a different description.[24] Faberge,

Inc. was correct and was in fact recently reiterated


in Canon Kabushiki Kaisha vs. Court of Appeals.[25]
Assuming arguendo that Poster Ads could validly
qualify as a trademark, the failure of P & D to secure a
trademark registration for specific use on the light
boxes meant that there could not have been any
trademark infringement since registration was an
essential element thereof.
ON THE ISSUE OF UNFAIR COMPETITION
If at all, the cause of action should have been for
unfair competition, a situation which was possible even
if P & D had no registration. [26] However, while the
petitioners complaint in the RTC also cited unfair
competition, the trial court did not find private
respondents liable therefor. Petitioner did not appeal
this particular point; hence, it cannot now revive its
claim of unfair competition.
But even disregarding procedural issues, we
nevertheless cannot hold respondents guilty of unfair
competition.
By the nature of things, there can be no unfair
competition under the law on copyrights although it is
applicable to disputes over the use of trademarks.
Even a name or phrase incapable of appropriation as a
trademark or tradename may, by long and exclusive
use by a business (such that the name or phrase
becomes associated with the business or product in the
mind of the purchasing public), be entitled to
protection against unfair competition. [27] In this case,
there was no evidence that P & Ds use of Poster Ads
was distinctive or well-known. As noted by the Court of
Appeals, petitioners expert witnesses himself had
testified that Poster Ads was too generic a name. So it
was difficult to identify it with any company, honestly
speaking.[28] This crucial admission by its own expert
witness that Poster Ads could not be associated with P
& D showed that, in the mind of the public, the goods
and services carrying the trademark Poster Ads could
not be distinguished from the goods and services of
other entities.
This fact also prevented the application of the
doctrine of secondary meaning. Poster Ads was generic
and incapable of being used as a trademark because it
was used in the field of poster advertising, the very
business engaged in by petitioner. Secondary meaning
means that a word or phrase originally incapable of
exclusive appropriation with reference to an article in
the market (because it is geographically or otherwise
descriptive) might nevertheless have been used for so
long and so exclusively by one producer with reference
to his article that, in the trade and to that branch of the
purchasing public, the word or phrase has come to
mean that the article was his property. [29] The
admission by petitioners own expert witness that he
himself could not associate Poster Ads with petitioner P

& D because it was too generic definitely precluded the


application of this exception.
Having discussed the most important and critical
issues, we see no need to belabor the rest.
All told, the Court finds no reversible error
committed by the Court of Appeals when it reversed
the Regional Trial Court of Makati City.
WHEREFORE, the petition is hereby DENIED and
the decision of the Court of Appeals dated May 22,
2001 is AFFIRMED in toto.
SO ORDERED.
Puno,
(Chairman),
Panganiban,
Gutierrez, and Carpio-Morales, JJ., concur.

Sandoval-

Republic of the Philippines


SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 115758

March 19, 2002

ELIDAD C. KHO, doing business under the name and


style of KEC COSMETICS LABORATORY, petitioner,
vs.
HON. COURT OF APPEALS, SUMMERVILLE
GENERAL MERCHANDISING and
COMPANY, and ANG TIAM CHAY, respondents.
DE LEON, JR., J.:
Before us is a petition for review on certiorari of the
Decision1 dated May 24, 1993 of the Court of Appeals
setting aside and declaring as null and void the
Orders2 dated February 10, 1992 and March 19, 1992
of the Regional Trial Court, Branch 90, of Quezon City
granting the issuance of a writ of preliminary
injunction.
The facts of the case are as follows:
On December 20, 1991, petitioner Elidad C. Kho filed a
complaint for injunction and damages with a prayer for
the issuance of a writ of preliminary injunction,
docketed as Civil Case No. Q-91-10926, against the
respondents Summerville General Merchandising and
Company (Summerville, for brevity) and Ang Tiam
Chay.
The petitioner's complaint alleges that petitioner, doing
business under the name and style of KEC Cosmetics
Laboratory, is the registered owner of the
copyrights Chin Chun Su and Oval Facial Cream
Container/Case, as shown by Certificates of Copyright
Registration No. 0-1358 and No. 0-3678; that she also
has patent rights on Chin Chun Su & Device and Chin
Chun Su for medicated cream after purchasing the
same from Quintin Cheng, the registered owner thereof
in the Supplemental Register of the Philippine Patent
Office on February 7, 1980 under Registration
Certificate No. 4529; that respondent Summerville
advertised and sold petitioner's cream products under
the brand name Chin Chun Su, in similar containers
that petitioner uses, thereby misleading the public, and
resulting in the decline in the petitioner's business
sales and income; and, that the respondents should be
enjoined from allegedly infringing on the copyrights
and patents of the petitioner.
The respondents, on the other hand, alleged as their
defense that Summerville is the exclusive and
authorized importer, re-packer and distributor of Chin
Chun Su products manufactured by Shun Yi Factory of
Taiwan; that the said Taiwanese manufacturing
company authorized Summerville to register its trade

name Chin Chun Su Medicated Cream with the


Philippine Patent Office and other appropriate
governmental agencies; that KEC Cosmetics Laboratory
of the petitioner obtained the copyrights through
misrepresentation and falsification; and, that the
authority of Quintin Cheng, assignee of the patent
registration certificate, to distribute and market Chin
Chun Su products in the Philippines had already been
terminated by the said Taiwanese Manufacturing
Company.
After due hearing on the application for preliminary
injunction, the trial court granted the same in an Order
dated February 10, 1992, the dispositive portion of
which reads:
ACCORDINGLY, the application of plaintiff
Elidad C. Kho, doing business under the style of
KEC Cosmetic Laboratory, for preliminary
injunction, is hereby granted. Consequentially,
plaintiff is required to file with the Court a bond
executed to defendants in the amount of five
hundred thousand pesos (P500,000.00) to the
effect that plaintiff will pay to defendants all
damages which defendants may sustain by
reason of the injunction if the Court should
finally decide that plaintiff is not entitled
thereto.
SO ORDERED.3
The respondents moved for reconsideration but their
motion for reconsideration was denied by the trial
court in an Order dated March 19, 1992. 4
On April 24, 1992, the respondents filed a petition
for certiorari with the Court of Appeals, docketed as
CA-G.R. SP No. 27803, praying for the nullification of
the said writ of preliminary injunction issued by the
trial court. After the respondents filed their reply and
almost a month after petitioner submitted her
comment, or on August 14 1992, the latter moved to
dismiss the petition for violation of Supreme Court
Circular No. 28-91, a circular prohibiting forum
shopping. According to the petitioner, the respondents
did not state the docket number of the civil case in the
caption of their petition and, more significantly, they
did not include therein a certificate of non-forum
shopping. The respondents opposed the petition and
submitted to the appellate court a certificate of nonforum shopping for their petition.
On May 24, 1993, the appellate court rendered a
Decision in CA-G.R. SP No. 27803 ruling in favor of the
respondents, the dispositive portion of which reads:
WHEREFORE, the petition is hereby given due
course and the orders of respondent court
dated February 10, 1992 and March 19, 1992
granting the writ of preliminary injunction and
denying petitioners' motion for reconsideration
are hereby set aside and declared null and

void. Respondent court is directed to forthwith


proceed with the trial of Civil Case No. Q-9110926 and resolve the issue raised by the
parties on the merits.

declared an unfair competitor even if


his competing trademark is registered
(Parke, Davis & Co. v. Kiu Foo & Co., et
al., 60 Phil 928; La Yebana Co. v. chua
Seco & Co., 14 Phil 534)."6

SO ORDERED.5
In granting the petition, the appellate court ruled that:
The registration of the trademark or
brandname "Chin Chun Su" by KEC with the
supplemental register of the Bureau of Patents,
Trademarks and Technology Transfer cannot be
equated with registration in the principal
register, which is duly protected by the
Trademark Law.1wphi1.nt
xxx

xxx

xxx

As ratiocinated in La Chemise Lacoste, S.S. vs.


Fernandez, 129 SCRA 373, 393:
"Registration in the Supplemental
Register, therefore, serves as notice
that the registrant is using or has
appropriated the trademark. By the
very fact that the trademark cannot as
yet be on guard and there are certain
defects, some obstacles which the use
must still overcome before he can
claim legal ownership of the mark or
ask the courts to vindicate his claims of
an exclusive right to the use of the
same. It would be deceptive for a party
with nothing more than a registration
in the Supplemental Register to posture
before courts of justice as if the
registration is in the Principal Register.
The reliance of the private respondent
on the last sentence of the Patent
office action on application Serial No.
30954 that 'registrants is presumed to
be the owner of the mark until after the
registration is declared cancelled' is,
therefore, misplaced and grounded on
shaky foundation. The supposed
presumption not only runs counter to
the precept embodied in Rule 124 of
the Revised Rules of Practice before the
Philippine Patent Office in Trademark
Cases but considering all the facts
ventilated before us in the four
interrelated petitions involving the
petitioner and the respondent, it is
devoid of factual basis. As even in
cases where presumption and precept
may factually be reconciled, we have
held that the presumption is
rebuttable, not conclusive, (People v.
Lim Hoa, G.R. No. L-10612, May 30,
1958, Unreported). One may be

The petitioner filed a motion for reconsideration. This


she followed with several motions to declare
respondents in contempt of court for publishing
advertisements notifying the public of the
promulgation of the assailed decision of the appellate
court and stating that genuine Chin Chun Su products
could be obtained only from Summerville General
Merchandising and Co.
In the meantime, the trial court went on to hear
petitioner's complaint for final injunction and damages.
On October 22, 1993, the trial court rendered a
Decision7 barring the petitioner from using the
trademark Chin Chun Su and upholding the right of the
respondents to use the same, but recognizing the
copyright of the petitioner over the oval shaped
container of her beauty cream. The trial court did not
award damages and costs to any of the parties but to
their respective counsels were awarded Seventy-Five
Thousand Pesos (P75,000.00) each as attorney's fees.
The petitioner duly appealed the said decision to the
Court of Appeals.
On June 3, 1994, the Court of Appeals promulgated a
Resolution8 denying the petitioner's motions for
reconsideration and for contempt of court in CA-G.R. SP
No. 27803.
Hence, this petition anchored on the following
assignment of errors:
I
RESPONDENT HONORABLE COURT OF APPEALS
COMMITTED GRAVE ABUSE OF DISCRETION
AMOUNTING TO LACK OF JURISDICTION IN
FAILING TO RULE ON PETITIONER'S MOTION TO
DISMISS.
II
RESPONDENT HONORABLE COURT OF APPEALS
COMMITTED GRAVE ABUSE OF DISCRETION
AMOUNTING TO LACK OF JURISDICTION IN
REFUSING TO PROMPTLY RESOLVE
PETITIONER'S MOTION FOR RECONSIDERATION.
III
IN DELAYING THE RESOLUTION OF
PETITIONER'S MOTION FOR RECONSIDERATION,
THE HONORABLE COURT OF APPEALS DENIED
PETITIONER'S RIGHT TO SEEK TIMELY
APPELLATE RELIEF AND VIOLATED
PETITIONER'S RIGHT TO DUE PROCESS.

IV
RESPONDENT HONORABLE COURT OF APPEALS
COMMITTED GRAVE ABUSE OF DISCRETION
AMOUNTING TO LACK OF JURISDICTION IN
FAILING TO CITE THE PRIVATE RESPONDENTS IN
CONTEMPT.9
The petitioner faults the appellate court for not
dismissing the petition on the ground of violation of
Supreme Court Circular No. 28-91. Also, the petitioner
contends that the appellate court violated Section 6,
Rule 9 of the Revised Internal Rules of the Court of
Appeals when it failed to rule on her motion for
reconsideration within ninety (90) days from the time it
is submitted for resolution. The appellate court ruled
only after the lapse of three hundred fifty-four (354)
days, or on June 3, 1994. In delaying the resolution
thereof, the appellate court denied the petitioner's
right to seek the timely appellate relief. Finally,
petitioner describes as arbitrary the denial of her
motions for contempt of court against the respondents.
We rule in favor of the respondents.
Pursuant to Section 1, Rule 58 of the Revised Rules of
Civil Procedure, one of the grounds for the issuance of
a writ of preliminary injunction is a proof that the
applicant is entitled to the relief demanded, and the
whole or part of such relief consists in restraining the
commission or continuance of the act or acts
complained of, either for a limited period or
perpetually. Thus, a preliminary injunction order may
be granted only when the application for the issuance
of the same shows facts entitling the applicant to the
relief demanded.10 This is the reason why we have
ruled that it must be shown that the invasion of the
right sought to be protected is material and
substantial, that the right of complainant is clear and
unmistakable, and, that there is an urgent and
paramount necessity for the writ to prevent serious
damage.11
In the case at bar, the petitioner applied for the
issuance of a preliminary injunctive order on the
ground that she is entitled to the use of the trademark
on Chin Chun Su and its container based on her
copyright and patent over the same. We first find it
appropriate to rule on whether the copyright and
patent over the name and container of a beauty cream
product would entitle the registrant to the use and
ownership over the same to the exclusion of others.
Trademark, copyright and patents are different
intellectual property rights that cannot be interchanged
with one another. A trademark is any visible sign
capable of distinguishing the goods (trademark) or
services (service mark) of an enterprise and shall
include a stamped or marked container of goods.12 In
relation thereto, a trade name means the name or
designation identifying or distinguishing an
enterprise.13 Meanwhile, the scope of a copyright is

confined to literary and artistic works which are original


intellectual creations in the literary and artistic domain
protected from the moment of their
creation.14 Patentable inventions, on the other hand,
refer to any technical solution of a problem in any field
of human activity which is new, involves an inventive
step and is industrially applicable.15
Petitioner has no right to support her claim for the
exclusive use of the subject trade name and its
container. The name and container of a beauty cream
product are proper subjects of a trademark inasmuch
as the same falls squarely within its definition. In order
to be entitled to exclusively use the same in the sale of
the beauty cream product, the user must sufficiently
prove that she registered or used it before anybody
else did. The petitioner's copyright and patent
registration of the name and container would not
guarantee her the right to the exclusive use of the
same for the reason that they are not appropriate
subjects of the said intellectual rights. Consequently, a
preliminary injunction order cannot be issued for the
reason that the petitioner has not proven that she has
a clear right over the said name and container to the
exclusion of others, not having proven that she has
registered a trademark thereto or used the same
before anyone did.
We cannot likewise overlook the decision of the trial
court in the case for final injunction and damages. The
dispositive portion of said decision held that the
petitioner does not have trademark rights on the name
and container of the beauty cream product. The said
decision on the merits of the trial court rendered the
issuance of the writ of a preliminary injunction moot
and academic notwithstanding the fact that the same
has been appealed in the Court of Appeals. This is
supported by our ruling in La Vista Association, Inc.
v. Court of Appeals16, to wit: Considering that
preliminary injunction is a provisional remedy which
may be granted at any time after the commencement
of the action and before judgment when it is
established that the plaintiff is entitled to the relief
demanded and only when his complaint shows facts
entitling such reliefs xxx and it appearing that the trial
court had already granted the issuance of a final
injunction in favor of petitioner in its decision rendered
after trial on the merits xxx the Court resolved to
Dismiss the instant petition having been rendered
moot and academic. An injunction issued by the trial
court after it has already made a clear pronouncement
as to the plaintiff's right thereto, that is, after the same
issue has been decided on the merits, the trial court
having appreciated the evidence presented, is proper,
notwithstanding the fact that the decision rendered is
not yet final xxx. Being an ancillary remedy, the
proceedings for preliminary injunction cannot stand
separately or proceed independently of the decision
rendered on the merit of the main case for injunction.
The merit of the main case having been already
determined in favor of the applicant, the preliminary
determination of its non-existence ceases to have any
force and effect. (italics supplied)

La Vista categorically pronounced that the issuance of


a final injunction renders any question on the
preliminary injunctive order moot and academic
despite the fact that the decision granting a final
injunction is pending appeal. Conversely, a decision
denying the applicant-plaintiff's right to a final
injunction, although appealed, renders moot and
academic any objection to the prior dissolution of a writ
of preliminary injunction.
The petitioner argues that the appellate court erred in
not dismissing the petition for certiorari for noncompliance with the rule on forum shopping. We
disagree. First, the petitioner improperly raised the
technical objection of non-compliance with Supreme
Court Circular No. 28-91 by filing a motion to dismiss
the petition for certiorari filed in the appellate court.
This is prohibited by Section 6, Rule 66 of the Revised
Rules of Civil Procedure which provides that "(I)n
petitions for certiorari before the Supreme Court and
the Court of Appeals, the provisions of Section 2, Rule
56, shall be observed. Before giving due course
thereto, the court may require the respondents to file
their comment to, and not a motion to dismiss, the
petition xxx (italics supplied)". Secondly, the issue was
raised one month after petitioner had filed her
answer/comment and after private respondent had
replied thereto. Under Section 1, Rule 16 of the Revised
Rules of Civil Procedure, a motion to dismiss shall be
filed within the time for but before filing the answer to
the complaint or pleading asserting a claim. She
therefore could no longer submit a motion to dismiss
nor raise defenses and objections not included in the
answer/comment she had earlier tendered. Thirdly,
substantial justice and equity require this Court not to
revive a dissolved writ of injunction in favor of a party
without any legal right thereto merely on a technical
infirmity. The granting of an injunctive writ based on a
technical ground rather than compliance with the
requisites for the issuance of the same is contrary to
the primary objective of legal procedure which is to
serve as a means to dispense justice to the deserving
party.
The petitioner likewise contends that the appellate
court unduly delayed the resolution of her motion for
reconsideration. But we find that petitioner contributed
to this delay when she filed successive contentious
motions in the same proceeding, the last of which was
on October 27, 1993, necessitating countermanifestations from private respondents with the last
one being filed on November 9, 1993. Nonetheless, it is
well-settled that non-observance of the period for
deciding cases or their incidents does not render such
judgments ineffective or void.17 With respect to the
purported damages she suffered due to the alleged
delay in resolving her motion for reconsideration, we
find that the said issue has likewise been rendered
moot and academic by our ruling that she has no right
over the trademark and, consequently, to the issuance
of a writ of preliminary injunction.1wphi1.nt

Finally, we rule that the Court of Appeals correctly


denied the petitioner's several motions for contempt of
court. There is nothing contemptuous about the
advertisements complained of which, as regards the
proceedings in CA-G.R. SP No. 27803 merely
announced in plain and straightforward language the
promulgation of the assailed Decision of the appellate
court. Moreover, pursuant to Section 4 of Rule 39 of the
Revised Rules of Civil Procedure, the said decision
nullifying the injunctive writ was immediately
executory.
WHEREFORE, the petition is DENIED. The Decision and
Resolution of the Court of Appeals dated May 24, 1993
and June 3, 1994, respectively, are hereby AFFIRMED.
With costs against the petitioner.
SO ORDERED.

Republic of the Philippines


SUPREME COURT
Manila
EN BANC

G.R. No. 118295 May 2, 1997


WIGBERTO E. TAADA and ANNA DOMINIQUE
COSETENG, as members of the Philippine Senate
and as taxpayers; GREGORIO ANDOLANA and
JOKER ARROYO as members of the House of
Representatives and as taxpayers; NICANOR P.
PERLAS and HORACIO R. MORALES, both as
taxpayers; CIVIL LIBERTIES UNION, NATIONAL
ECONOMIC PROTECTIONISM ASSOCIATION,
CENTER FOR ALTERNATIVE DEVELOPMENT
INITIATIVES, LIKAS-KAYANG KAUNLARAN
FOUNDATION, INC., PHILIPPINE RURAL
RECONSTRUCTION MOVEMENT, DEMOKRATIKONG
KILUSAN NG MAGBUBUKID NG PILIPINAS, INC.,
and PHILIPPINE PEASANT INSTITUTE, in
representation of various taxpayers and as nongovernmental organizations, petitioners,
vs.
EDGARDO ANGARA, ALBERTO ROMULO, LETICIA
RAMOS-SHAHANI, HEHERSON ALVAREZ, AGAPITO
AQUINO, RODOLFO BIAZON, NEPTALI GONZALES,
ERNESTO HERRERA, JOSE LINA, GLORIA.
MACAPAGAL-ARROYO, ORLANDO MERCADO, BLAS
OPLE, JOHN OSMEA, SANTANINA RASUL,
RAMON REVILLA, RAUL ROCO, FRANCISCO TATAD
and FREDDIE WEBB, in their respective
capacities as members of the Philippine Senate
who concurred in the ratification by the
President of the Philippines of the Agreement
Establishing the World Trade Organization;
SALVADOR ENRIQUEZ, in his capacity as
Secretary of Budget and Management; CARIDAD
VALDEHUESA, in her capacity as National
Treasurer; RIZALINO NAVARRO, in his capacity as
Secretary of Trade and Industry; ROBERTO
SEBASTIAN, in his capacity as Secretary of
Agriculture; ROBERTO DE OCAMPO, in his
capacity as Secretary of Finance; ROBERTO
ROMULO, in his capacity as Secretary of Foreign
Affairs; and TEOFISTO T. GUINGONA, in his
capacity as Executive Secretary, respondents.

PANGANIBAN, J.:
The emergence on January 1, 1995 of the World Trade
Organization, abetted by the membership thereto of
the vast majority of countries has revolutionized
international business and economic relations amongst
states. It has irreversibly propelled the world towards
trade liberalization and economic globalization.
Liberalization, globalization, deregulation and

privatization, the third-millennium buzz words, are


ushering in a new borderless world of business by
sweeping away as mere historical relics the heretofore
traditional modes of promoting and protecting national
economies like tariffs, export subsidies, import quotas,
quantitative restrictions, tax exemptions and currency
controls. Finding market niches and becoming the best
in specific industries in a market-driven and exportoriented global scenario are replacing age-old "beggarthy-neighbor" policies that unilaterally protect weak
and inefficient domestic producers of goods and
services. In the words of Peter Drucker, the well-known
management guru, "Increased participation in the
world economy has become the key to domestic
economic growth and prosperity."
Brief Historical Background
To hasten worldwide recovery from the devastation
wrought by the Second World War, plans for the
establishment of three multilateral institutions
inspired by that grand political body, the United
Nations were discussed at Dumbarton Oaks and
Bretton Woods. The first was the World Bank (WB)
which was to address the rehabilitation and
reconstruction of war-ravaged and later developing
countries; the second, the International Monetary Fund
(IMF) which was to deal with currency problems; and
the third, the International Trade Organization (ITO),
which was to foster order and predictability in world
trade and to minimize unilateral protectionist policies
that invite challenge, even retaliation, from other
states. However, for a variety of reasons, including its
non-ratification by the United States, the ITO, unlike
the IMF and WB, never took off. What remained was
only GATT the General Agreement on Tariffs and
Trade. GATT was a collection of treaties governing
access to the economies of treaty adherents with no
institutionalized body administering the agreements or
dependable system of dispute settlement.
After half a century and several dizzying rounds of
negotiations, principally the Kennedy Round, the Tokyo
Round and the Uruguay Round, the world finally gave
birth to that administering body the World Trade
Organization with the signing of the "Final Act" in
Marrakesh, Morocco and the ratification of the WTO
Agreement by its members. 1
Like many other developing countries, the Philippines
joined WTO as a founding member with the goal, as
articulated by President Fidel V. Ramos in two letters to
the Senate (infra), of improving "Philippine access to
foreign markets, especially its major trading partners,
through the reduction of tariffs on its exports,
particularly agricultural and industrial products." The
President also saw in the WTO the opening of "new
opportunities for the services sector . . . , (the
reduction of) costs and uncertainty associated with
exporting . . . , and (the attraction of) more
investments into the country." Although the Chief
Executive did not expressly mention it in his letter, the

Philippines and this is of special interest to the legal


profession will benefit from the WTO system of
dispute settlement by judicial adjudication through the
independent WTO settlement bodies called (1) Dispute
Settlement Panels and (2) Appellate Tribunal.
Heretofore, trade disputes were settled mainly through
negotiations where solutions were arrived at frequently
on the basis of relative bargaining strengths, and
where naturally, weak and underdeveloped countries
were at a disadvantage.
The Petition in Brief
Arguing mainly (1) that the WTO requires the
Philippines "to place nationals and products of
member-countries on the same footing as Filipinos and
local products" and (2) that the WTO "intrudes, limits
and/or impairs" the constitutional powers of both
Congress and the Supreme Court, the instant petition
before this Court assails the WTO Agreement for
violating the mandate of the 1987 Constitution to
"develop a self-reliant and independent national
economy effectively controlled by Filipinos . . . (to) give
preference to qualified Filipinos (and to) promote the
preferential use of Filipino labor, domestic materials
and locally produced goods."
Simply stated, does the Philippine Constitution prohibit
Philippine participation in worldwide trade liberalization
and economic globalization? Does it proscribe
Philippine integration into a global economy that is
liberalized, deregulated and privatized? These are the
main questions raised in this petition for certiorari,
prohibition and mandamus under Rule 65 of the Rules
of Court praying (1) for the nullification, on
constitutional grounds, of the concurrence of the
Philippine Senate in the ratification by the President of
the Philippines of the Agreement Establishing the World
Trade Organization (WTO Agreement, for brevity) and
(2) for the prohibition of its implementation and
enforcement through the release and utilization of
public funds, the assignment of public officials and
employees, as well as the use of government
properties and resources by respondent-heads of
various executive offices concerned therewith. This
concurrence is embodied in Senate Resolution No. 97,
dated December 14, 1994.
The Facts
On April 15, 1994, Respondent Rizalino Navarro, then
Secretary of The Department of Trade and Industry
(Secretary Navarro, for brevity), representing the
Government of the Republic of the Philippines, signed
in Marrakesh, Morocco, the Final Act Embodying the
Results of the Uruguay Round of Multilateral
Negotiations (Final Act, for brevity).
By signing the Final Act, 2 Secretary Navarro on behalf
of the Republic of the Philippines, agreed:

(a) to submit, as appropriate, the WTO


Agreement for the consideration of
their respective competent authorities,
with a view to seeking approval of the
Agreement in accordance with their
procedures; and
(b) to adopt the Ministerial Declarations
and Decisions.
On August 12, 1994, the members of the Philippine
Senate received a letter dated August 11, 1994 from
the President of the Philippines, 3 stating among others
that "the Uruguay Round Final Act is hereby submitted
to the Senate for its concurrence pursuant to Section
21, Article VII of the Constitution."
On August 13, 1994, the members of the Philippine
Senate received another letter from the President of
the Philippines 4 likewise dated August 11, 1994, which
stated among others that "the Uruguay Round Final
Act, the Agreement Establishing the World Trade
Organization, the Ministerial Declarations and
Decisions, and the Understanding on Commitments in
Financial Services are hereby submitted to the Senate
for its concurrence pursuant to Section 21, Article VII of
the Constitution."
On December 9, 1994, the President of the Philippines
certified the necessity of the immediate adoption of
P.S. 1083, a resolution entitled "Concurring in the
Ratification of the Agreement Establishing the World
Trade Organization." 5
On December 14, 1994, the Philippine Senate adopted
Resolution No. 97 which "Resolved, as it is hereby
resolved, that the Senate concur, as it hereby concurs,
in the ratification by the President of the Philippines of
the Agreement Establishing the World Trade
Organization." 6 The text of the WTO Agreement is
written on pages 137 et seq. of Volume I of the 36volume Uruguay Round of Multilateral Trade
Negotiations and includes various agreements and
associated legal instruments (identified in the said
Agreement as Annexes 1, 2 and 3 thereto and
collectively referred to as Multilateral Trade
Agreements, for brevity) as follows:
ANNEX 1
Annex 1A: Multilateral Agreement on
Trade in Goods
General Agreement on Tariffs and Trade
1994
Agreement on Agriculture
Agreement on the Application of
Sanitary and
Phytosanitary Measures
Agreement on Textiles and Clothing
Agreement on Technical Barriers to
Trade
Agreement on Trade-Related

Investment Measures
Agreement on Implementation of
Article VI of he
General Agreement on Tariffs and Trade
1994
Agreement on Implementation of
Article VII of the
General on Tariffs and Trade 1994
Agreement on Pre-Shipment Inspection
Agreement on Rules of Origin
Agreement on Imports Licensing
Procedures
Agreement on Subsidies and
Coordinating
Measures
Agreement on Safeguards
Annex 1B: General Agreement on Trade
in Services and Annexes
Annex 1C: Agreement on Trade-Related
Aspects of Intellectual
Property Rights
ANNEX 2
Understanding on Rules
and Procedures
Governing
the Settlement of
Disputes
ANNEX 3
Trade Policy Review
Mechanism
On December 16, 1994, the President of the Philippines
signed 7 the Instrument of Ratification, declaring:
NOW THEREFORE, be it known that I,
FIDEL V. RAMOS, President of the
Republic of the Philippines, after having
seen and considered the
aforementioned Agreement
Establishing the World Trade
Organization and the agreements and
associated legal instruments included
in Annexes one (1), two (2) and three
(3) of that Agreement which are
integral parts thereof, signed at
Marrakesh, Morocco on 15 April 1994,
do hereby ratify and confirm the same
and every Article and Clause thereof.
To emphasize, the WTO Agreement ratified by the
President of the Philippines is composed of the
Agreement Proper and "the associated legal
instruments included in Annexes one (1), two (2) and
three (3) of that Agreement which are integral parts
thereof."

On the other hand, the Final Act signed by Secretary


Navarro embodies not only the WTO Agreement (and
its integral annexes aforementioned) but also (1) the
Ministerial Declarations and Decisions and (2) the
Understanding on Commitments in Financial Services.
In his Memorandum dated May 13, 1996, 8 the Solicitor
General describes these two latter documents as
follows:
The Ministerial Decisions and
Declarations are twenty-five
declarations and decisions on a wide
range of matters, such as measures in
favor of least developed countries,
notification procedures, relationship of
WTO with the International Monetary
Fund (IMF), and agreements on
technical barriers to trade and on
dispute settlement.
The Understanding on Commitments in
Financial Services dwell on, among
other things, standstill or limitations
and qualifications of commitments to
existing non-conforming measures,
market access, national treatment, and
definitions of non-resident supplier of
financial services, commercial
presence and new financial service.
On December 29, 1994, the present petition was filed.
After careful deliberation on respondents' comment
and petitioners' reply thereto, the Court resolved on
December 12, 1995, to give due course to the petition,
and the parties thereafter filed their respective
memoranda. The court also requested the Honorable
Lilia R. Bautista, the Philippine Ambassador to the
United Nations stationed in Geneva, Switzerland, to
submit a paper, hereafter referred to as "Bautista
Paper," 9 for brevity, (1) providing a historical
background of and (2) summarizing the said
agreements.
During the Oral Argument held on August 27, 1996, the
Court directed:
(a) the petitioners to submit the (1)
Senate Committee Report on the
matter in controversy and (2) the
transcript of proceedings/hearings in
the Senate; and
(b) the Solicitor General, as counsel for
respondents, to file (1) a list of
Philippine treaties signed prior to the
Philippine adherence to the WTO
Agreement, which derogate from
Philippine sovereignty and (2) copies of
the multi-volume WTO Agreement and
other documents mentioned in the
Final Act, as soon as possible.

After receipt of the foregoing documents, the Court


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

G. Whether the respondent members


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

decide this case was deliberated upon by the Court


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

DECLARATIONS AND DECISIONS, AND


THE UNDERSTANDING ON
COMMITMENTS IN FINANCIAL
SERVICES?
The First Issue: Does the Court
Have Jurisdiction Over the Controversy?
In seeking to nullify an act of the Philippine Senate on
the ground that it contravenes the Constitution, the
petition no doubt raises a justiciable controversy.
Where an action of the legislative branch is seriously
alleged to have infringed the Constitution, it becomes
not only the right but in fact the duty of the judiciary to
settle the dispute. "The question thus posed is judicial
rather than political. The duty (to adjudicate) remains
to assure that the supremacy of the Constitution is
upheld." 12 Once a "controversy as to the application or
interpretation of a constitutional provision is raised
before this Court (as in the instant case), it becomes a
legal issue which the Court is bound by constitutional
mandate to decide." 13
The jurisdiction of this Court to adjudicate the
matters 14 raised in the petition is clearly set out in the
1987 Constitution, 15 as follows:
Judicial power includes the duty of the
courts of justice to settle actual
controversies involving rights which are
legally demandable and enforceable,
and to determine whether or not there
has been a grave abuse of discretion
amounting to lack or excess of
jurisdiction on the part of any branch or
instrumentality of the government.
The foregoing text emphasizes the judicial
department's duty and power to strike down grave
abuse of discretion on the part of any branch or
instrumentality of government including Congress. It is
an innovation in our political law. 16 As explained by
former Chief Justice Roberto Concepcion, 17 "the
judiciary is the final arbiter on the question of whether
or not a branch of government or any of its officials has
acted without jurisdiction or in excess of jurisdiction or
so capriciously as to constitute an abuse of discretion
amounting to excess of jurisdiction. This is not only a
judicial power but a duty to pass judgment on matters
of this nature."
As this Court has repeatedly and firmly emphasized in
many cases, 18 it will not shirk, digress from or abandon
its sacred duty and authority to uphold the Constitution
in matters that involve grave abuse of discretion
brought before it in appropriate cases, committed by
any officer, agency, instrumentality or department of
the government.
As the petition alleges grave abuse of discretion and as
there is no other plain, speedy or adequate remedy in
the ordinary course of law, we have no hesitation at all

in holding that this petition should be given due course


and the vital questions raised therein ruled upon under
Rule 65 of the Rules of Court. Indeed, certiorari,
prohibition and mandamus are appropriate remedies to
raise constitutional issues and to review and/or
prohibit/nullify, when proper, acts of legislative and
executive officials. On this, we have no equivocation.
We should stress that, in deciding to take jurisdiction
over this petition, this Court will not review
the wisdom of the decision of the President and the
Senate in enlisting the country into the WTO, or pass
upon the merits of trade liberalization as a policy
espoused by said international body. Neither will it rule
on the propriety of the government's economic policy
of reducing/removing tariffs, taxes, subsidies,
quantitative restrictions, and other import/trade
barriers. Rather, it will only exercise its constitutional
duty "to determine whether or not there had been a
grave abuse of discretion amounting to lack or excess
of jurisdiction" on the part of the Senate in ratifying the
WTO Agreement and its three annexes.
Second Issue: The WTO Agreement
and Economic Nationalism
This is the lis mota, the main issue, raised by the
petition.
Petitioners vigorously argue that the "letter, spirit and
intent" of the Constitution mandating "economic
nationalism" are violated by the so-called "parity
provisions" and "national treatment" clauses scattered
in various parts not only of the WTO Agreement and its
annexes but also in the Ministerial Decisions and
Declarations and in the Understanding on
Commitments in Financial Services.
Specifically, the "flagship" constitutional provisions
referred to are Sec 19, Article II, and Secs. 10 and 12,
Article XII, of the Constitution, which are worded as
follows:
Article II
DECLARATION OF PRINCIPLES
AND STATE POLICIES
xxx xxx xxx
Sec. 19. The State shall develop a selfreliant and independent national
economy effectively controlled by
Filipinos.
xxx xxx xxx

xxx xxx xxx


Sec. 10. . . . The Congress shall enact
measures that will encourage the
formation and operation of enterprises
whose capital is wholly owned by
Filipinos.
In the grant of rights, privileges, and
concessions covering the national
economy and patrimony, the State
shall give preference to qualified
Filipinos.
xxx xxx xxx
Sec. 12. The State shall promote the
preferential use of Filipino labor,
domestic materials and locally
produced goods, and adopt measures
that help make them competitive.
Petitioners aver that these sacred constitutional
principles are desecrated by the following WTO
provisions quoted in their memorandum: 19
a) In the area of investment measures
related to trade in goods (TRIMS, for
brevity):
Article 2
National Treatment and Quantitative
Restrictions.
1. Without prejudice to other rights and obligations
under GATT 1994, no Member shall apply any TRIM
that is inconsistent with the provisions of Article II or
Article XI of GATT 1994.
2. An illustrative list of
TRIMS that are
inconsistent with the
obligations of general
elimination of
quantitative restrictions
provided for in
paragraph I of Article XI
of GATT 1994 is
contained in the Annex
to this Agreement."
(Agreement on TradeRelated Investment
Measures, Vol. 27,
Uruguay Round, Legal
Instruments, p. 22121,
emphasis supplied).

Article XII
The Annex referred to reads as follows:
NATIONAL ECONOMY AND PATRIMONY

ANNEX

inflows attributable to
the enterprise; or

Illustrative List
1. TRIMS that are inconsistent with the
obligation of national treatment
provided for in paragraph 4 of Article III
of GATT 1994 include those which are
mandatory or enforceable under
domestic law or under administrative
rulings, or compliance with which is
necessary to obtain an advantage, and
which require:
(a) the purchase or use
by an enterprise of
products of domestic
origin or from any
domestic source,
whether specified in
terms of particular
products, in terms of
volume or value of
products, or in terms of
proportion of volume or
value of its local
production; or
(b) that an enterprise's
purchases or use of
imported products be
limited to an amount
related to the volume
or value of local
products that it
exports.
2. TRIMS that are inconsistent with the
obligations of general elimination of
quantitative restrictions provided for in
paragraph 1 of Article XI of GATT 1994
include those which are mandatory or
enforceable under domestic laws or
under administrative rulings, or
compliance with which is necessary to
obtain an advantage, and which
restrict:
(a) the importation by
an enterprise of
products used in or
related to the local
production that it
exports;
(b) the importation by
an enterprise of
products used in or
related to its local
production by
restricting its access to
foreign exchange

(c) the exportation or


sale for export
specified in terms of
particular products, in
terms of volume or
value of products, or in
terms of a preparation
of volume or value of
its local production.
(Annex to the
Agreement on TradeRelated Investment
Measures, Vol. 27,
Uruguay Round Legal
Documents, p. 22125,
emphasis supplied).
The paragraph 4 of Article III of GATT
1994 referred to is quoted as follows:
The products of the
territory of any
contracting party
imported into the
territory of any other
contracting party shall
be accorded treatment
no less favorable than
that accorded to like
products of national
origin in respect of
laws, regulations and
requirements affecting
their internal sale,
offering for sale,
purchase,
transportation,
distribution or use, the
provisions of this
paragraph shall not
prevent the application
of differential internal
transportation charges
which are based
exclusively on the
economic operation of
the means of transport
and not on the
nationality of the
product." (Article III,
GATT 1947, as
amended by the
Protocol Modifying Part
II, and Article XXVI of
GATT, 14 September
1948, 62 UMTS 82-84
in relation to paragraph
1(a) of the General
Agreement on Tariffs
and Trade 1994, Vol. 1,

Uruguay Round, Legal


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

own like services and


service suppliers.
3. Formally identical or
formally different
treatment shall be
considered to be less
favourable if it modifies
the conditions of
completion in favour of
services or service
suppliers of the
Member compared to
like services or service
suppliers of any other
Member. (Article XVII,
General Agreement on
Trade in Services, Vol.
28, Uruguay Round
Legal Instruments, p.
22610 emphasis
supplied).
It is petitioners' position that the foregoing "national
treatment" and "parity provisions" of the WTO
Agreement "place nationals and products of member
countries on the same footing as Filipinos and local
products," in contravention of the "Filipino First" policy
of the Constitution. They allegedly render meaningless
the phrase "effectively controlled by Filipinos." The
constitutional conflict becomes more manifest when
viewed in the context of the clear duty imposed on the
Philippines as a WTO member to ensure the conformity
of its laws, regulations and administrative procedures
with its obligations as provided in the annexed
agreements. 20 Petitioners further argue that these
provisions contravene constitutional limitations on the
role exports play in national development and negate
the preferential treatment accorded to Filipino labor,
domestic materials and locally produced goods.
On the other hand, respondents through the Solicitor
General counter (1) that such Charter provisions are
not self-executing and merely set out general policies;
(2) that these nationalistic portions of the Constitution
invoked by petitioners should not be read in isolation
but should be related to other relevant provisions of
Art. XII, particularly Secs. 1 and 13 thereof; (3) that
read properly, the cited WTO clauses do not conflict
with Constitution; and (4) that the WTO Agreement
contains sufficient provisions to protect developing
countries like the Philippines from the harshness of
sudden trade liberalization.
We shall now discuss and rule on these arguments.
Declaration of Principles
Not Self-Executing
By its very title, Article II of the Constitution is a
"declaration of principles and state policies." The
counterpart of this article in the 1935 Constitution

21

is

called the "basic political creed of the nation" by Dean


Vicente Sinco. 22 These principles in Article II are not
intended to be self-executing principles ready for
enforcement through the courts. 23 They are used by
the judiciary as aids or as guides in the exercise of its
power of judicial review, and by the legislature in its
enactment of laws. As held in the leading case
of Kilosbayan, Incorporated vs. Morato, 24 the principles
and state policies enumerated in Article II and some
sections of Article XII are not "self-executing provisions,
the disregard of which can give rise to a cause of
action in the courts. They do not embody judicially
enforceable constitutional rights but guidelines for
legislation."
In the same light, we held in Basco vs. Pagcor 25 that
broad constitutional principles need legislative
enactments to implement the, thus:
On petitioners' allegation that P.D.
1869 violates Sections 11 (Personal
Dignity) 12 (Family) and 13 (Role of
Youth) of Article II; Section 13 (Social
Justice) of Article XIII and Section 2
(Educational Values) of Article XIV of
the 1987 Constitution, suffice it to state
also that these are merely statements
of principles and policies. As such, they
are basically not self-executing,
meaning a law should be passed by
Congress to clearly define and
effectuate such principles.
In general, therefore,
the 1935 provisions
were not intended to
be self-executing
principles ready for
enforcement through
the courts. They were
rather directives
addressed to the
executive and to the
legislature. If the
executive and the
legislature failed to
heed the directives of
the article, the
available remedy was
not judicial but
political. The electorate
could express their
displeasure with the
failure of the executive
and the legislature
through the language
of the ballot. (Bernas,
Vol. II, p. 2).
The reasons for denying a cause of action to an alleged
infringement of board constitutional principles are
sourced from basic considerations of due process and

the lack of judicial authority to wade "into the


uncharted ocean of social and economic policy
making." Mr. Justice Florentino P. Feliciano in his
concurring opinion in Oposa vs. Factoran,
Jr., 26 explained these reasons as follows:
My suggestion is simply that
petitioners must, before the trial court,
show a more specific legal right a
right cast in language of a significantly
lower order of generality than Article II
(15) of the Constitution that is or
may be violated by the actions, or
failures to act, imputed to the public
respondent by petitioners so that the
trial court can validly render judgment
grating all or part of the relief prayed
for. To my mind, the court should be
understood as simply saying that such
a more specific legal right or rights
may well exist in our corpus of law,
considering the general policy
principles found in the Constitution and
the existence of the Philippine
Environment Code, and that the trial
court should have given petitioners an
effective opportunity so to
demonstrate, instead of aborting the
proceedings on a motion to dismiss.
It seems to me important that the legal
right which is an essential component
of a cause of action be a specific,
operable legal right, rather than a
constitutional or statutory policy, for at
least two (2) reasons. One is that
unless the legal right claimed to have
been violated or disregarded is given
specification in operational terms,
defendants may well be unable to
defend themselves intelligently and
effectively; in other words, there are
due process dimensions to this matter.
The second is a broader-gauge
consideration where a specific
violation of law or applicable regulation
is not alleged or proved, petitioners
can be expected to fall back on the
expanded conception of judicial power
in the second paragraph of Section 1 of
Article VIII of the Constitution which
reads:
Sec. 1. . . .
Judicial power includes
the duty of the courts
of justice to settle
actual controversies
involving rights which
are legally demandable

and enforceable, and to


determine whether or
not there has been a
grave abuse of
discretion amounting to
lack or excess of
jurisdiction on the part
of any branch or
instrumentality of the
Government.
(Emphasis supplied)
When substantive standards as general
as "the right to a balanced and healthy
ecology" and "the right to health" are
combined with remedial standards as
broad ranging as "a grave abuse of
discretion amounting to lack or excess
of jurisdiction," the result will be, it is
respectfully submitted, to propel courts
into the uncharted ocean of social and
economic policy making. At least in
respect of the vast area of
environmental protection and
management, our courts have no claim
to special technical competence and
experience and professional
qualification. Where no specific,
operable norms and standards are
shown to exist, then the policy making
departments the legislative and
executive departments must be
given a real and effective opportunity
to fashion and promulgate those norms
and standards, and to implement them
before the courts should intervene.
Economic Nationalism Should Be Read with
Other Constitutional Mandates to Attain
Balanced Development of Economy
On the other hand, Secs. 10 and 12 of Article XII, apart
from merely laying down general principles relating to
the national economy and patrimony, should be read
and understood in relation to the other sections in said
article, especially Secs. 1 and 13 thereof which read:
Sec. 1. The goals of the national
economy are a more equitable
distribution of opportunities, income,
and wealth; a sustained increase in the
amount of goods and services
produced by the nation for the benefit
of the people; and an expanding
productivity as the key to raising the
quality of life for all especially the
underprivileged.
The State shall promote
industrialization and full employment
based on sound agricultural
development and agrarian reform,

through industries that make full and


efficient use of human and natural
resources, and which are competitive
in both domestic and foreign markets.
However, the State shall protect
Filipino enterprises against unfair
foreign competition and trade
practices.
In the pursuit of these goals, all sectors
of the economy and all regions of the
country shall be given optimum
opportunity to develop. . . .
xxx xxx xxx
Sec. 13. The State shall pursue a trade
policy that serves the general welfare
and utilizes all forms and arrangements
of exchange on the basis of equality
and reciprocity.
As pointed out by the Solicitor General, Sec. 1 lays
down the basic goals of national economic
development, as follows:
1. A more equitable distribution of opportunities,
income and wealth;
2. A sustained increase in the amount of goods and
services provided by the nation for the benefit of the
people; and
3. An expanding productivity as the key to raising the
quality of life for all especially the underprivileged.
With these goals in context, the Constitution then
ordains the ideals of economic nationalism (1) by
expressing preference in favor of qualified Filipinos "in
the grant of rights, privileges and concessions covering
the national economy and patrimony" 27 and in the use
of "Filipino labor, domestic materials and locallyproduced goods"; (2) by mandating the State to "adopt
measures that help make them competitive; 28 and (3)
by requiring the State to "develop a self-reliant and
independent national economy effectively controlled by
Filipinos." 29 In similar language, the Constitution takes
into account the realities of the outside world as it
requires the pursuit of "a trade policy that serves the
general welfare and utilizes all forms and
arrangements of exchange on the basis of equality ad
reciprocity"; 30 and speaks of industries "which are
competitive in both domestic and foreign markets" as
well as of the protection of "Filipino enterprises
against unfair foreign competition and trade practices."
It is true that in the recent case of Manila Prince Hotel
vs. Government Service Insurance System, et
al., 31 this Court held that "Sec. 10, second par., Art. XII
of the 1987 Constitution is a mandatory, positive
command which is complete in itself and which needs

no further guidelines or implementing laws or rule for


its enforcement. From its very words the provision does
not require any legislation to put it in operation. It
is per se judicially enforceable." However, as the
constitutional provision itself states, it is enforceable
only in regard to "the grants of rights, privileges and
concessions covering national economy and
patrimony" and not to every aspect of trade and
commerce. It refers to exceptions rather than the rule.
The issue here is not whether this paragraph of Sec. 10
of Art. XII is self-executing or not. Rather, the issue is
whether, as a rule, there are enough balancing
provisions in the Constitution to allow the Senate to
ratify the Philippine concurrence in the WTO
Agreement. And we hold that there are.

Hence, poor countries can protect their common


interests more effectively through the WTO than
through one-on-one negotiations with developed
countries. Within the WTO, developing countries can
form powerful blocs to push their economic agenda
more decisively than outside the Organization. This is
not merely a matter of practical alliances but a
negotiating strategy rooted in law. Thus, the basic
principles underlying the WTO Agreement recognize
the need of developing countries like the Philippines to
"share in the growth in international
trade commensurate with the needs of their economic
development." These basic principles are found in the
preamble 34 of the WTO Agreement as follows:
The Parties to this Agreement,

All told, while the Constitution indeed mandates a bias


in favor of Filipino goods, services, labor and
enterprises, at the same time, it recognizes the need
for business exchange with the rest of the world on the
bases of equality and reciprocity and limits protection
of Filipino enterprises only against foreign competition
and trade practices that are unfair. 32 In other words,
the Constitution did not intend to pursue an isolationist
policy. It did not shut out foreign investments, goods
and services in the development of the Philippine
economy. While the Constitution does not encourage
the unlimited entry of foreign goods, services and
investments into the country, it does not prohibit them
either. In fact, it allows an exchange on the basis of
equality and reciprocity, frowning only on foreign
competition that is unfair.
WTO Recognizes Need to
Protect Weak Economies
Upon the other hand, respondents maintain that the
WTO itself has some built-in advantages to protect
weak and developing economies, which comprise the
vast majority of its members. Unlike in the UN where
major states have permanent seats and veto powers in
the Security Council, in the WTO, decisions are made
on the basis of sovereign equality, with each member's
vote equal in weight to that of any other. There is no
WTO equivalent of the UN Security Council.
WTO decides by consensus whenever
possible, otherwise, decisions of the
Ministerial Conference and the General
Council shall be taken by the majority
of the votes cast, except in cases of
interpretation of the Agreement or
waiver of the obligation of a member
which would require three fourths vote.
Amendments would require two thirds
vote in general. Amendments to MFN
provisions and the Amendments
provision will require assent of all
members. Any member may withdraw
from the Agreement upon the
expiration of six months from the date
of notice of withdrawals. 33

Recognizing that their relations in the


field of trade and economic endeavour
should be conducted with a view to
raising standards of living, ensuring full
employment and a large and steadily
growing volume of real income and
effective demand, and expanding the
production of and trade in goods and
services, while allowing for the optimal
use of the world's resources in
accordance with the objective of
sustainable development, seeking both
to protect and preserve the
environment and to enhance the
means for doing so in a manner
consistent with their respective needs
and concerns at different levels of
economic development,
Recognizing further that there is need
for positive efforts designed to ensure
that developing countries, and
especially the least developed among
them, secure a share in the growth in
international trade commensurate with
the needs of their economic
development,
Being desirous of contributing to these
objectives by entering into reciprocal
and mutually advantageous
arrangements directed to the
substantial reduction of tariffs and
other barriers to trade and to
the elimination of discriminatory
treatment in international trade
relations,
Resolved, therefore, to develop an
integrated, more viable and durable
multilateral trading system
encompassing the General Agreement
on Tariffs and Trade, the results of past
trade liberalization efforts, and all of

the results of the Uruguay Round of


Multilateral Trade Negotiations,
Determined to preserve the basic
principles and to further the objectives
underlying this multilateral trading
system, . . . (emphasis supplied.)
Specific WTO Provisos
Protect Developing Countries
So too, the Solicitor General points out that pursuant to
and consistent with the foregoing basic principles, the
WTO Agreement grants developing countries a more
lenient treatment, giving their domestic industries
some protection from the rush of foreign competition.
Thus, with respect to tariffs in general, preferential
treatment is given to developing countries in terms of
the amount of tariff reduction and the period within
which the reduction is to be spread out. Specifically,
GATT requires an average tariff reduction rate of 36%
for developed countries to be effected within a period
of six (6) years while developing countries including
the Philippines are required to effect an average
tariff reduction of only 24% within ten (10) years.
In respect to domestic subsidy, GATT
requires developed countries to reduce domestic
support to agricultural products by 20% over six (6)
years, as compared to only 13% for developing
countries to be effected within ten (10) years.
In regard to export subsidy for agricultural products,
GATT requires developed countries to reduce their
budgetary outlays for export subsidy by 36% and
export volumes receiving export subsidy by 21% within
a period of six (6) years. For developing countries,
however, the reduction rate is only two-thirds of that
prescribed for developed countries and a longer period
of ten (10) years within which to effect such reduction.
Moreover, GATT itself has provided built-in protection
from unfair foreign competition and trade practices
including anti-dumping measures, countervailing
measures and safeguards against import surges.
Where local businesses are jeopardized by unfair
foreign competition, the Philippines can avail of these
measures. There is hardly therefore any basis for the
statement that under the WTO, local industries and
enterprises will all be wiped out and that Filipinos will
be deprived of control of the economy. Quite the
contrary, the weaker situations of developing nations
like the Philippines have been taken into account; thus,
there would be no basis to say that in joining the WTO,
the respondents have gravely abused their discretion.
True, they have made a bold decision to steer the ship
of state into the yet uncharted sea of economic
liberalization. But such decision cannot be set aside on
the ground of grave abuse of discretion, simply
because we disagree with it or simply because we
believe only in other economic policies. As earlier
stated, the Court in taking jurisdiction of this case will

not pass upon the advantages and disadvantages of


trade liberalization as an economic policy. It will only
perform its constitutional duty of determining whether
the Senate committed grave abuse of discretion.
Constitution Does Not
Rule Out Foreign Competition
Furthermore, the constitutional policy of a "self-reliant
and independent national economy" 35 does not
necessarily rule out the entry of foreign investments,
goods and services. It contemplates neither "economic
seclusion" nor "mendicancy in the international
community." As explained by Constitutional
Commissioner Bernardo Villegas, sponsor of this
constitutional policy:
Economic self-reliance is a primary
objective of a developing country that
is keenly aware of overdependence on
external assistance for even its most
basic needs. It does not mean autarky
or economic seclusion; rather, it means
avoiding mendicancy in the
international community. Independence
refers to the freedom from undue
foreign control of the national
economy, especially in such strategic
industries as in the development of
natural resources and public utilities. 36
The WTO reliance on "most favored nation," "national
treatment," and "trade without discrimination" cannot
be struck down as unconstitutional as in fact they are
rules of equality and reciprocity that apply to all WTO
members. Aside from envisioning a trade policy based
on "equality and reciprocity," 37 the fundamental law
encourages industries that are "competitive in both
domestic and foreign markets," thereby demonstrating
a clear policy against a sheltered domestic trade
environment, but one in favor of the gradual
development of robust industries that can compete
with the best in the foreign markets. Indeed, Filipino
managers and Filipino enterprises have shown
capability and tenacity to compete internationally. And
given a free trade environment, Filipino entrepreneurs
and managers in Hongkong have demonstrated the
Filipino capacity to grow and to prosper against the
best offered under a policy of laissez faire.
Constitution Favors Consumers,
Not Industries or Enterprises
The Constitution has not really shown any unbalanced
bias in favor of any business or enterprise, nor does it
contain any specific pronouncement that Filipino
companies should be pampered with a total
proscription of foreign competition. On the other hand,
respondents claim that WTO/GATT aims to make
available to the Filipino consumer the best goods and
services obtainable anywhere in the world at the most
reasonable prices. Consequently, the question boils

down to whether WTO/GATT will favor the general


welfare of the public at large.
Will adherence to the WTO treaty bring this ideal (of
favoring the general welfare) to reality?
Will WTO/GATT succeed in promoting the Filipinos'
general welfare because it will as promised by its
promoters expand the country's exports and
generate more employment?
Will it bring more prosperity, employment, purchasing
power and quality products at the most reasonable
rates to the Filipino public?
The responses to these questions involve "judgment
calls" by our policy makers, for which they are
answerable to our people during appropriate electoral
exercises. Such questions and the answers thereto are
not subject to judicial pronouncements based on grave
abuse of discretion.
Constitution Designed to Meet
Future Events and Contingencies
No doubt, the WTO Agreement was not yet in existence
when the Constitution was drafted and ratified in 1987.
That does not mean however that the Charter is
necessarily flawed in the sense that its framers might
not have anticipated the advent of a borderless world
of business. By the same token, the United Nations was
not yet in existence when the 1935 Constitution
became effective. Did that necessarily mean that the
then Constitution might not have contemplated a
diminution of the absoluteness of sovereignty when the
Philippines signed the UN Charter, thereby effectively
surrendering part of its control over its foreign relations
to the decisions of various UN organs like the Security
Council?
It is not difficult to answer this question. Constitutions
are designed to meet not only the vagaries of
contemporary events. They should be interpreted to
cover even future and unknown circumstances. It is to
the credit of its drafters that a Constitution can
withstand the assaults of bigots and infidels but at the
same time bend with the refreshing winds of change
necessitated by unfolding events. As one eminent
political law writer and respected jurist 38 explains:
The Constitution must be
quintessential rather than superficial,
the root and not the blossom, the base
and frame-work only of the edifice that
is yet to rise. It is but the core of the
dream that must take shape, not in a
twinkling by mandate of our delegates,
but slowly "in the crucible of Filipino
minds and hearts," where it will in time
develop its sinews and gradually
gather its strength and finally achieve

its substance. In fine, the Constitution


cannot, like the goddess Athena, rise
full-grown from the brow of the
Constitutional Convention, nor can it
conjure by mere fiat an instant
Utopia. It must grow with the society it
seeks to re-structure and march apace
with the progress of the race, drawing
from the vicissitudes of history the
dynamism and vitality that will keep it,
far from becoming a petrified rule, a
pulsing, living law attuned to the
heartbeat of the nation.
Third Issue: The WTO Agreement and Legislative Power
The WTO Agreement provides that "(e)ach Member
shall ensure the conformity of its laws, regulations and
administrative procedures with its obligations as
provided in the annexed Agreements." 39 Petitioners
maintain that this undertaking "unduly limits, restricts
and impairs Philippine sovereignty, specifically the
legislative power which under Sec. 2, Article VI of the
1987 Philippine Constitution is vested in the Congress
of the Philippines. It is an assault on the sovereign
powers of the Philippines because this means that
Congress could not pass legislation that will be good
for our national interest and general welfare if such
legislation will not conform with the WTO Agreement,
which not only relates to the trade in goods . . . but
also to the flow of investments and money . . . as well
as to a whole slew of agreements on socio-cultural
matters . . . 40
More specifically, petitioners claim that said WTO
proviso derogates from the power to tax, which is
lodged in the Congress. 41 And while the Constitution
allows Congress to authorize the President to fix tariff
rates, import and export quotas, tonnage and wharfage
dues, and other duties or imposts, such authority is
subject to "specified limits and . . . such limitations and
restrictions" as Congress may provide, 42 as in fact it
did under Sec. 401 of the Tariff and Customs Code.
Sovereignty Limited by
International Law and Treaties
This Court notes and appreciates the ferocity and
passion by which petitioners stressed their arguments
on this issue. However, while sovereignty has
traditionally been deemed absolute and allencompassing on the domestic level, it is however
subject to restrictions and limitations voluntarily
agreed to by the Philippines, expressly or impliedly, as
a member of the family of nations. Unquestionably, the
Constitution did not envision a hermit-type isolation of
the country from the rest of the world. In its
Declaration of Principles and State Policies, the
Constitution "adopts the generally accepted principles
of international law as part of the law of the land, and
adheres to the policy of peace, equality, justice,
freedom, cooperation and amity, with all nations." 43 By

the doctrine of incorporation, the country is bound by


generally accepted principles of international law,
which are considered to be automatically part of our
own laws. 44 One of the oldest and most fundamental
rules in international law is pacta sunt servanda
international agreements must be performed in good
faith. "A treaty engagement is not a mere moral
obligation but creates a legally binding obligation on
the parties . . . A state which has contracted valid
international obligations is bound to make in its
legislations such modifications as may be necessary to
ensure the fulfillment of the obligations undertaken." 45
By their inherent nature, treaties really limit or restrict
the absoluteness of sovereignty. By their voluntary act,
nations may surrender some aspects of their state
power in exchange for greater benefits granted by or
derived from a convention or pact. After all, states, like
individuals, live with coequals, and in pursuit of
mutually covenanted objectives and benefits, they also
commonly agree to limit the exercise of their otherwise
absolute rights. Thus, treaties have been used to
record agreements between States concerning such
widely diverse matters as, for example, the lease of
naval bases, the sale or cession of territory, the
termination of war, the regulation of conduct of
hostilities, the formation of alliances, the regulation of
commercial relations, the settling of claims, the laying
down of rules governing conduct in peace and the
establishment of international organizations. 46 The
sovereignty of a state therefore cannot in fact and in
reality be considered absolute. Certain restrictions
enter into the picture: (1) limitations imposed by the
very nature of membership in the family of nations and
(2) limitations imposed by treaty stipulations. As aptly
put by John F. Kennedy, "Today, no nation can build its
destiny alone. The age of self-sufficient nationalism is
over. The age of interdependence is here." 47
UN Charter and Other Treaties
Limit Sovereignty
Thus, when the Philippines joined the United Nations as
one of its 51 charter members, it consented to restrict
its sovereign rights under the "concept of sovereignty
as auto-limitation." 47-A Under Article 2 of the UN
Charter, "(a)ll members shall give the United Nations
every assistance in any action it takes in accordance
with the present Charter, and shall refrain from giving
assistance to any state against which the United
Nations is taking preventive or enforcement action."
Such assistance includes payment of its corresponding
share not merely in administrative expenses but also in
expenditures for the peace-keeping operations of the
organization. In its advisory opinion of July 20, 1961,
the International Court of Justice held that money used
by the United Nations Emergency Force in the Middle
East and in the Congo were "expenses of the United
Nations" under Article 17, paragraph 2, of the UN
Charter. Hence, all its members must bear their
corresponding share in such expenses. In this sense,
the Philippine Congress is restricted in its power to
appropriate. It is compelled to appropriate funds

whether it agrees with such peace-keeping expenses or


not. So too, under Article 105 of the said Charter, the
UN and its representatives enjoy diplomatic privileges
and immunities, thereby limiting again the exercise of
sovereignty of members within their own territory.
Another example: although "sovereign equality" and
"domestic jurisdiction" of all members are set forth as
underlying principles in the UN Charter, such provisos
are however subject to enforcement measures decided
by the Security Council for the maintenance of
international peace and security under Chapter VII of
the Charter. A final example: under Article 103, "(i)n
the event of a conflict between the obligations of the
Members of the United Nations under the present
Charter and their obligations under any other
international agreement, their obligation under the
present charter shall prevail," thus unquestionably
denying the Philippines as a member the
sovereign power to make a choice as to which of
conflicting obligations, if any, to honor.
Apart from the UN Treaty, the Philippines has entered
into many other international pacts both bilateral
and multilateral that involve limitations on Philippine
sovereignty. These are enumerated by the Solicitor
General in his Compliance dated October 24, 1996, as
follows:
(a) Bilateral convention with the United
States regarding taxes on income,
where the Philippines agreed, among
others, to exempt from tax, income
received in the Philippines by, among
others, the Federal Reserve Bank of the
United States, the Export/Import Bank
of the United States, the Overseas
Private Investment Corporation of the
United States. Likewise, in said
convention, wages, salaries and similar
remunerations paid by the United
States to its citizens for labor and
personal services performed by them
as employees or officials of the United
States are exempt from income tax by
the Philippines.
(b) Bilateral agreement with Belgium,
providing, among others, for the
avoidance of double taxation with
respect to taxes on income.
(c) Bilateral convention with the
Kingdom of Sweden for the avoidance
of double taxation.
(d) Bilateral convention with the French
Republic for the avoidance of double
taxation.
(e) Bilateral air transport agreement
with Korea where the Philippines
agreed to exempt from all customs

duties, inspection fees and other duties


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

In the foregoing treaties, the Philippines has effectively


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

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

made with the use of the said patented process but the
owner of the patent could not determine the exact
process used in obtaining such identical product.
Hence, the "burden of proof" contemplated by Article
34 should actually be understood as the duty of the
alleged patent infringer to overthrow such
presumption. Such burden, properly understood,
actually refers to the "burden of evidence" (burden of
going forward) placed on the producer of the identical
(or fake) product to show that his product was
produced without the use of the patented process.
The foregoing notwithstanding, the patent owner still
has the "burden of proof" since, regardless of the
presumption provided under paragraph 1 of Article 34,
such owner still has to introduce evidence of the
existence of the alleged identical product, the fact that
it is "identical" to the genuine one produced by the
patented process and the fact of "newness" of the
genuine product or the fact of "substantial likelihood"
that the identical product was made by the patented
process.
The foregoing should really present no problem in
changing the rules of evidence as the present law on
the subject, Republic Act No. 165, as amended,
otherwise known as the Patent Law, provides a similar
presumption in cases of infringement of patented
design or utility model, thus:
Sec. 60. Infringement. Infringement
of a design patent or of a patent for
utility model shall consist in
unauthorized copying of the patented
design or utility model for the purpose
of trade or industry in the article or
product and in the making, using or
selling of the article or product copying
the patented design or utility
model. Identity or substantial identity
with the patented design or utility
model shall constitute evidence of
copying. (emphasis supplied)
Moreover, it should be noted that the requirement of
Article 34 to provide a disputable presumption applies
only if (1) the product obtained by the patented
process in NEW or (2) there is a substantial likelihood
that the identical product was made by the process
and the process owner has not been able through
reasonable effort to determine the process used.
Where either of these two provisos does not obtain,
members shall be free to determine the appropriate
method of implementing the provisions of TRIPS within
their own internal systems and processes.
By and large, the arguments adduced in connection
with our disposition of the third issue derogation of
legislative power will apply to this fourth issue also.
Suffice it to say that the reciprocity clause more than
justifies such intrusion, if any actually exists. Besides,
Article 34 does not contain an unreasonable burden,

consistent as it is with due process and the concept of


adversarial dispute settlement inherent in our judicial
system.
So too, since the Philippine is a signatory to most
international conventions on patents, trademarks and
copyrights, the adjustment in legislation and rules of
procedure will not be substantial. 52
Fifth Issue: Concurrence Only in the WTO Agreement
and
Not in Other Documents Contained in the Final Act
Petitioners allege that the Senate concurrence in the
WTO Agreement and its annexes but not in the other
documents referred to in the Final Act, namely the
Ministerial Declaration and Decisions and the
Understanding on Commitments in Financial Services
is defective and insufficient and thus constitutes
abuse of discretion. They submit that such concurrence
in the WTO Agreement alone is flawed because it is in
effect a rejection of the Final Act, which in turn was the
document signed by Secretary Navarro, in
representation of the Republic upon authority of the
President. They contend that the second letter of the
President to the Senate 53 which enumerated what
constitutes the Final Act should have been the subject
of concurrence of the Senate.
"A final act, sometimes called protocol de cloture, is an
instrument which records the winding up of the
proceedings of a diplomatic conference and usually
includes a reproduction of the texts of treaties,
conventions, recommendations and other acts agreed
upon and signed by the plenipotentiaries attending the
conference." 54 It is not the treaty itself. It is rather a
summary of the proceedings of a protracted
conference which may have taken place over several
years. The text of the "Final Act Embodying the Results
of the Uruguay Round of Multilateral Trade
Negotiations" is contained in just one page 55 in Vol. I of
the 36-volume Uruguay Round of Multilateral Trade
Negotiations. By signing said Final Act, Secretary
Navarro as representative of the Republic of the
Philippines undertook:
(a) to submit, as appropriate, the WTO
Agreement for the consideration of
their respective competent authorities
with a view to seeking approval of the
Agreement in accordance with their
procedures; and
(b) to adopt the Ministerial Declarations
and Decisions.
The assailed Senate Resolution No. 97 expressed
concurrence in exactly what the Final Act required from
its signatories, namely, concurrence of the Senate in
the WTO Agreement.

The Ministerial Declarations and Decisions were


deemed adopted without need for ratification. They
were approved by the ministers by virtue of Article
XXV: 1 of GATT which provides that representatives of
the members can meet "to give effect to those
provisions of this Agreement which invoke joint action,
and generally with a view to facilitating the operation
and furthering the objectives of this Agreement." 56
The Understanding on Commitments in Financial
Services also approved in Marrakesh does not apply to
the Philippines. It applies only to those 27 Members
which "have indicated in their respective schedules of
commitments on standstill, elimination of monopoly,
expansion of operation of existing financial service
suppliers, temporary entry of personnel, free transfer
and processing of information, and national treatment
with respect to access to payment, clearing systems
and refinancing available in the normal course of
business." 57
On the other hand, the WTO Agreement itself
expresses what multilateral agreements are deemed
included as its integral parts, 58 as follows:
Article II
Scope of the WTO
1. The WTO shall provide the common
institutional frame-work for the conduct
of trade relations among its Members
in matters to the agreements and
associated legal instruments included
in the Annexes to this Agreement.
2. The Agreements and associated
legal instruments included in Annexes
1, 2, and 3, (hereinafter referred to as
"Multilateral Agreements") are integral
parts of this Agreement, binding on all
Members.
3. The Agreements and associated
legal instruments included in Annex 4
(hereinafter referred to as "Plurilateral
Trade Agreements") are also part of
this Agreement for those Members that
have accepted them, and are binding
on those Members. The Plurilateral
Trade Agreements do not create either
obligation or rights for Members that
have not accepted them.
4. The General Agreement on Tariffs
and Trade 1994 as specified in annex
1A (hereinafter referred to as "GATT
1994") is legally distinct from the
General Agreement on Tariffs and
Trade, dated 30 October 1947, annexed
to the Final Act adopted at the

conclusion of the Second Session of the


Preparatory Committee of the United
Nations Conference on Trade and
Employment, as subsequently rectified,
amended or modified (hereinafter
referred to as "GATT 1947").
It should be added that the Senate was well-aware of
what it was concurring in as shown by the members'
deliberation on August 25, 1994. After reading the
letter of President Ramos dated August 11, 1994, 59 the
senators
of the Republic minutely dissected what the Senate
was concurring in, as follows: 60
THE CHAIRMAN: Yes. Now, the question
of the validity of the submission came
up in the first day hearing of this
Committee yesterday. Was the
observation made by Senator Taada
that what was submitted to the Senate
was not the agreement on establishing
the World Trade Organization by the
final act of the Uruguay Round which is
not the same as the agreement
establishing the World Trade
Organization? And on that basis,
Senator Tolentino raised a point of
order which, however, he agreed to
withdraw upon understanding that his
suggestion for an alternative solution
at that time was acceptable. That
suggestion was to treat the
proceedings of the Committee as being
in the nature of briefings for Senators
until the question of the submission
could be clarified.
And so, Secretary Romulo, in effect, is
the President submitting a new . . . is
he making a new submission which
improves on the clarity of the first
submission?
MR. ROMULO: Mr. Chairman, to make
sure that it is clear cut and there
should be no misunderstanding, it was
his intention to clarify all matters by
giving this letter.
THE CHAIRMAN: Thank you.
Can this Committee hear from Senator
Taada and later on Senator Tolentino
since they were the ones that raised
this question yesterday?
Senator Taada, please.
SEN. TAADA: Thank you,
Mr. Chairman.

Based on what Secretary Romulo has


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

THE CHAIRMAN. Thank you, Senator


Tolentino, May I call on Senator
Gonzales.
SEN. GONZALES. Mr. Chairman, my
views on this matter are already a
matter of record. And they had been
adequately reflected in the journal of
yesterday's session and I don't see any
need for repeating the same.
Now, I would consider the new
submission as an act ex abudante
cautela.
THE CHAIRMAN. Thank you, Senator
Gonzales. Senator Lina, do you want to
make any comment on this?
SEN. LINA. Mr. President, I agree with
the observation just made by Senator
Gonzales out of the abundance of
question. Then the new submission is, I
believe, stating the obvious and
therefore I have no further comment to
make.
Epilogue
In praying for the nullification of the Philippine
ratification of the WTO Agreement, petitioners are
invoking this Court's constitutionally imposed duty "to
determine whether or not there has been grave abuse
of discretion amounting to lack or excess of
jurisdiction" on the part of the Senate in giving its
concurrence therein via Senate Resolution No. 97.
Procedurally, a writ of certiorari grounded on grave
abuse of discretion may be issued by the Court under
Rule 65 of the Rules of Court when it is amply shown
that petitioners have no other plain, speedy and
adequate remedy in the ordinary course of law.
By grave abuse of discretion is meant such capricious
and whimsical exercise of judgment as is equivalent to
lack of jurisdiction. 61 Mere abuse of discretion is not
enough. It must be grave abuse of discretion as when
the power is exercised in an arbitrary or despotic
manner by reason of passion or personal hostility, and
must be so patent and so gross as to amount to an
evasion of a positive duty or to a virtual refusal to
perform the duty enjoined or to act at all in
contemplation of law. 62 Failure on the part of the
petitioner to show grave abuse of discretion will result
in the dismissal of the petition. 63
In rendering this Decision, this Court never forgets that
the Senate, whose act is under review, is one of two
sovereign houses of Congress and is thus entitled to
great respect in its actions. It is itself a constitutional
body independent and coordinate, and thus its actions
are presumed regular and done in good faith. Unless

convincing proof and persuasive arguments are


presented to overthrow such presumptions, this Court
will resolve every doubt in its favor. Using the foregoing
well-accepted definition of grave abuse of discretion
and the presumption of regularity in the Senate's
processes, this Court cannot find any cogent reason to
impute grave abuse of discretion to the Senate's
exercise of its power of concurrence in the WTO
Agreement granted it by Sec. 21 of Article VII of the
Constitution. 64
It is true, as alleged by petitioners, that broad
constitutional principles require the State to develop an
independent national economy effectively controlled by
Filipinos; and to protect and/or prefer Filipino labor,
products, domestic materials and locally produced
goods. But it is equally true that such principles
while serving as judicial and legislative guides are
not in themselves sources of causes of action.
Moreover, there are other equally fundamental
constitutional principles relied upon by the Senate
which mandate the pursuit of a "trade policy that
serves the general welfare and utilizes all forms and
arrangements of exchange on the basis of equality and
reciprocity" and the promotion of industries "which are
competitive in both domestic and foreign markets,"
thereby justifying its acceptance of said treaty. So too,
the alleged impairment of sovereignty in the exercise
of legislative and judicial powers is balanced by the
adoption of the generally accepted principles of
international law as part of the law of the land and the
adherence of the Constitution to the policy of
cooperation and amity with all nations.
That the Senate, after deliberation and voting,
voluntarily and overwhelmingly gave its consent to the
WTO Agreement thereby making it "a part of the law of
the land" is a legitimate exercise of its sovereign duty
and power. We find no "patent and gross" arbitrariness
or despotism "by reason of passion or personal
hostility" in such exercise. It is not impossible to
surmise that this Court, or at least some of its
members, may even agree with petitioners that it is
more advantageous to the national interest to strike
down Senate Resolution No. 97. But that is not a legal
reason to attribute grave abuse of discretion to the
Senate and to nullify its decision. To do so would
constitute grave abuse in the exercise of our own
judicial power and duty. Ineludably, what the Senate
did was a valid exercise of its authority. As to whether
such exercise was wise, beneficial or viable is outside
the realm of judicial inquiry and review. That is a
matter between the elected policy makers and the
people. As to whether the nation should join the
worldwide march toward trade liberalization and
economic globalization is a matter that our people
should determine in electing their policy makers. After
all, the WTO Agreement allows withdrawal of
membership, should this be the political desire of a
member.
The eminent futurist John Naisbitt, author of the best
seller Megatrends, predicts an Asian

Renaissance 65 where "the East will become the


dominant region of the world economically, politically
and culturally in the next century." He refers to the
"free market" espoused by WTO as the "catalyst" in
this coming Asian ascendancy. There are at present
about 31 countries including China, Russia and Saudi
Arabia negotiating for membership in the WTO.
Notwithstanding objections against possible limitations
on national sovereignty, the WTO remains as the only
viable structure for multilateral trading and the
veritable forum for the development of international
trade law. The alternative to WTO is isolation,
stagnation, if not economic self-destruction. Duly
enriched with original membership, keenly aware of the
advantages and disadvantages of globalization with its
on-line experience, and endowed with a vision of the
future, the Philippines now straddles the crossroads of
an international strategy for economic prosperity and
stability in the new millennium. Let the people, through
their duly authorized elected officers, make their free
choice.
WHEREFORE, the petition is DISMISSED for lack of
merit.
SO ORDERED.
Narvasa, C.J., Regalado, Davide, Jr., Romero, Bellosillo,
Melo, Puno, Kapunan, Mendoza, Francisco,
Hermosisima, Jr. and Torres, Jr., JJ., concur.
Padilla and Vitug, JJ., concur in the result.

[G.R. No. 154342. July 14, 2004]


MIGHTY
CORPORATION
and
LA
CAMPANA
FABRICA DE TABACO, INC. petitioners, vs. E. & J.
GALLO WINERY and THE ANDRESONS GROUP,
INC. respondents.
DECISION
CORONA, J.:
In this petition for review on certiorari under Rule 45,
petitioners Mighty Corporation and La Campana
Fabrica de Tabaco, Inc. (La Campana) seek to annul,
reverse and set aside: (a) the November 15, 2001
decision[1]of the Court of Appeals (CA) in CA-G.R. CV
No. 65175 affirming the November 26, 1998 decision,
[2]
as modified by the June 24, 1999 order, [3] of the
Regional Trial Court of Makati City, Branch 57 (Makati
RTC) in Civil Case No. 93-850, which held petitioners
liable for, and permanently enjoined them from,
committing trademark infringement and unfair
competition, and which ordered them to pay damages
to respondents E. & J. Gallo Winery (Gallo Winery) and
The Andresons Group, Inc. (Andresons); (b) the July 11,
2002 CA resolution denying their motion for
reconsideration[4] and (c) the aforesaid Makati RTC
decision itself.
I.
The Factual Background
Respondent Gallo Winery is a foreign corporation not
doing business in the Philippines but organized and
existing under the laws of the State of California,
United States of America (U.S.), where all its wineries
are located. Gallo Winery produces different kinds of
wines and brandy products and sells them in many
countries under different registered trademarks,
including the GALLO and ERNEST & JULIO GALLO wine
trademarks.
Respondent domestic corporation, Andresons, has
been Gallo Winerys exclusive wine importer and
distributor in the Philippines since 1991, selling these
products in its own name and for its own account. [5]
Gallo Winerys GALLO wine trademark was registered in
the principal register of the Philippine Patent Office
(now Intellectual Property Office) on November 16,
1971 under Certificate of Registration No. 17021 which
was renewed on November 16, 1991 for another 20
years.[6] Gallo Winery also applied for registration of its
ERNEST & JULIO GALLO wine trademark on October 11,
1990 under Application Serial No. 901011-00073599PN but the records do not disclose if it was ever
approved by the Director of Patents.[7]
On the other hand, petitioners Mighty Corporation and
La Campana and their sister company, Tobacco
Industries of the Philippines (Tobacco Industries), are
engaged in the cultivation, manufacture, distribution
and sale of tobacco products for which they have been
using the GALLO cigarette trademark since 1973. [8]
The Bureau of Internal Revenue (BIR) approved
Tobacco Industries use of GALLO 100s cigarette mark
on September 14, 1973 and GALLO filter cigarette
mark on March 26, 1976, both for the manufacture and
sale of its cigarette products. In 1976, Tobacco
Industries filed its manufacturers sworn statement as
basis for BIRs collection of specific tax on GALLO
cigarettes.[9]
On February 5, 1974, Tobacco Industries applied for,
but eventually did not pursue, the registration of the

GALLO cigarette trademark in the principal register of


the then Philippine Patent Office.[10]
In May 1984, Tobacco Industries assigned the GALLO
cigarette trademark to La Campana which, on July 16,
1985, applied for trademark registration in the
Philippine Patent Office.[11] On July 17, 1985, the
National Library issued Certificate of Copyright
Registration No. 5834 for La Campanas lifetime
copyright claim over GALLO cigarette labels.[12]
Subsequently,
La
Campana
authorized
Mighty Corporation to manufacture and sell cigarettes
bearing the GALLO trademark.[13] BIR approved Mighty
Corporations use of GALLO 100s cigarette brand, under
licensing agreement with Tobacco Industries, on May
18, 1988, and GALLO SPECIAL MENTHOL 100s cigarette
brand on April 3, 1989.[14]
Petitioners claim that GALLO cigarettes have been sold
in the Philippines since 1973, initially by Tobacco
Industries, then by La Campana and finally by Mighty
Corporation.[15]
On the other hand, although the GALLO wine
trademark was registered in the Philippines in 1971,
respondents claim that they first introduced and sold
the GALLO and ERNEST & JULIO GALLO wines in the
Philippines circa 1974 within the then U.S. military
facilities only. By 1979, they had expanded their
Philippine market through authorized distributors and
independent outlets.[16]
Respondents claim that they first learned about the
existence of GALLO cigarettes in the latter part of 1992
when an Andresons employee saw such cigarettes on
display with GALLO wines in a Davao supermarket wine
cellar section.[17] Forthwith, respondents sent a demand
letter to petitioners asking them to stop using the
GALLO trademark, to no avail.
II.
The Legal Dispute
On March 12, 1993, respondents sued petitioners in
the Makati RTC for trademark and tradename
infringement and unfair competition, with a prayer for
damages and preliminary injunction.
Respondents charged petitioners with violating Article
6bis of the Paris Convention for the Protection of
Industrial Property (Paris Convention)[18] and RA 166
(Trademark Law),[19] specifically, Sections 22 and 23
(for trademark infringement),[20] 29 and 30[21] (for unfair
competition and false designation of origin) and 37 (for
tradename
infringement).[22] They
claimed
that
petitioners adopted the GALLO trademark to ride on
Gallo Winerys GALLO and ERNEST & JULIO GALLO
trademarks established reputation and popularity, thus
causing confusion, deception and mistake on the part
of the purchasing public who had always associated
GALLO and ERNEST & JULIO GALLO trademarks with
Gallo Winerys wines. Respondents prayed for the
issuance of a writ of preliminary injunction and ex
parte restraining order, plus P2 million as actual and
compensatory
damages,
at
least P500,000
as
exemplary and moral damages, and at least P500,000
as attorneys fees and litigation expenses.[23]
In their answer, petitioners alleged, among other
affirmative defenses, that: petitioners GALLO cigarettes
and Gallo Winerys wines were totally unrelated
products; Gallo Winerys GALLO trademark registration
certificate covered wines only, not cigarettes; GALLO
cigarettes and GALLO wines were sold through different
channels of trade; GALLO cigarettes, sold at P4.60 for
GALLO filters and P3 for GALLO menthols, were low-

cost items compared to Gallo Winerys high-priced


luxury wines which cost between P98 to P242.50; the
target market of Gallo Winerys wines was the middle or
high-income bracket with at least P10,000 monthly
income while GALLO cigarette buyers were farmers,
fishermen, laborers and other low-income workers; the
dominant feature of the GALLO cigarette mark was the
rooster device with the manufacturers name clearly
indicated as MIGHTY CORPORATION while, in the case
of Gallo Winerys wines, it was the full names of the
founders-owners ERNEST & JULIO GALLO or just their
surname GALLO; by their inaction and conduct,
respondents were guilty of laches and estoppel; and
petitioners acted with honesty, justice and good faith in
the exercise of their right to manufacture and sell
GALLO cigarettes.
In an order dated April 21, 1993, [24] the Makati RTC
denied, for lack of merit, respondents prayer for the
issuance of a writ of preliminary injunction, [25] holding
that respondents GALLO trademark registration
certificate covered wines only, that respondents wines
and petitioners cigarettes were not related goods and
respondents failed to prove material damage or great
irreparable injury as required by Section 5, Rule 58 of
the Rules of Court.[26]
On August 19, 1993, the Makati RTC denied, for lack of
merit, respondents motion for reconsideration. The
court reiterated that respondents wines and petitioners
cigarettes were not related goods since the likelihood
of deception and confusion on the part of the
consuming public was very remote. The trial court
emphasized that it could not rely on foreign rulings
cited by respondents because the[se] cases were
decided by foreign courts on the basis of unknown
facts peculiar to each case or upon factual
surroundings which may exist only within their
jurisdiction. Moreover, there [was] no showing that
[these cases had] been tested or found applicable in
our jurisdiction.[27]
On February 20, 1995, the CA likewise dismissed
respondents petition for review on certiorari, docketed
as CA-G.R. No. 32626, thereby affirming the Makati
RTCs denial of the application for issuance of a writ of
preliminary injunction against petitioners.[28]
After trial on the merits, however, the Makati RTC, on
November 26, 1998, held petitioners liable for, and
permanently
enjoined
them
from,
committing
trademark infringement and unfair competition with
respect to the GALLO trademark:
WHEREFORE, judgment is rendered in favor of the
plaintiff (sic) and against the defendant (sic), to wit:
a. permanently restraining and enjoining defendants,
their distributors, trade outlets, and all persons acting
for them or under their instructions, from (i) using E &
Js registered trademark GALLO or any other
reproduction, counterfeit, copy or colorable imitation of
said trademark, either singly or in conjunction with
other words, designs or emblems and other acts of
similar nature, and (ii) committing other acts of unfair
competition against plaintiffs by manufacturing and
selling their cigarettes in the domestic or export
markets under the GALLO trademark.
b. ordering defendants to pay plaintiffs
(i) actual and compensatory damages for the injury
and prejudice and impairment of plaintiffs business and
goodwill as a result of the acts and conduct pleaded as
basis for this suit, in an amount equal to 10% of
FOURTEEN MILLION TWO HUNDRED THIRTY FIVE

THOUSAND PESOS (PHP14,235,000.00) from the filing


of the complaint until fully paid;
(ii)
exemplary
damages
in
the
amount
of
PHP100,000.00;
(iii) attorneys fees and expenses of litigation in the
amount of PHP1,130,068.91;
(iv) the cost of suit.
SO ORDERED.[29]
On June 24, 1999, the Makati RTC granted respondents
motion for partial reconsideration and increased the
award of actual and compensatory damages to 10%
of P199,290,000 or P19,929,000.[30]
On appeal, the CA affirmed the Makati RTC decision
and subsequently denied petitioners motion for
reconsideration.
III.
The Issues
Petitioners now seek relief from this Court contending
that the CA did not follow prevailing laws and
jurisprudence when it held that: [a] RA 8293
(Intellectual Property Code of the Philippines [IP
Code]) was applicable in this case; [b] GALLO
cigarettes and GALLO wines were identical, similar or
related goods for the reason alone that they were
purportedly forms of vice; [c] both goods passed
through the same channels of trade and [d] petitioners
were liable for trademark infringement, unfair
competition and damages.[31]
Respondents, on the other hand, assert that this
petition which invokes Rule 45 does not involve pure
questions of law, and hence, must be dismissed
outright.
IV.
Discussion
THE EXCEPTIONAL CIRCUMSTANCES
IN THIS CASE OBLIGE THE COURT TO REVIEW
THE CAS FACTUAL FINDINGS
As
a
general
rule,
a
petition
for
review
on certiorari under Rule 45 must raise only questions of
law[32] (that is, the doubt pertains to the application and
interpretation of law to a certain set of facts) and not
questions of fact (where the doubt concerns the truth
or falsehood of alleged facts), [33] otherwise, the petition
will be denied. We are not a trier of facts and the Court
of Appeals factual findings are generally conclusive
upon us.[34]
This case involves questions of fact which are directly
related and intertwined with questions of law. The
resolution of the factual issues concerning the goods
similarity, identity, relation, channels of trade, and acts
of trademark infringement and unfair competition is
greatly dependent on the interpretation of applicable
laws. The controversy here is not simply the identity or
similarity of both parties trademarks but whether or
not infringement or unfair competition was committed,
a
conclusion
based
on
statutory
interpretation. Furthermore, one or more of the
following exceptional circumstances oblige us to review
the evidence on record:[35]
(1) the conclusion is grounded entirely on speculation,
surmises, and conjectures;
(2) the inference of the Court of Appeals from its
findings of fact is manifestly mistaken, absurd and
impossible;
(3) there is grave abuse of discretion;
(4) the judgment is based on a misapprehension of
facts;

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


beyond the issues of the case, and the same are
contrary to the admissions of both the appellant and
the appellee;
(6) the findings are without citation of specific evidence
on which they are based;
(7) the facts set forth in the petition as well as in the
petitioner's main and reply briefs are not disputed by
the respondents; and
(8) the findings of fact of the Court of Appeals are
premised on the absence of evidence and are
contradicted [by the evidence] on record.[36]
In this light, after thoroughly examining the evidence
on record, weighing, analyzing and balancing all factors
to determine whether trademark infringement and/or
unfair competition has been committed, we conclude
that both the Court of Appeals and the trial court
veered away from the law and well-settled
jurisprudence.
Thus, we give due course to the petition.
THE TRADEMARK LAW AND THE PARIS
CONVENTION ARE THE APPLICABLE LAWS,
NOT THE INTELLECTUAL PROPERTY CODE
We note that respondents sued petitioners on March
12, 1993 for trademark infringement and unfair
competition committed during the effectivity of the
Paris Convention and the Trademark Law.
Yet, in the Makati RTC decision of November 26, 1998,
petitioners were held liable not only under the
aforesaid governing laws but also under the IP Code
which took effect only on January 1, 1998,[37] or about
five years after the filing of the complaint:
Defendants unauthorized use of the GALLO trademark
constitutes trademark infringement pursuant to
Section 22 of Republic Act No. 166, Section 155 of
the IP Code, Article 6bis of the Paris Convention, and
Article 16 (1) of the TRIPS Agreement as it causes
confusion, deception and mistake on the part of the
purchasing public.[38] (Emphasis and underscoring
supplied)
The CA apparently did not notice the error and affirmed
the Makati RTC decision:
In the light of its finding that appellants use of the
GALLO trademark on its cigarettes is likely to create
confusion with the GALLO trademark on wines
previously registered and used in the Philippines by
appellee E & J Gallo Winery, the trial court thus did
not err in holding that appellants acts not
only violated the provisions of the our trademark laws
(R.A. No. 166 and R.A. Nos. (sic) 8293) but also
Article 6bis of the Paris Convention.[39] (Emphasis and
underscoring supplied)
We therefore hold that the courts a quo erred in
retroactively applying the IP Code in this case.
It is a fundamental principle that the validity and
obligatory force of a law proceed from the fact that it
has first been promulgated. A law that is not yet
effective cannot be considered as conclusively known
by the populace. To make a law binding even before it
takes effect may lead to the arbitrary exercise of the
legislative power.[40] Nova constitutio futuris formam
imponere debet non praeteritis. A new state of the law
ought to affect the future, not the past. Any doubt
must generally be resolved against the retroactive
operation of laws, whether these are original
enactments, amendments or repeals.[41] There are only
a few instances when laws may be given retroactive
effect,[42] none of which is present in this case.

The IP Code, repealing the Trademark Law, [43] was


approved on June 6, 1997. Section 241 thereof
expressly decreed that it was to take effect only on
January 1, 1998, without any provision for retroactive
application.Thus, the Makati RTC and the CA should
have limited the consideration of the present case
within the parameters of the Trademark Law and the
Paris Convention, the laws in force at the time of the
filing of the complaint.
DISTINCTIONS BETWEEN
TRADEMARK INFRINGEMENT
AND UNFAIR COMPETITION
Although the laws on trademark infringement and
unfair competition have a common conception at their
root, that is, a person shall not be permitted to
misrepresent his goods or his business as the goods or
business of another, the law on unfair competition is
broader and more inclusive than the law on trademark
infringement. The latter is more limited but it
recognizes a more exclusive right derived from the
trademark adoption and registration by the person
whose goods or business is first associated with it. The
law on trademarks is thus a specialized subject distinct
from the law on unfair competition, although the two
subjects are entwined with each other and are dealt
with together in the Trademark Law (now, both are
covered by the IP Code). Hence, even if one fails to
establish his exclusive property right to a trademark,
he may still obtain relief on the ground of his
competitors unfairness or fraud. Conduct constitutes
unfair competition if the effect is to pass off on the
public the goods of one man as the goods of another. It
is not necessary that any particular means should be
used to this end.[44]
In Del Monte Corporation vs. Court of Appeals, [45] we
distinguished trademark infringement from unfair
competition:
(1) Infringement of trademark is the unauthorized use
of a trademark, whereas unfair competition is the
passing off of one's goods as those of another.
(2) In infringement of trademark fraudulent intent is
unnecessary, whereas in unfair competition fraudulent
intent is essential.
(3) In infringement of trademark the prior registration
of the trademark is a prerequisite to the action,
whereas in unfair competition registration is not
necessary.
Pertinent Provisions on Trademark
Infringement under the Paris
Convention and the Trademark Law
Article 6bis of the Paris Convention,[46] an international
agreement binding on the Philippines and the United
States (Gallo Winerys country of domicile and origin)
prohibits the [registration] or use of a trademark which
constitutes a reproduction, imitation or 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
[Paris]
Convention
and
used
for
identical
or similar goods. [This rule also applies] when the
essential part of the mark constitutes a reproduction of
any such well-known mark or an imitation liable to
create confusion therewith. There is no time limit for
seeking the prohibition of the use of marks used in bad
faith.[47]
Thus, under Article 6bis of the Paris Convention, the
following are the elements of trademark infringement:

(a) registration or use by another person of a


trademark which is a reproduction, imitation or
translation liable to create confusion,
(b) of a mark considered by the competent authority of
the country of registration or use[48] to be well-known in
that country and is already the mark of a person
entitled to the benefits of the Paris Convention, and
(c) such trademark is used for identical or similar
goods.
On the other hand, Section 22 of the Trademark Law
holds a person liable for infringement when, among
others, he uses without the consent of the registrant,
any reproduction, counterfeit, copy or colorable
imitation of any registered mark or tradename in
connection with the sale, offering for sale, or
advertising of any goods, business or services or in
connection with which such use is likely to cause
confusion or mistake or to deceive purchasers or others
as to the source or origin of such goods or services, or
identity of such business; or reproduce, counterfeit,
copy or colorably imitate any such mark or tradename
and apply such reproduction, counterfeit, copy or
colorable imitation to labels, signs, prints, packages,
wrappers, receptacles or advertisements intended to
be used upon or in connection with such goods,
business or services.[49] Trademark registration and
actual use are material to the complaining partys
cause of action.
Corollary to this, Section 20 of the Trademark
Law[50] considers the trademark registration certificate
as prima facie evidence of the validity of the
registration, the registrants ownership and exclusive
right to use the trademark in connection with the
goods, business or services as classified by the
Director of Patents[51] and as specified in the certificate,
subject to the conditions and limitations stated
therein. Sections 2 and 2-A[52] of the Trademark Law
emphasize the importance of the trademarks actual
use in commerce in the Philippines prior to its
registration. In the adjudication of trademark rights
between contending parties, equitable principles of
laches, estoppel, and acquiescence may be considered
and applied.[53]
Under Sections 2, 2-A, 9-A, 20 and 22 of the Trademark
Law therefore, the following constitute the elements of
trademark infringement:
(a) a trademark actually used in commerce in the
Philippines and registered in the principal register of
the Philippine Patent Office
(b) is used by another person in connection with the
sale, offering for sale, or advertising of any goods,
business or services or in connection with which such
use is likely to cause confusion or mistake or to
deceive purchasers or others as to the source or
origin of such goods or services, or identity of such
business;
or
such
trademark
is
reproduced,
counterfeited, copied or colorably imitated by another
person and such reproduction, counterfeit, copy or
colorable imitation is applied to labels, signs, prints,
packages, wrappers, receptacles or advertisements
intended to be used upon or in connection with such
goods, business or services as to likely cause confusion
or mistake or to deceive purchasers,
(c) the trademark is used for identical or similar goods,
and
(d) such act is done without the consent of the
trademark registrant or assignee.

In summary, the Paris Convention protects well-known


trademarks only (to be determined by domestic
authorities), while the Trademark Law protects all
trademarks, whether well-known or not, provided that
they have been registered and are in actual
commercial use in the Philippines. Following universal
acquiescence and comity, in case of domestic legal
disputes on any conflicting provisions between the
Paris Convention (which is an international agreement)
and the Trademark law (which is a municipal law) the
latter will prevail.[54]
Under both the Paris Convention and the Trademark
Law, the protection of a registered trademark is limited
only to goods identical or similar to those in respect of
which such trademark is registered and only when
there is likelihood of confusion. Under both laws, the
time element in commencing infringement cases is
material in ascertaining the registrants express or
implied consent to anothers use of its trademark or a
colorable imitation thereof. This is why acquiescence,
estoppel or laches may defeat the registrants
otherwise valid cause of action.
Hence, proof of all the elements of trademark
infringement is a condition precedent to any finding of
liability.
THE ACTUAL COMMERCIAL USE IN THE
PHILIPPINES OF GALLO CIGARETTE
TRADEMARK PRECEDED THAT OF
GALLO WINE TRADEMARK.
By respondents own judicial admission, the GALLO
wine trademark was registered in the Philippines in
November 1971 but the wine itself was first marketed
and sold in the country only in 1974 and only within
the former U.S. military facilities, and outside thereof,
only in 1979. To prove commercial use of the GALLO
wine trademark in the Philippines, respondents
presented sales invoice no. 29991 dated July 9, 1981
addressed to Conrad Company Inc., Makati, Philippines
and sales invoice no. 85926 dated March 22, 1996
addressed to Andresons Global, Inc., Quezon City,
Philippines. Both invoices were for the sale and
shipment of GALLO wines to the Philippines during that
period.[55] Nothing at all, however, was presented to
evidence the alleged sales of GALLO wines in the
Philippines in 1974 or, for that matter, prior to July 9,
1981.
On the other hand, by testimonial evidence supported
by the BIR authorization letters, forms and
manufacturers sworn statement, it appears that
petitioners and its predecessor-in-interest, Tobacco
Industries, have indeed been using and selling GALLO
cigarettes in the Philippines since 1973 or before July 9,
1981.[56]
In Emerald Garment Manufacturing Corporation vs.
Court of Appeals,[57] we reiterated our rulings in Pagasa
Industrial Corporation vs. Court of Appeals, [58] Converse
Rubber Corporation vs. Universal Rubber Products,
Inc.,[59] Sterling
Products
International,
Inc.
vs.
Farbenfabriken Bayer Aktiengesellschaft,[60] Kabushi
Kaisha Isetan vs. Intermediate Appellate Court,
[61]
and Philip Morris vs. Court of Appeals,[62] giving
utmost importance to the actual commercial use of
a trademark in the Philippines prior to its registration,
notwithstanding the provisions of the Paris Convention:
xxx xxx xxx
In addition to the foregoing, we are constrained to
agree with petitioner's contention that private
respondent
failed
to
prove
prior
actual

commercial use of its LEE trademark in the


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

acquisition of the right of ownership over a


trademark.
xxx xxx xxx
The credibility placed on a certificate of registration of
one's trademark, or its weight as evidence of validity,
ownership
and
exclusive
use,
is
qualified. A
registration certificate serves merely as prima
facie evidence. It is not conclusive but can and
may be rebutted by controverting evidence.
xxx xxx xxx
In the case at bench, however, we reverse the findings
of the Director of Patents and the Court of
Appeals. After a meticulous study of the records,
we observe that the Director of Patents and the
Court
of Appeals
relied mainly
on the
registration certificates as proof of use by
private respondent of the trademark LEE which,
as we have previously discussed are not
sufficient. We cannot give credence to private
respondent's claim that its LEE mark first
reached the Philippines in the 1960's through
local sales by the Post Exchanges of the U.S.
Military Bases in the Philippines (Rollo, p. 177)
based as it was solely on the self-serving
statements of Mr. Edward Poste, General
Manager of Lee (Phils.), Inc., a wholly owned
subsidiary of the H.D. Lee, Co., Inc., U.S.A.,
herein private respondent. (Original Records, p.
52) Similarly, we give little weight to the
numerous
vouchers
representing
various
advertising expenses in the Philippines for LEE
products. It is well to note that these expenses
were incurred only in 1981 and 1982 by LEE
(Phils.), Inc. after it entered into a licensing
agreement with private respondent on 11 May
1981. (Exhibit E)
On the other hand, petitioner has sufficiently
shown that it has been in the business of selling
jeans and other garments adopting its STYLISTIC
MR. LEE trademark since 1975 as evidenced by
appropriate sales invoices to various stores and
retailers. (Exhibit 1-e to 1-o)
Our rulings in Pagasa Industrial Corp. v. Court of
Appeals (118 SCRA 526 [1982]) and Converse Rubber
Corp. v. Universal Rubber Products, Inc., (147 SCRA
154 [1987]), respectively, are instructive:
The Trademark Law is very clear. It requires actual
commercial
use
of
the
mark
prior
to
its
registration. There is no dispute that respondent
corporation was the first registrant, yet it failed
to fully substantiate its claim that it used in
trade or business in the Philippines the subject
mark; it did not present proof to invest it with
exclusive, continuous adoption of the trademark
which
should
consist
among
others,
of
considerable sales since its first use. The
invoices submitted by respondent which were
dated way back in 1957 show that the zippers
sent to the Philippines were to be used as
samples and of no commercial value. The evidence
for respondent must be clear, definite and free from
inconsistencies. Samples are not for sale and therefore,
the fact of exporting them to the Philippines cannot be
considered to be equivalent to the use contemplated
by law. Respondent did not expect income from such
samples. There were no receipts to establish sale, and
no proof were presented to show that they were
subsequently sold in the Philippines.

xxx xxx xxx


For lack of adequate proof of actual use of its
trademark in the Philippines prior to petitioner's
use of its own mark and for failure to establish
confusing similarity between said trademarks,
private respondent's action for infringement
must necessarily fail. (Emphasis supplied.)
In view of the foregoing jurisprudence and respondents
judicial admission that the actual commercial use of
the GALLO wine trademark was subsequent to its
registration in 1971 and to Tobacco Industries
commercial use of the GALLO cigarette trademark in
1973, we rule that, on this account, respondents never
enjoyed the exclusive right to use the GALLO wine
trademark to the prejudice of Tobacco Industries and
its successors-in-interest, herein petitioners, either
under the Trademark Law or the Paris Convention.
Respondents GALLO trademark
registration is limited to
wines only
We also note that the GALLO trademark registration
certificates in the Philippines and in other countries
expressly state that they cover wines only, without any
evidence or indication that registrant Gallo Winery
expanded or intended to expand its business to
cigarettes.[63]
Thus, by strict application of Section 20 of the
Trademark Law, Gallo Winerys exclusive right to use
the GALLO trademark should be limited to wines, the
only
product
indicated
in
its
registration
certificates. This strict statutory limitation on the
exclusive right to use trademarks was amply clarified
in our ruling in Faberge, Inc. vs. Intermediate Appellate
Court:[64]
Having thus reviewed the laws applicable to the case
before Us, it is not difficult to discern from the
foregoing
statutory
enactments
that
private
respondent may be permitted to register the
trademark BRUTE for briefs produced by it
notwithstanding petitioner's vehement protestations of
unfair dealings in marketing its own set of items which
are limited to: after-shave lotion, shaving cream,
deodorant, talcum powder and toilet soap. Inasmuch
as petitioner has not ventured in the production
of briefs, an item which is not listed in its
certificate of registration, petitioner cannot and
should not be allowed to feign that private
respondent had invaded petitioner's exclusive
domain. To be sure, it is significant that petitioner
failed to annex in its Brief the so-called eloquent proof
that petitioner indeed intended to expand its mark
BRUT to other goods (Page 27, Brief for the Petitioner;
page 202, Rollo). Even then, a mere application by
petitioner in this aspect does not suffice and may not
vest an exclusive right in its favor that can ordinarily
be
protected
by
the
Trademark
Law. In
short, paraphrasing Section 20 of the Trademark
Law as applied to the documentary evidence
adduced by petitioner, the certificate of
registration issued by the Director of Patents
can confer upon petitioner the exclusive right to
use its own symbol only to those goods specified
in the certificate, subject to any conditions and
limitations stated therein. This basic point is perhaps
the
unwritten rationale
of
Justice
Escolin
in Philippine Refining Co., Inc. vs. Ng Sam (115
SCRA 472 [1982]), when he stressed the principle
enunciated by the United States Supreme Court

in American Foundries vs. Robertson (269 U.S. 372,


381, 70 L ed 317, 46 Sct. 160) that one who has
adopted and used a trademark on his goods does
not prevent the adoption and use of the same
trademark by others for products which are of a
different description. Verily, this Court had the
occasion to observe in the 1966 case of George W. Luft
Co., Inc. vs. Ngo Guan (18 SCRA 944 [1966]) that no
serious objection was posed by the petitioner therein
since the applicant utilized the emblem Tango for no
other product than hair pomade in which petitioner
does not deal.
This brings Us back to the incidental issue raised by
petitioner which private respondent sought to belie as
regards petitioner's alleged expansion of its business. It
may be recalled that petitioner claimed that it has a
pending application for registration of the emblem
BRUT 33 for briefs (page 25, Brief for the Petitioner;
page 202, Rollo) to impress upon Us the Solomonic
wisdom imparted by Justice JBL Reyes in Sta. Ana vs.
Maliwat (24 SCRA 1018 [1968]), to the effect that
dissimilarity of goods will not preclude relief if
the junior user's goods are not remote from any
other product which the first user would be likely
to make or sell (vide, at page 1025). Commenting on
the former provision of the Trademark Law now
embodied substantially under Section 4(d) of Republic
Act No. 166, as amended, the erudite jurist opined that
the law in point does not require that the articles of
manufacture of the previous user and late user of the
mark should possess the same descriptive properties
or should fall into the same categories as to bar the
latter from registering his mark in the principal register.
(supra at page 1026).
Yet, it is equally true that as aforesaid, the
protective mantle of the Trademark Law extends
only to the goods used by the first user as
specified in the certificate of registration
following the clear message conveyed by Section
20.
How do We now reconcile the apparent conflict
between Section 4(d) which was relied upon by
Justice JBL Reyes in the Sta. Ana case and
Section 20? It would seem that Section 4(d) does
not require that the goods manufactured by the
second user be related to the goods produced by
the senior user while Section 20 limits the
exclusive right of the senior user only to those
goods
specified
in
the
certificate
of
registration. But the rule has been laid down that the
clause which comes later shall be given paramount
significance
over
an
anterior proviso upon
the
presumption that it expresses the latest and dominant
purpose. (Graham Paper Co. vs. National Newspapers
Asso. (Mo. App.) 193 S.W. 1003;Barnett vs. Merchant's
L. Ins. Co., 87 Okl. 42; State ex nel Atty. Gen. vs.
Toledo, 26 N.E., p. 1061; cited by Martin, Statutory
Construction Sixth ed., 1980 Reprinted, p. 144). It
ineluctably follows that Section 20 is controlling
and,
therefore,
private
respondent
can
appropriate its symbol for the briefs it
manufactures because as aptly remarked by
Justice
Sanchez
in Sterling
Products
International Inc. vs. Farbenfabriken Bayer (27
SCRA 1214 [1969]):
Really, if the certificate of registration were to
be deemed as including goods not specified
therein, then a situation may arise whereby an

applicant may be tempted to register a


trademark on any and all goods which his mind
may conceive even if he had never intended to
use the trademark for the said goods. We believe
that such omnibus registration is not contemplated by
our Trademark Law. (1226).
NO LIKELIHOOD OF CONFUSION, MISTAKE
OR DECEIT AS TO THE IDENTITY OR SOURCE
OF PETITIONERS AND RESPONDENTS
GOODS OR BUSINESS
A crucial issue in any trademark infringement case is
the likelihood of confusion, mistake or deceit as to the
identity, source or origin of the goods or identity of the
business as a consequence of using a certain
mark.Likelihood of confusion is admittedly a relative
term, to be determined rigidly according to the
particular (and sometimes peculiar) circumstances of
each case. Thus, in trademark cases, more than in
other kinds of litigation, precedents must be studied in
the light of each particular case. [65]
There are two types of confusion in trademark
infringement. The first is confusion of goods when an
otherwise prudent purchaser is induced to purchase
one product in the belief that he is purchasing another,
in which case defendants goods are then bought as the
plaintiffs and its poor quality reflects badly on the
plaintiffs reputation. The other is confusion of
business wherein the goods of the parties are different
but the defendants product can reasonably (though
mistakenly) be assumed to originate from the plaintiff,
thus deceiving the public into believing that there is
some connection between the plaintiff and defendant
which, in fact, does not exist.[66]
In determining the likelihood of confusion, the Court
must consider: [a] the resemblance between the
trademarks; [b] the similarity of the goods to which the
trademarks are attached; [c] the likely effect on the
purchaser and [d] the registrants express or implied
consent and other fair and equitable considerations.
Petitioners and respondents both use GALLO in the
labels of their respective cigarette and wine products.
But, as held in the following cases, the use of an
identical mark does not, by itself, lead to a legal
conclusion that there is trademark infringement:
(a) in Acoje Mining Co., Inc. vs. Director of Patent, [67] we
ordered the approval of Acoje Minings application for
registration of the trademark LOTUS for its soy sauce
even though Philippine Refining Company had prior
registration and use of such identical mark for its
edible oil which, like soy sauce, also belonged to Class
47;
(b) in Philippine Refining Co., Inc. vs. Ng Sam and
Director of Patents,[68] we upheld the Patent Directors
registration of the same trademark CAMIA for Ng Sams
ham under Class 47, despite Philippine Refining
Companys prior trademark registration and actual use
of such mark on its lard, butter, cooking oil (all of which
belonged to Class 47), abrasive detergents, polishing
materials and soaps;
(c) in Hickok Manufacturing Co., Inc. vs. Court of
Appeals and Santos Lim Bun Liong, [69] we dismissed
Hickoks petition to cancel private respondents HICKOK
trademark registration for its Marikina shoes as against
petitioners earlier registration of the same trademark
for handkerchiefs, briefs, belts and wallets;
(d) in Shell Company of the Philippines vs. Court of
Appeals,[70] in a minute resolution, we dismissed the
petition for review for lack of merit and affirmed the

Patent Offices registration of the trademark SHELL


used in the cigarettes manufactured by respondent
Fortune Tobacco Corporation, notwithstanding Shell
Companys opposition as the prior registrant of the
same trademark for its gasoline and other petroleum
products;
(e) in Esso Standard Eastern, Inc. vs. Court of Appeals,
[71]
we dismissed ESSOs complaint for trademark
infringement against United Cigarette Corporation and
allowed the latter to use the trademark ESSO for its
cigarettes, the same trademark used by ESSO for its
petroleum products, and
(f) in Canon Kabushiki Kaisha vs. Court of Appeals and
NSR Rubber Corporation,[72] we affirmed the rulings of
the Patent Office and the CA that NSR Rubber
Corporation could use the trademark CANON for its
sandals (Class 25) despite Canon Kabushiki Kaishas
prior registration and use of the same trademark for its
paints, chemical products, toner and dyestuff (Class 2).
Whether a trademark causes confusion and is likely to
deceive
the
public
hinges
on
colorable
imitation[73] which has been defined as such similarity
in form, content, words, sound, meaning, special
arrangement or general appearance of the trademark
or tradename in their overall presentation or in their
essential and substantive and distinctive parts as
would likely mislead or confuse persons in the ordinary
course of purchasing the genuine article.[74]
Jurisprudence has developed two tests in determining
similarity and likelihood of confusion in trademark
resemblance:[75]
(a) the Dominancy Test applied in Asia Brewery, Inc. vs.
Court of Appeals[76] and other cases,[77] and
(b) the Holistic or Totality Test used in Del Monte
Corporation vs. Court of Appeals [78] and its preceding
cases.[79]
The Dominancy Test focuses on the similarity of the
prevalent features of the competing trademarks which
might cause confusion or deception, and thus
infringement. If the competing trademark contains the
main, essential or dominant features of another, and
confusion or deception is likely to result, infringement
takes place. Duplication or imitation is not necessary;
nor is it necessary that the infringing label should
suggest an effort to imitate. The question is whether
the use of the marks involved is likely to cause
confusion or mistake in the mind of the public or
deceive purchasers.[80]
On the other hand, the Holistic Test requires that the
entirety of the marks in question be considered in
resolving confusing similarity. Comparison of words is
not the only determining factor. The trademarks in
their entirety as they appear in their respective labels
or hang tags must also be considered in relation to the
goods to which they are attached. The discerning eye
of the observer must focus not only on the
predominant words but also on the other features
appearing in both labels in order that he may draw his
conclusion whether one is confusingly similar to the
other.[81]
In comparing the resemblance or colorable imitation of
marks, various factors have been considered, such as
the dominant color, style, size, form, meaning of
letters, words, designs and emblems used, the
likelihood of deception of the mark or name's tendency
to confuse[82] and the commercial impression likely to
be conveyed by the trademarks if used in conjunction
with the respective goods of the parties.[83]

Applying the Dominancy and Holistic Tests, we find that


the dominant feature of the GALLO cigarette trademark
is the device of a large rooster facing left, outlined in
black against a gold background. The roosters color is
either green or red green for GALLO menthols and red
for GALLO filters. Directly below the large rooster
device is the word GALLO. The rooster device is given
prominence in the GALLO cigarette packs in terms of
size and location on the labels.[84]
The GALLO mark appears to be a fanciful and arbitrary
mark for the cigarettes as it has no relation at all to the
product but was chosen merely as a trademark due to
the fondness for fighting cocks of the son of petitioners
president. Furthermore, petitioners adopted GALLO, the
Spanish word for rooster, as a cigarette trademark to
appeal
to
one
of
their
target
markets,
the sabungeros (cockfight aficionados).[85]
Also, as admitted by respondents themselves, [86] on the
side of the GALLO cigarette packs are the words MADE
BY MIGHTY CORPORATION, thus clearly informing the
public as to the identity of the manufacturer of the
cigarettes.
On the other hand, GALLO Winerys wine and brandy
labels are diverse. In many of them, the labels are
embellished with sketches of buildings and trees,
vineyards or a bunch of grapes while in a few, one or
two small roosters facing right or facing each other
(atop the EJG crest, surrounded by leaves or ribbons),
with additional designs in green, red and yellow colors,
appear as minor features thereof.[87] Directly below or
above these sketches is the entire printed name of the
founder-owners, ERNEST & JULIO GALLO or just their
surname GALLO,[88] which appears in different fonts,
sizes,
styles
and
labels,
unlike
petitioners uniform casque-font bold-lettered GALLO
mark.
Moreover, on the labels of Gallo Winerys wines are
printed the words VINTED AND BOTTLED BY ERNEST &
JULIO GALLO, MODESTO, CALIFORNIA.[89]
The many different features like color schemes, art
works and other markings of both products drown out
the similarity between them the use of the word GALLO
a family surname for the Gallo Winerys wines and a
Spanish word for rooster for petitioners cigarettes.
WINES AND CIGARETTES ARE NOT
IDENTICAL, SIMILAR, COMPETING OR
RELATED GOODS
Confusion of goods is evident where the litigants are
actually in competition; but confusion of business may
arise between non-competing interests as well.[90]
Thus, apart from the strict application of Section 20 of
the Trademark Law and Article 6bis of the Paris
Convention which proscribe trademark infringement
not only of goods specified in the certificate of
registration but also of identical or similar goods, we
have also uniformly recognized and applied the
modern concept of related goods. [91] Simply stated,
when goods are so related that the public may be, or is
actually, deceived and misled that they come from the
same maker or manufacturer, trademark infringement
occurs.[92]
Non-competing goods may be those which, though
they are not in actual competition, are so related to
each other that it can reasonably be assumed that they
originate from one manufacturer, in which case,
confusion of business can arise out of the use of similar
marks.[93] They may also be those which, being entirely
unrelated, cannot be assumed to have a common

source; hence, there is no confusion of business, even


though similar marks are used. [94] Thus, there is no
trademark infringement if the public does not expect
the plaintiff to make or sell the same class of goods as
those made or sold by the defendant.[95]
In resolving whether goods are related, [96] several
factors come into play:
(a) the business (and its location) to which the goods
belong
(b) the class of product to which the goods belong
(c) the product's quality, quantity, or size, including the
nature of the package, wrapper or container [97]
(d) the nature and cost of the articles[98]
(e) the descriptive properties, physical attributes or
essential characteristics with reference to their form,
composition, texture or quality
(f) the purpose of the goods[99]
(g) whether the article is bought for immediate
consumption,[100] that is, day-to-day household items[101]
(h) the fields of manufacture[102]
(i) the conditions under which the article is usually
purchased[103] and
(j) the channels of trade through which the goods flow,
[104]
how they are distributed, marketed, displayed and
sold.[105]
The wisdom of this approach is its recognition that
each trademark infringement case presents its own
unique set of facts. No single factor is preeminent, nor
can the presence or absence of one determine, without
analysis of the others, the outcome of an infringement
suit. Rather, the court is required to sift the evidence
relevant to each of the criteria. This requires that the
entire panoply of elements constituting the relevant
factual landscape be comprehensively examined. [106] It
is a weighing and balancing process. With reference to
this ultimate question, and from a balancing of the
determinations reached on all of the factors, a
conclusion is reached whether the parties have a right
to the relief sought.[107]
A very important circumstance though is whether there
exists a likelihood that an appreciable number of
ordinarily prudent purchasers will be misled, or simply
confused, as to the source of the goods in question.
[108]
The purchaser is not the completely unwary
consumer but is the ordinarily intelligent buyer
considering the type of product involved. [109] He is
accustomed to buy, and therefore to some extent
familiar with, the goods in question. The test of
fraudulent simulation is to be found in the likelihood of
the deception of some persons in some measure
acquainted with an established design and desirous of
purchasing the commodity with which that design has
been associated. The test is not found in the deception,
or the possibility of deception, of the person who
knows nothing about the design which has been
counterfeited, and who must be indifferent between
that and the other. The simulation, in order to be
objectionable, must be such as appears likely to
mislead the ordinary intelligent buyer who has a need
to supply and is familiar with the article that he seeks
to purchase.[110]
Hence, in the adjudication of trademark infringement,
we give due regard to the goods usual purchasers
character, attitude, habits, age, training and
education. [111]
Applying these legal precepts to the present case,
petitioners use of the GALLO cigarette trademark is not
likely to cause confusion or mistake, or to deceive the

ordinarily intelligent buyer of either wines or cigarettes


or both as to the identity of the goods, their source and
origin, or identity of the business of petitioners and
respondents.
Obviously, wines and cigarettes are not identical or
competing products. Neither do they belong to the
same class of goods. Respondents GALLO wines belong
to Class 33 under Rule 84[a] Chapter III, Part II of the
Rules of Practice in Trademark Cases while petitioners
GALLO cigarettes fall under Class 34.
We are mindful that product classification alone cannot
serve as the decisive factor in the resolution of whether
or
not
wines
and
cigarettes
are
related
goods. Emphasis should be on the similarity of the
products involved and not on the arbitrary
classification or general description of their properties
or characteristics. But the mere fact that one person
has adopted and used a particular trademark for his
goods does not prevent the adoption and use of the
same trademark by others on articles of a different
description. [112]
Both the Makati RTC and the CA held that wines and
cigarettes are related products because: (1) they are
related forms of vice, harmful when taken in excess,
and used for pleasure and relaxation and (2) they are
grouped or classified in the same section of
supermarkets and groceries.
We find these premises patently insufficient and too
arbitrary to support the legal conclusion that wines and
cigarettes
are
related
products
within
the
contemplation of the Trademark Law and the Paris
Convention.
First, anything - not only wines and cigarettes can be
used for pleasure and relaxation and can be harmful
when taken in excess. Indeed, it would be a grave
abuse of discretion to treat wines and cigarettes as
similar or related products likely to cause confusion just
because they are pleasure-giving, relaxing or
potentially harmful. Such reasoning makes no sense.
Second, it is common knowledge that supermarkets
sell an infinite variety of wholly unrelated products and
the goods here involved, wines and cigarettes, have
nothing whatsoever in common with respect to their
essential characteristics, quality, quantity, size,
including the nature of their packages, wrappers or
containers.[113]
Accordingly, the U.S. patent office and courts have
consistently held that the mere fact that goods are sold
in one store under the same roof does not
automatically mean that buyers are likely to be
confused as to the goods respective sources,
connections or sponsorships. The fact that different
products are available in the same store is an
insufficient standard, in and of itself, to warrant a
finding of likelihood of confusion.[114]
In this regard, we adopted the Director of Patents
finding in Philippine Refining Co., Inc. vs. Ng Sam and
the Director of Patents:[115]
In his decision, the Director of Patents enumerated the
factors that set respondents products apart from the
goods of petitioner. He opined and we quote:
I have taken into account such factors as probable
purchaser attitude and habits, marketing activities,
retail outlets, and commercial impression likely to be
conveyed by the trademarks if used in conjunction with
the respective goods of the parties, I believe that
ham on one hand, and lard, butter, oil, and soap
on the other are products that would not move in

the same manner through the same channels of


trade. They pertain to unrelated fields of
manufacture, might be distributed and marketed
under dissimilar conditions, and are displayed
separately even though they frequently may be
sold
through
the
same
retail
food
establishments. Opposers products are ordinary dayto-day household items whereas ham is not necessarily
so. Thus, the goods of the parties are not of a character
which purchasers would likely attribute to a common
origin.
The observations and conclusion of the Director of
Patents are correct. The particular goods of the parties
are so unrelated that consumers, would not, in any
probability mistake one as the source of origin of the
product of the other. (Emphasis supplied).
The same is true in the present case. Wines and
cigarettes are non-competing and are totally unrelated
products not likely to cause confusion vis--vis the
goods or the business of the petitioners and
respondents.
Wines are bottled and consumed by drinking while
cigarettes are packed in cartons or packages and
smoked. There is a whale of a difference between their
descriptive properties, physical attributes or essential
characteristics like form, composition, texture and
quality.
GALLO cigarettes are inexpensive items while GALLO
wines are not. GALLO wines are patronized by middleto-high-income earners while GALLO cigarettes appeal
only to simple folks like farmers, fishermen, laborers
and other low-income workers.[116] Indeed, the big price
difference of these two products is an important factor
in proving that they are in fact unrelated and that they
travel in different channels of trade. There is a distinct
price segmentation based on vastly different social
classes of purchasers.[117]
GALLO cigarettes and GALLO wines are not sold
through the same channels of trade. GALLO cigarettes
are Philippine-made and petitioners neither claim nor
pass off their goods as imported or emanating from
Gallo Winery. GALLO cigarettes are distributed,
marketed and sold through ambulant and sidewalk
vendors, small local sari-sari stores and grocery stores
in Philippine rural areas, mainly in Misamis Oriental,
Pangasinan, Bohol, and Cebu.[118] On the other hand,
GALLO wines are imported, distributed and sold in the
Philippines through Gallo Winerys exclusive contracts
with a domestic entity, which is currently Andresons.
By respondents own testimonial evidence, GALLO
wines are sold in hotels, expensive bars and
restaurants, and high-end grocery stores and
supermarkets, not through sari-sari stores or ambulant
vendors.[119]
Furthermore, the Makati RTC and the CA erred in
relying on Carling Brewing Company vs. Philip Morris,
Inc.[120] to support its finding that GALLO wines and
GALLO cigarettes are related goods. The courts a
quoshould have taken into consideration the
subsequent case of IDV North America, Inc. and R & A
Bailey Co. Limited vs. S & M Brands, Inc.:[121]
IDV correctly acknowledges, however, that there is
no per se rule that the use of the same mark on alcohol
and tobacco products always will result in a likelihood
of confusion. Nonetheless, IDV relies heavily on the
decision in John Walker & Sons, Ltd. vs. Tampa Cigar
Co., 124 F. Supp. 254, 256 (S.D. Fla. 1954), affd, 222 F.
2d 460 (5th Cir. 1955), wherein the court enjoined the

use of the mark JOHNNIE WALKER on cigars because


the fame of the plaintiffs mark for scotch whiskey and
because the plaintiff advertised its scotch whiskey on,
or in connection with tobacco products. The court,
in John Walker & Sons, placed great significance
on the finding that the infringers use was a
deliberate attempt to capitalize on the senior
marks fame. Id. At 256. IDV also relies on Carling
Brewing Co. v. Philip Morris, Inc., 297 F. Supp.
1330, 1338 (N.D. Ga. 1968), in which the court
enjoined the defendants use of the mark BLACK
LABEL for cigarettes because it was likely to
cause confusion with the plaintiffs well-known
mark BLACK LABEL for beer.
xxx xxx xxx
Those decisions, however, must be considered in
perspective of the principle that tobacco
products and alcohol products should be
considered related only in cases involving
special circumstances. Schenley Distillers, Inc. v.
General Cigar Co., 57C.C.P.A. 1213, 427 F. 2d
783, 785 (1970). The presence of special
circumstances has been found to exist where
there is a finding of unfair competition or where
a
famous
or
well-known
mark
is
involved and there is a demonstrated intent to
capitalize on that mark. For example, in John Walker
& Sons, the court was persuaded to find a relationship
between products, and hence a likelihood of confusion,
because of the plaintiffs long use and extensive
advertising of its mark and placed great emphasis on
the fact that the defendant used the trademark Johnnie
Walker with full knowledge of its fame and reputation
and with the intention of taking advantage
thereof. John Walker & Sons, 124 F. Supp. At 256; see
Mckesson & Robbins, Inc. v. P. Lorillard Co., 1959 WL
5894, 120 U.S.P.Q. 306, 307 (1959) (holding that the
decision in John Walker & Sons was merely the law on
the particular case based upon its own peculiar
facts); see also Alfred Dunhill, 350 F. Supp. At 1363
(defendants adoption of Dunhill mark was not
innocent). However, in Schenley, the court noted that
the relation between tobacco and whiskey products is
significant where a widely known arbitrary mark has
long been used for diversified products emanating from
a single source and a newcomer seeks to use the same
mark on unrelated goods. Schenley, 427 F.2d. at 785.
Significantly, in Schenley, the court looked at the
industry practice and the facts of the case in order to
determine the nature and extent of the relationship
between the mark on the tobacco product and the
mark on the alcohol product.
The record here establishes conclusively that IDV has
never advertised BAILEYS liqueurs in conjunction with
tobacco or tobacco accessory products and that IDV
has no intent to do so. And, unlike the defendant
in Dunhill, S & M Brands does not market bar
accessories, or liqueur related products, with its
cigarettes. The advertising and promotional materials
presented a trial in this action demonstrate a complete
lack of affiliation between the tobacco and liqueur
products bearing the marks here at issue.
xxx xxx xxx
Of equal significance, it is undisputed that S & M
Brands had no intent, by adopting the family
name Baileys as the mark for its cigarettes, to
capitalize upon the fame of the BAILEYS mark for
liqueurs. See Schenley, 427 F. 2d at 785.Moreover, as

will be discussed below, and as found


in Mckesson & Robbins, the survey evidence
refutes the contention that cigarettes and
alcoholic beverages are so intimately associated
in the public mind that they cannot under any
circumstances be sold under the same mark
without causing confusion. See Mckesson &
Robbins, 120 U.S.P.Q. at 308.
Taken as a whole, the evidence here demonstrates the
absence of the special circumstances in which courts
have found a relationship between tobacco and alcohol
products sufficient to tip the similarity of goods
analysis in favor of the protected mark and against the
allegedly infringing mark. It is true that BAILEYS
liqueur, the worlds best selling liqueur and the
second best selling in the United States, is a
well-known product. That fact alone, however, is
insufficient to invoke the special circumstances
connection here where so much other evidence
and so many other factors disprove a likelihood
of confusion. The similarity of products analysis,
therefore, augers against finding that there is a
likelihood of confusion. (Emphasis supplied).
In short, tobacco and alcohol products may be
considered related only in cases involving special
circumstances which exist only if a famous mark is
involved and there is a demonstrated intent to
capitalize on it. Both of these are absent in the present
case.
THE GALLO WINE TRADEMARK IS NOT A
WELL-KNOWN MARK IN THE CONTEXT
OF THE PARIS CONVENTION IN THIS CASE
SINCE WINES AND CIGARETTES ARE NOT
IDENTICAL OR SIMILAR GOODS
First, the records bear out that most of the trademark
registrations took place in the late 1980s and the
1990s, that is, after Tobacco Industries use of the
GALLO cigarette trademark in 1973 and petitioners use
of the same mark in 1984.
GALLO wines and GALLO cigarettes are neither the
same, identical, similar nor related goods, a requisite
element under both the Trademark Law and the Paris
Convention.
Second, the GALLO trademark cannot be considered a
strong and distinct mark in the Philippines.
Respondents do not dispute the documentary evidence
that aside from Gallo Winerys GALLO trademark
registration, the Bureau of Patents, Trademarks and
Technology Transfer also issued on September 4, 1992
Certificate of Registration No. 53356 under the
Principal Register approving Productos Alimenticios
Gallo, S.As April 19, 1990 application for GALLO
trademark registration and use for its noodles,
prepared food or canned noodles, ready or canned
sauces for noodles, semolina, wheat flour and bread
crumbs, pastry, confectionery, ice cream, honey,
molasses syrup, yeast, baking powder, salt, mustard,
vinegar, species and ice.[122]
Third and most important, pursuant to our ruling
in Canon Kabushiki Kaisha vs. Court of Appeals and
NSR
Rubber
Corporation,[123] GALLO
cannot
be
considered
a
well-known
mark
within
the
contemplation and protection of the Paris Convention
in this case since wines and cigarettes are not identical
or similar goods:
We agree with public respondents that the controlling
doctrine with respect to the applicability of Article 8 of
the Paris Convention is that established in Kabushi

Kaisha Isetan vs. Intermediate Appellate Court (203


SCRA 59 [1991]). As pointed out by the BPTTT:
Regarding the applicability of Article 8 of the
Paris Convention, this Office believes that there
is no automatic protection afforded an entity
whose tradename is alleged to have been
infringed through the use of that name as a
trademark by a local entity.
In Kabushiki Kaisha Isetan vs. The Intermediate
Appellate Court, et. al., G.R. No. 75420, 15 November
1991, the Honorable Supreme Court held that:
The Paris Convention for the Protection of
Industrial Property does not automatically
exclude all countries of the world which have
signed it from using a tradename which happens
to be used in one country. To illustrate if a
taxicab or bus company in a town in the United
Kingdom or India happens to use the tradename
Rapid Transportation, it does not necessarily
follow that Rapid can no longer be registered in
Uganda, Fiji, or the Philippines.
This office is not unmindful that in (sic) the Treaty of
Paris for the Protection of Intellectual Property
regarding well-known marks and possible application
thereof in this case. Petitioner, as this office sees it, is
trying to seek refuge under its protective mantle,
claiming that the subject mark is well known in this
country at the time the then application of NSR Rubber
was filed.
However, the then Minister of Trade and Industry, the
Hon. Roberto V. Ongpin, issued a memorandum dated
25 October 1983 to the Director of Patents, a set of
guidelines in the implementation of Article 6 bis of
the Treaty of Paris. These conditions are:
a) the mark must be internationally known;
b) the subject of the right must be a trademark, not a
patent or copyright or anything else;
c) the mark must be for use in the same or similar
kinds of goods; and
d) the person claiming must be the owner of the
mark (The Parties Convention Commentary on the
Paris Convention. Article by Dr. Bogsch, Director
General
of
the
World
Intellectual
Property
Organization, Geneva, Switzerland, 1985)
From the set of facts found in the records, it is ruled
that the Petitioner failed to comply with the third
requirement of the said memorandum that is the
mark must be for use in the same or similar
kinds of goods. The Petitioner is using the mark
CANON for products belonging to class 2 (paints,
chemical products) while the Respondent is
using the same mark for sandals (class 25).
Hence, Petitioner's contention that its mark is
well-known at the time the Respondent filed its
application
for
the
same
mark
should
fail. (Emphasis supplied.)
Consent of the Registrant and
Other air, Just and Equitable
Considerations
Each trademark infringement case presents a unique
problem which must be answered by weighing the
conflicting interests of the litigants.[124]
Respondents claim that GALLO wines and GALLO
cigarettes flow through the same channels of trade,
that is, retail trade. If respondents assertion is true,
then both goods co-existed peacefully for a
considerable period of time. It took respondents almost
20 years to know about the existence of GALLO

cigarettes and sue petitioners for trademark


infringement. Given, on one hand, the long period of
time that petitioners were engaged in the manufacture,
marketing, distribution and sale of GALLO cigarettes
and, on the other, respondents delay in enforcing their
rights (not to mention implied consent, acquiescence
or negligence) we hold that equity, justice and fairness
require us to rule in favor of petitioners. The scales of
conscience and reason tip far more readily in favor of
petitioners than respondents.
Moreover, there exists no evidence that petitioners
employed malice, bad faith or fraud, or that they
intended to capitalize on respondents goodwill in
adopting the GALLO mark for their cigarettes which are
totally unrelated to respondents GALLO wines. Thus,
we rule out trademark infringement on the part of
petitioners.
PETITIONERS ARE ALSO NOT LIABLE
FOR UNFAIR COMPETITION
Under Section 29 of the Trademark Law, any person
who employs deception or any other means contrary to
good faith by which he passes off the goods
manufactured by him or in which he deals, or his
business, or services for those of the one having
established such goodwill, or who commits any acts
calculated to produce said result, is guilty of unfair
competition. It includes the following acts:
(a) Any person, who in selling his goods shall give them
the general appearance of goods of another
manufacturer or dealer, either as to the goods
themselves or in the wrapping of the packages in
which they are contained, or the devices or words
thereon, or in any other feature of their appearance,
which would be likely to influence purchasers to
believe that the goods offered are those of a
manufacturer or dealer other than the actual
manufacturer or dealer, or who otherwise clothes the
goods with such appearance as shall deceive the public
and defraud another of his legitimate trade, or any
subsequent vendor of such goods or any agent of any
vendor engaged in selling such goods with a like
purpose;
(b) Any person who by any artifice, or device, or who
employs any other means calculated to induce the
false belief that such person is offering the services of
another who has identified such services in the mind of
the public;
(c) Any person who shall make any false statement in
the course of trade or who shall commit any other act
contrary to good faith of a nature calculated to
discredit the goods, business or services of another.
The universal test question is whether the public is
likely to be deceived. Nothing less than conduct
tending to pass off one mans goods or business as that
of another constitutes unfair competition. Actual or
probable deception and confusion on the part of
customers by reason of defendants practices must
always appear.[125] On this score, we find that
petitioners never attempted to pass off their cigarettes
as those of respondents.There is no evidence of bad
faith or fraud imputable to petitioners in using their
GALLO cigarette mark.
All told, after applying all the tests provided by the
governing laws as well as those recognized by
jurisprudence, we conclude that petitioners are not
liable for trademark infringement, unfair competition or
damages.

WHEREFORE, finding the petition for review


meritorious, the same is hereby GRANTED. The
questioned decision and resolution of the Court of
Appeals in CA-G.R. CV No. 65175 and the November
26, 1998 decision and the June 24, 1999 order of the
Regional Trial Court of Makati, Branch 57 in Civil Case
No. 93-850 are hereby REVERSED and SET ASIDE and
the complaint against petitioners DISMISSED.
Costs against respondents.
SO ORDERED.
Vitug, (Chairman), and Sandoval-Gutierrez, JJ., concur.
Carpio-Morales, J., no part.
Republic of the Philippines
Supreme Court
Manila
SECOND DIVISION
PHIL PHARMAWEALTH, INC.,
Petitioner,

- versus -

PFIZER, INC. and PFIZER (PHIL.) INC.,


Respondents.

x-------------------------------------------------x
DECISION
PERALTA, J.:
Before the Court is a petition for review
on certiorari seeking to annul and set aside the
Resolutions dated January 18, 2005[1] and April 11,
2005[2] by the Court of Appeals (CA) in CA-G.R. SP No.
82734.
The instant case arose from a Complaint [3] for patent
infringement
filed
against
petitioner
Phil
Pharmawealth, Inc. by respondent companies, Pfizer,
Inc. and Pfizer (Phil.), Inc., with the Bureau of Legal
Affairs of the Intellectual Property Office (BLA-IPO). The
Complaint alleged as follows:
xxxx
6. Pfizer is the registered owner of Philippine Letters
Patent No. 21116 (the Patent) which was issued by this
Honorable Office on July 16, 1987. The patent is valid
until July 16, 2004. The claims of this Patent are
directed to a method of increasing the effectiveness of
a beta-lactam antibiotic in a mammalian subject, which

comprises co-administering to said subject a betalactam antibiotic effectiveness increasing amount of a


compound of the formula IA. The scope of the claims of
the Patent extends to a combination of penicillin such
as ampicillin sodium and beta-lactam antibiotic like
sulbactam sodium.
7. Patent No. 21116 thus covers ampicillin
sodium/sulbactam
sodium
(hereafter
Sulbactam
Ampicillin). Ampicillin sodium is a specific example of
the broad beta-lactam antibiotic disclosed and claimed
in the Patent. It is the compound which efficacy is
being enhanced by co-administering the same with
sulbactam sodium. Sulbactam sodium, on the other
hand, is a specific compound of the formula IA
disclosed and claimed in the Patent.
8. Pfizer is marketing Sulbactam Ampicillin under the
brand name Unasyn. Pfizer's Unasyn products, which
G.R. No.
come
167715
in oral and IV formulas, are covered by
Certificates of Product Registration (CPR) issued by the
Present:
Bureau of Food and Drugs (BFAD) under the name of
complainants. The sole and exclusive distributor of
CARPIO,
Unasyn products in the Philippines is Zuellig Pharma
NACHURA,
Corporation, pursuant to a Distribution Services
PERALTA,
Agreement it executed with Pfizer Phils. on January 23,
ABAD,2001.
MENDOZA,
9. Sometime in January and February 2003,
Promulgated:
complainants came to know that respondent [herein
petitioner] submitted bids for the supply of Sulbactam
November
Ampicillin
17, 2010
to several hospitals without the consent of
complainants and in violation of the complainants'
intellectual property rights. x x x
xxxx
10. Complainants thus wrote the above hospitals and
demanded that the latter immediately cease and desist
from accepting bids for the supply [of] Sulbactam
Ampicillin or awarding the same to entities other than
complainants. Complainants, in the same letters sent
through undersigned counsel, also demanded that
respondent immediately withdraw its bids to supply
Sulbactam Ampicillin.
11. In gross and evident bad faith, respondent and the
hospitals named in paragraph 9 hereof, willfully
ignored complainants' just, plain and valid demands,
refused to comply therewith and continued to infringe
the Patent, all to the damage and prejudice of
complainants. As registered owner of the Patent, Pfizer
is entitled to protection under Section 76 of the IP
Code.
x x x x[4]
Respondents prayed for permanent injunction,
damages and the forfeiture and impounding of the
alleged infringing products. They also asked for the
issuance of a temporary restraining order and a
preliminary injunction that would prevent herein
petitioner, its agents, representatives and assigns,
from importing, distributing, selling or offering the
subject product for sale to any entity in the Philippines.
In an Order[5] dated July 15, 2003 the BLA-IPO issued a
preliminary injunction which was effective for ninety
days from petitioner's receipt of the said Order.
Prior to the expiration of the ninety-day period,
respondents filed a Motion for Extension of Writ of

Preliminary Injunction[6] which, however, was denied by


the BLA-IPO in an Order[7] dated October 15, 2003.
Respondents filed a Motion for Reconsideration but the
same was also denied by the BLA-IPO in a
Resolution[8] dated January 23, 2004.

issued by the CA on the same basis that the patent


right sought to be protected has been extinguished
due to the lapse of the patent license and on the
ground that the CA has no jurisdiction to review the
order of the BLA-IPO as said jurisdiction is vested by
law in the Office of the Director General of the IPO.

Respondents then filed a special civil action


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

On April 11, 2005, the CA rendered its presently


assailed Resolution denying the Motion to Dismiss,
dated November 16, 2004, and the motion for
reconsideration, as well as Motion to Dismiss, both
dated February 7, 2005.

While the case was pending before the CA,


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

a) Can an injunctive relief be issued based on an action


of patent infringement when the patent allegedly
infringed has already lapsed?

On August 24, 2004, the RTC of Makati City issued an


Order[10] directing the issuance of a temporary
restraining order conditioned upon respondents' filing
of a bond.

In the first issue raised, petitioner argues that


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

In a subsequent Order [11] dated April 6, 2005, the same


RTC directed the issuance of a writ of preliminary
injunction prohibiting and restraining [petitioner], its
agents, representatives and assigns from importing,
distributing or selling Sulbactam Ampicillin products to
any entity in the Philippines.
Meanwhile, on November 16, 2004, petitioner filed a
Motion to Dismiss[12] the petition filed with the CA on
the ground of forum shopping, contending that the
case filed with the RTC has the same objective as the
petition filed with the CA, which is to obtain an
injunction prohibiting petitioner from importing,
distributing and selling Sulbactam Ampicillin products.
On January 18, 2005, the CA issued its questioned
Resolution[13] approving
the
bond
posted
by
respondents pursuant to the Resolution issued by the
appellate court on March 23, 2004 which directed the
issuance of a temporary restraining order conditioned
upon the filing of a bond. On even date, the CA issued
a temporary restraining order [14] which prohibited
petitioner from importing, distributing, selling or
offering for sale Sulbactam Ampicillin products to any
hospital or to any other entity in the Philippines, or
from infringing Pfizer Inc.'s Philippine Patent No. 21116
and impounding all the sales invoices and other
documents evidencing sales by [petitioner] of
Sulbactam Ampicillin products.
On February 7, 2005, petitioner again filed a Motion to
Dismiss[15] the case for being moot and academic,
contending that respondents' patent had already
lapsed. In the same manner, petitioner also moved for
the reconsideration of the temporary restraining order

Hence, the present petition raising the following issues:

b) What tribunal has jurisdiction to review the decisions


of the Director of Legal Affairs of the Intellectual
Property Office?
c) Is there forum shopping when a party files two
actions with two seemingly different causes of action
and yet pray for the same relief?[16]

The Court agrees.


Section 37 of Republic Act No. (RA) 165, [17] which was
the governing law at the time of the issuance of
respondents' patent, provides:
Section 37. Rights of patentees. A patentee shall
have the exclusive right to make, use and sell the
patented machine, article or product, and to use the
patented process for the purpose of industry or
commerce,
throughout
the
territory
of
the
Philippines for the term of the patent; and such
making, using, or selling by any person without the
authorization of the patentee constitutes infringement
of the patent.[18]
It is clear from the above-quoted provision of law that
the exclusive right of a patentee to make, use and sell
a patented product, article or process exists only
during the term of the patent. In the instant case,
Philippine Letters Patent No. 21116, which was the
basis of respondents in filing their complaint with the
BLA-IPO, was issued on July 16, 1987. This fact was
admitted by respondents themselves in their
complaint. They also admitted that the validity of the
said patent is until July 16, 2004, which is in conformity
with Section 21 of RA 165, providing that the term of a
patent shall be seventeen (17) years from the date of
issuance thereof. Section 4, Rule 129 of the Rules of

Court provides that an admission, verbal or written,


made by a party in the course of the proceedings in the
same case, does not require proof and that the
admission may be contradicted only by showing that it
was made through palpable mistake or that no such
admission was made. In the present case, there is no
dispute as to respondents' admission that the term of
their patent expired on July 16, 2004. Neither is there
evidence to show that their admission was made
through palpable mistake. Hence, contrary to the
pronouncement of the CA, there is no longer any need
to present evidence on the issue of expiration of
respondents' patent.

the only issue raised therein is the propriety of


extending the writ of preliminary injunction issued by
the BLA-IPO. Since the patent which was the basis for
issuing the injunction, was no longer valid, any issue as
to the propriety of extending the life of the injunction
was already rendered moot and academic.

On the basis of the foregoing, the Court agrees with


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

It is true that under Section 7(b) of RA 8293, otherwise


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

Section 3, Rule 58, of the Rules of Court lays down the


requirements for the issuance of a writ of preliminary
injunction, viz:
(a) That the applicant is entitled to the relief
demanded, and the whole or part of such relief consists
in restraining the commission or continuance of the
acts complained of, or in requiring the performance of
an act or acts, either for a limited period or
perpetually;
(b) That the commission, continuance or nonperformance of the act or acts complained of during
the litigation would probably work injustice to the
applicant; or
(c) That a party, court, or agency or a person is
doing, threatening, or attempting to do, or is procuring
or suffering to be done, some act or acts probably in
violation of the rights of the applicant respecting the
subject of the action or proceeding, and tending to
render the judgment ineffectual.
In this connection, pertinent portions of Section 5, Rule
58 of the same Rules provide that if the matter is of
extreme urgency and the applicant will suffer grave
injustice and irreparable injury, a temporary restraining
order may be issued ex parte.
From the foregoing, it can be inferred that two
requisites must exist to warrant the issuance of an
injunctive relief, namely: (1) the existence of a clear
and unmistakable right that must be protected; and (2)
an urgent and paramount necessity for the writ to
prevent serious damage.[19]
In the instant case, it is clear that when the CA issued
its January 18, 2005 Resolution approving the bond
filed by respondents, the latter no longer had a right
that must be protected, considering that Philippine
Letters Patent No. 21116 which was issued to them
already expired on July 16, 2004. Hence, the issuance
by the CA of a temporary restraining order in favor of
the respondents is not proper.
In fact, the CA should have granted petitioner's motion
to dismiss the petition for certiorari filed before it as

As to the second issue raised, the Court, is not


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

RA 8293 is silent with respect to any remedy available


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

from exercising its jurisdiction until after an


administrative agency has determined some question
or some aspect of some question arising in the
proceeding before the court. It applies where the claim
is originally cognizable in the courts and comes into
play whenever enforcement of the claim requires the
resolution of issues which, under a regulatory scheme,
has been placed within the special competence of an
administrative body; in such case, the judicial process
is suspended pending referral of such issues to the
administrative body for its view.[22]
Based on the foregoing, the Court finds that
respondents' initial filing of their complaint with the
BLA-IPO, instead of the regular courts, is in keeping
with the doctrine of primary jurisdiction owing to the
fact that the determination of the basic issue of
whether petitioner violated respondents' patent rights
requires the exercise by the IPO of sound
administrative discretion which is based on the
agency's
special
competence,
knowledge
and
experience.
However, the propriety of extending the life of the writ
of preliminary injunction issued by the BLA-IPO in the
exercise of its quasi-judicial power is no longer a
matter that falls within the jurisdiction of the said
administrative agency, particularly that of its Director
General. The resolution of this issue which was raised
before the CA does not demand the exercise by the IPO
of sound administrative discretion requiring special
knowledge, experience and services in determining
technical and intricate matters of fact. It is settled that
one of the exceptions to the doctrine of primary
jurisdiction is where the question involved is purely
legal and will ultimately have to be decided by the
courts of justice.[23] This is the case with respect to the
issue raised in the petition filed with the CA.
Moreover, as discussed earlier, RA 8293 and its
implementing rules and regulations do not provide for
a procedural remedy to question interlocutory orders
issued by the BLA-IPO. In this regard, it bears to
reiterate that the judicial power of the courts, as
provided for under the Constitution, includes the
authority of the courts to determine in an appropriate
action the validity of the acts of the political
departments.[24] Judicial power also includes the duty of
the courts of justice to settle actual controversies
involving rights which are legally demandable and
enforceable, and to determine whether or not there has
been a grave abuse of discretion amounting to lack or
excess of jurisdiction on the part of any branch or
instrumentality of the Government.[25] Hence, the CA,
and not the IPO Director General, has jurisdiction to
determine whether the BLA-IPO committed grave
abuse of discretion in denying respondents' motion to
extend the effectivity of the writ of preliminary
injunction which the said office earlier issued.
Lastly, petitioner avers that respondents are guilty of
forum shopping for having filed separate actions before
the IPO and the RTC praying for the same relief.
The Court agrees.
Forum shopping is defined as the act of a party against
whom an adverse judgment has been rendered in one
forum, of seeking another (and possibly favorable)
opinion in another forum (other than by appeal or the

special civil action of certiorari), or the institution of


two (2) or more actions or proceedings grounded on
the same cause on the supposition that one or the
other court would make a favorable disposition.[26]
The elements of forum shopping are: (a) identity of
parties, or at least such parties that represent the
same interests in both actions; (b) identity of rights
asserted and reliefs prayed for, the reliefs being
founded on the same facts; (c) identity of the two
preceding particulars, such that any judgment
rendered in the other action will, regardless of which
party is successful, amount to res judicata in the action
under consideration.[27]
There is no question as to the identity of parties in the
complaints filed with the IPO and the RTC.
Respondents argue that they cannot be held guilty of
forum shopping because their complaints are based on
different causes of action as shown by the fact that the
said complaints are founded on violations of different
patents.
The Court is not persuaded.
Section 2, Rule 2 of the Rules of Court defines a cause
of action as the act or omission by which a party
violates a right of another. In the instant case,
respondents' cause of action in their complaint filed
with the IPO is the alleged act of petitioner in
importing, distributing, selling or offering for sale
Sulbactam Ampicillin products, acts that are
supposedly violative of respondents' right to the
exclusive sale of the said products which are covered
by the latter's patent. However, a careful reading of the
complaint filed with the RTC of Makati City would show
that respondents have the same cause of action as in
their complaint filed with the IPO. They claim that they
have the exclusive right to make, use and sell
Sulbactam Ampicillin products and that petitioner
violated this right. Thus, it does not matter that the
patents upon which the complaints were based are
different. The fact remains that in both complaints the
rights violated and the acts violative of such rights are
identical.
In fact, respondents seek substantially the same reliefs
in their separate complaints with the IPO and the RTC
for the purpose of accomplishing the same objective.
It is settled by this Court in several cases that the filing
by a party of two apparently different actions but with
the same objective constitutes forum shopping.[28] The
Court discussed this species of forum shopping as
follows:
Very simply stated, the original complaint in the
court a quo which gave rise to the instant petition was
filed by the buyer (herein private respondent and his
predecessors-in-interest) against the seller (herein
petitioners) to enforce the alleged perfected sale of
real estate. On the other hand, the complaint in the
Second Case seeks to declare such purported sale
involving the same real property as unenforceable as
against the Bank, which is the petitioner herein. In
other words, in the Second Case, the majority
stockholders, in representation of the Bank, are
seeking to accomplish what the Bank itself failed to do
in the original case in the trial court. In brief, the

objective or the relief being sought, though


worded differently, is the same, namely, to
enable the petitioner Bank to escape from the
obligation to sell the property to respondent.[29]
In Danville Maritime, Inc. v. Commission on Audit,
[30]
the Court ruled as follows:
In the attempt to make the two actions appear to be
different, petitioner impleaded different respondents
therein PNOC in the case before the lower court and
the COA in the case before this Court and sought what
seems to be different reliefs. Petitioner asks this Court
to set aside the questioned letter-directive of the COA
dated October 10, 1988 and to direct said body to
approve the Memorandum of Agreement entered into
by and between the PNOC and petitioner, while in the
complaint before the lower court petitioner seeks to
enjoin the PNOC from conducting a rebidding and from
selling to other parties the vessel T/T Andres Bonifacio,
and for an extension of time for it to comply with the
paragraph 1 of the memorandum of agreement and
damages. One can see that although the relief
prayed for in the two (2) actions are ostensibly
different, the ultimate objective in both actions
is the same, that is, the approval of the sale of
vessel in favor of petitioner, and to overturn the
letter directive of the COA of October 10,
1988 disapproving the sale.[31]

(iii) ordering the condemnation, seizure or forfeiture


of respondent's infringing goods or products, wherever
they may be found, including the materials and
implements used in the commission of infringement, to
be disposed of in such manner as may be deemed
appropriate by this Honorable Office; and
(iv) making the injunction permanent.[32]
In an almost identical manner, respondents prayed for
the following in their complaint filed with the RTC:
(a) Immediately upon the filing of this action, issue
an ex parte order:
(1) temporarily restraining Pharmawealth, its agents,
representatives
and
assigns
from importing,
distributing, selling or offering for sale infringing
sulbactam ampicillin products to various government
and private hospitals or to any other entity in
the Philippines, or from otherwise infringing Pfizer Inc.'s
Philippine Patent No. 26810.
(2) impounding all the sales invoices and other
documents evidencing sales by pharmawealth of
sulbactam ampicillin products; and
(3) disposing of the infringing goods outside the
channels of commerce.
(b) After hearing, issue a writ of preliminary injunction:

In the instant case, the prayer of respondents in their


complaint filed with the IPO is as follows:
A. Immediately upon the filing of this action, issue
an ex
parte order
(a)
temporarily
restraining
respondent, its agents, representatives and assigns
from importing, distributing, selling or offering for sale
Sulbactam Ampicillin products to the hospitals named
in paragraph 9 of this Complaint or to any other entity
in the Philippines, or from otherwise infringing Pfizer
Inc.'s Philippine Patent No. 21116; and (b) impounding
all the sales invoices and other documents evidencing
sales by respondent of Sulbactam Ampicillin products.
B. After hearing, issue a writ of preliminary injunction
enjoining respondent, its agents, representatives and
assigns from importing, distributing, selling or offering
for sale Sulbactam Ampicillin products to the hospitals
named in paragraph 9 of the Complaint or to any other
entity in the Philippines, or from otherwise infringing
Pfizer Inc.'s Philippine Patent No. 21116; and
C. After trial, render judgment:
(i)
declaring that respondent has infringed
Pfizer Inc.'s Philippine Patent No. 21116 and that
respondent
has
no
right
whatsoever
over
complainant's patent;
(ii) ordering respondent to pay complainants the
following amounts:
(a) at least P1,000,000.00 as actual damages;
(b) P700,000.00
as
attorney's
fees
and
litigation expenses;
(d) P1,000,000.00 as exemplary damages; and
(d) costs of this suit.

(1) enjoining Pharmawealth, its agents, representatives


and assigns from importing, distributing, selling or
offering for sale infringing sulbactam ampicillin
products to various government hospitals or to any
other entity in the Philippines, or from otherwise
infringing Patent No. 26810;
(2) impounding
all
the
sales
invoices
and
other documents evidencing sales by Pharmawealth of
sulbactam ampicillin products; and
(3) disposing of the infringing
channels of commerce.

goods

outside the

(c) After trial, render judgment:


(1) finding Pharmawealth to have infringed Patent No.
26810 and declaring Pharmawealth to have no right
whatsoever over plaintiff's patent;
(2) ordering Pharmawealth
to
pay
plaintiffs
the following amounts:
(i) at least P3,000,000.00 as actual damages;
(ii) P500,000.00 as attorney's fees and P1,000,000.00
as litigation expenses;
(iii) P3,000,000.00 as exemplary damages; and
(iv) costs of this suit.
(3) ordering the condemnation, seizure or forfeiture of
Pharmawealth's infringing goods or products, wherever
they may be found, including the materials and
implements used in the commission of infringement, to
be disposed of in such manner as may be deemed
appropriate by this Honorable Court; and
(4) making the injunction permanent.[33]

It is clear from the foregoing that the ultimate objective


which respondents seek to achieve in their separate
complaints filed with the RTC and the IPO, is to ask for
damages for the alleged violation of their right to
exclusively sell Sulbactam Ampicillin products and to
permanently prevent or prohibit petitioner from selling
said products to any entity. Owing to the substantial
identity of parties, reliefs and issues in the IPO and RTC
cases, a decision in one case will necessarily amount
to res judicata in the other action.
It bears to reiterate that what is truly important to
consider in determining whether forum shopping exists
or not is the vexation caused the courts and partieslitigant by a party who asks different courts and/or
administrative agencies to rule on the same or related
causes and/or to grant the same or substantially the
same reliefs, in the process creating the possibility of
conflicting
decisions
being
rendered
by
the
different fora upon the same issue.[34]
Thus, the Court agrees with petitioner that respondents
are indeed guilty of forum shopping.
Jurisprudence holds that if the forum shopping is not
considered willful and deliberate, the subsequent case
shall be dismissed without prejudice, on the ground of
either litis pendentia or res judicata.[35]However, if the
forum shopping is willful and deliberate, both (or all, if
there are more than two) actions shall be dismissed
with prejudice.[36] In the present case, the Court finds
that respondents did not deliberately violate the rule
on non-forum shopping. Respondents may not be
totally blamed for erroneously believing that they can
file separate actions simply on the basis of different
patents. Moreover, in the suit filed with the RTC of
Makati City, respondents were candid enough to inform
the trial court of the pendency of the complaint filed
with the
BLA-IPO
as
well as
the
petition
for certiorari filed with the CA. On these bases, only
Civil Case No. 04-754 should be dismissed on the
ground of litis pendentia.
WHEREFORE, the petition is PARTLY GRANTED. The
assailed Resolutions of the Court of Appeals, dated
January 18, 2005 and April 11, 2005, in CA-G.R. No.
82734, are REVERSED and SET ASIDE. The petition
for certiorari filed
with
the
Court
of
Appeals
is DISMISSED for being moot and academic.
Civil Case No. 04-754, filed with the Regional Trial Court
of Makati City, Branch 138, is likewise DISMISSED on
the ground of litis pendentia.
SO ORDERED.

Republic
of
the
Philippines
SUPREME
COURT
Manila
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.:
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 warrant1 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.
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 Philippineregistered 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
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 selfexecuting 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 "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 peoples right to health.
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 noncommercial 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;
"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; xxx7
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)1avvphi1
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 SLCOs 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 posteriors 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.
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 prohibitumor 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
peoples
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. The
Temporary Restraining Order dated 15 October 2001 is
hereby made PERMANENT. No pronouncements as to
costs.
SO ORDERED.

Republic
of
the
Philippines
SUPREME
COURT
Manila
THIRD DIVISION
G.R. No. 179127
December 24, 2008
IN-N-OUT
BURGER,
INC., petitioner,
vs.
SEHWANI, INCORPORATED AND/OR BENITAS
FRITES, INC., respondents.
DECISION
CHICO-NAZARIO, J.:
This is a Petition for Review on Certiorari under Rule 45
of the Rules of Court, seeking to reverse the
Decision1dated 18 July 2006 rendered by the Court of
Appeals in CA-G.R. SP No. 92785, which reversed the
Decision2dated 23 December 2005 of the Director
General of the Intellectual Property Office (IPO) in
Appeal No. 10-05-01. The Court of Appeals, in its
assailed Decision, decreed that the IPO Director of
Legal Affairs and the IPO Director General do not have
jurisdiction over cases involving unfair competition.
Petitioner IN-N-OUT BURGER, INC., a business entity
incorporated under the laws of California, United States
(US) of America, which is a signatory to the Convention
of Paris on Protection of Industrial Property and the
Agreement on Trade Related Aspects of Intellectual
Property Rights (TRIPS). Petitioner is engaged mainly in
the restaurant business, but it has never engaged in
business in the Philippines. 3
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
petitioners products.7
Following the filing of its complaint, petitioner sent on
18 October 2000 a demand letter directing respondent
Sehwani, Incorporated to cease and desist from
claiming ownership of the mark "IN-N-OUT" and to
voluntarily cancel its trademark registration. In a letter-

reply dated 23 October 2000, respondents refused to


accede to petitioner demand, but expressed
willingness to surrender the registration of respondent
Sehwani, Incorporated of the "IN N OUT" trademark for
a fair and reasonable consideration. 8
Petitioner was able to register the mark "Double
Double" on 4 July 2002, based on their application filed
on 2 June 1997.9 It alleged that respondents also used
this mark, as well as the menu color scheme.
Petitioners also averred that respondent Benitas
receipts bore the phrase, "representing IN-N-OUT
Burger."10 It should be noted that that although
respondent Sehwahi, Incorporated registered a mark
which appeared as "IN N OUT (the inside of the letter
"O" formed like a star)," respondents used the mark
"IN-N-OUT."11
To counter petitioners complaint, respondents filed
before the BLA-IPO an Answer with Counterclaim.
Respondents asserted therein that they had been using
the mark "IN N OUT" in the Philippines since 15
October 1982. On 15 November 1991, respondent
Sehwani, Incorporated filed with the then Bureau of
Patents, Trademarks and Technology Transfer (BPTTT)
an application for the registration of the mark "IN N
OUT (the inside of the letter "O" formed like a star)."
Upon approval of its application, a certificate of
registration of the said mark was issued in the name of
respondent Sehwani, Incorporated on 17 December
1993. On 30 August 2000, respondents Sehwani,
Incorporated and Benita Frites, Inc. entered into a
Licensing Agreement, wherein the former entitled the
latter to use its registered mark, "IN N OUT."
Respondents asserted that respondent Sehwani,
Incorporated, being the registered owner of the mark
"IN N OUT," should be accorded the presumption of a
valid 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. Petitioners marks are internationally wellknown, given the world-wide registration of the mark
"IN-N-OUT," and its numerous advertisements in
various publications and in the Internet. Moreover, the
IPO had already declared in a previous inter partes
case that "In-N-Out Burger and Arrow Design" was an
internationally
well-known
mark.
Given
these
circumstances, the IPO Director for Legal Affairs
pronounced in her Decision that petitioner had the
right to use its tradename and mark "IN-N-OUT" in the
Philippines to the exclusion of others, including the
respondents. However, respondents used the mark "IN
N OUT" in good faith and were not guilty of unfair
competition, since respondent Sehwani, Incorporated
did not evince any intent to ride upon petitioners
goodwill by copying the mark "IN-N-OUT Burger"

exactly. The inside of the letter "O" in the mark used by


respondents formed a star. In addition, the simple act
of respondent Sehwani, Incorporated of inquiring into
the existence of a pending application for registration
of the "IN-N-OUT" mark was not deemed fraudulent.
The dispositive part of the Decision of the IPO Director
for Legal Affairs reads:
With the foregoing disquisition, Certificate of
Registration No. 56666 dated 17 December 1993 for
the mark "IN-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 Benitas Frites are
hereby ordered to permanently cease and desist from
using the mark "IN-N-OUT" and "IN-N-OUT BURGER
LOGO" on its goods and in its business. With regards
the mark "Double-Double," considering that as earlier
discussed, the mark has been approved by this Office
for publication and that as shown by evidence,
Complainant is the owner of the said mark,
Respondents are so hereby ordered to permanently
cease and desist from using the mark Double-Double.
NO COSTS. 14
Both parties filed their respective Motions for
Reconsideration of the aforementioned Decision.
Respondents
Motion
for
Reconsideration15 and
petitioners Motion for Partial Reconsideration 16 were
denied by the IPO Director for Legal Affairs in
Resolution No. 2004-1817 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:
THE IPO DIRECTOR GENERAL COMMITTED GRAVE
ERROR IN DISMISSING APPEAL NO. 14-2004-00004 ON
A MERE TECHNICALITY
THE BUREAU OF LEGAL AFFAIRS (SIC) DECISION AND
RESOLUTION
(1)
CANCELLING
RESPONDENTS
CERTIFICATE OF REGISTRATION FOR THE MARK "IN-NOUT,"
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. 14-200400004.
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.
During the pendency of petitioners appeal before the
IPO Director General, the Court of Appeals already
rendered on 21 October 2005 its Decision dismissing
respondents Petition in CA-G.R. SP No. 88004.
In a Decision dated 23 December 2005, IPO Director
General Adrian Cristobal, Jr. found petitioners appeal
meritorious and modified the Decision dated 22
December 2003 of the IPO Director of Legal Affairs. The
IPO Director General declared that respondents were
guilty of unfair competition. Despite respondents
claims that they had been using the mark since 1982,
they only started constructing their restaurant
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
petitioners registered mark "Double-Double" as a sign
of bad faith and an intent to mislead the public. Thus,
the IPO Director General ruled that petitioner was
entitled to an award for the actual damages it suffered
by reason of respondents acts of unfair competition,
exemplary damages, and attorneys fees. 21 The fallo of
the Decision reads:
WHEREFORE, premises considered, the [herein
respondents] are held guilty of unfair competition.
Accordingly, Decision No. 2003-02 dated 22 December
2003 is hereby MODIFIED as follows:
[Herein Respondents] are hereby ordered to jointly and
severally pay [herein petitioner]:
1. Damages in the amount of TWO HUNDRED
TWELVE THOUSAND FIVE HUNDRED SEVENTY
FOUR AND 28/100(P212,574.28);
2. Exemplary damages in the amount of FIVE
HUNDRED THOUSAND PESOS (P500,000.00);
3. Attorneys fees and expenses of litigation in the
amount of FIVE HUNDRED THOUSAND PESOS
(P500,000.00).
All products of [herein respondents] including the
labels, signs, prints, packages, wrappers, receptacles
and materials used by them in committing unfair
competition should be without compensation of any
sort be seized and disposed of outside the channels of
commerce.
Let a copy of this Decision be furnished the Director of
Bureau of Legal Affairs for appropriate action, and the
records be returned to her for proper disposition.
Further, let a copy of this Decision be furnished the
Documentation, Information and Technology Transfer
Bureau for their information and records purposes.22
Aggrieved, respondents were thus constrained to file
on 11 January 2006 before the Court of Appeals
another Petition for Review under Rule 43 of the Rules
of Court, docketed as CA-G.R. SP No. 92785.
Respondents based their second Petition before the
appellate court on the following grounds:
THE IPO DIRECTOR GENERAL COMMITTED GRAVE
ERROR IN HOLDING PETITIONERS LIABLE FOR UNFAIR
COMPETITION AND IN ORDERING THEM TO PAY
DAMAGES AND ATTORNEYS FEES TO RESPONDENTS
THE IPO DIRECTOR GENERAL COMMITTED GRAVE
ERROR IN AFFIRMING THE BUREAU OF LEGAL AFFAIRS
DECISION (1) CANCELLING PETITIONERS CERTIFICATE
OF REGISTRATION FOR THE MARK "IN-N-OUT," AND (2)
ORDERING PETITIONERS TO PERMANENTLY CEASE AND
DESIST FROM USING THE SUBJECT MARK ON ITS
GOODS AND BUSINESS
Respondents assailed before the appellate court the
foregoing 23 December 2005 Decision of the IPO
Director General, alleging that their use of the disputed
mark was not tainted with fraudulent intent; hence,
they should not be held liable for damages. They
argued that petitioner had never entered into any
transaction involving its goods and services in the
Philippines and, therefore, could not claim that its
goods and services had already been identified in the

mind of the public. Respondents added that the


disputed mark was not well-known. Finally, they
maintained that petitioners complaint was already
barred by laches.23
At the end of their Petition in CA-G.R. SP No. 92785,
respondents presented the following prayer:
WHEREFORE, [respondents herein] respectfully pray
that this Honorable Court:
(a) upon the filing of this petition, issue a temporary
restraining order enjoining the IPO and [petitioner],
their agents, successors and assigns, from executing,
enforcing and implementing the IPO Director Generals
Decision dated 23 December 2005, which modified the
Decision No. 2003-02 dated 22 December 2003 of the
BLA, until further orders from this Honorable Court.
(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
attorneys 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
attorneys fees;
(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
Decision25 in CA-G.R. SP No. 92785 reversing the
Decision dated 23 December 2005 of the IPO Director
General.
The Court of Appeals, in its Decision, initially addressed
petitioners assertion that respondents had committed
forum 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 attorneys fees, to petitioner.
The Court of Appeals then proceeded to resolve CAG.R. SP No. 92785 on jurisdictional grounds not raised
by the parties. The appellate court declared that
Section 163 of the Intellectual Property Code
specifically confers upon the regular courts, and not
the BLA-IPO, sole jurisdiction to hear and decide cases
involving provisions of the Intellectual Property Code,
particularly trademarks. Consequently, the IPO Director
General had no jurisdiction to rule in its Decision dated
23 December 2005 on supposed violations of these
provisions of the Intellectual Property Code.
In the end, the Court of Appeals decreed:
WHEREFORE, the Petition is GRANTED. The Decision
dated 23 December 2005 rendered by the Director
General of the Intellectual Property Office of the
Philippines
in
Appeal
No.
10-05-01
is REVERSED and SET ASIDE. Insofar as they pertain
to acts governed by Article 168 of R.A. 8293 and other
sections enumerated in Section 163 of the same Code,
respondents claims in its Complaint docketed as IPV
No. 10-2001-00004 are hereby DISMISSED.26
The Court of Appeals, in a Resolution dated 31 July
2007,27 denied petitioners Motion for Reconsideration
of its aforementioned Decision.
Hence, the present Petition, where petitioner raises the
following issues:
I
WHETHER OR NOT THE COURT OF APPEALS ERRED IN
ISSUING THE QUESTIONED DECISIONDATED 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 DECISIONDATED 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 Decision29 in G.R. No. 171053
on 15 October 2007, which affirmed the IPO Director
Generals 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 Secretarys 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
Secretarys Certificate reads:
Subscribed and sworn to me this 20 th day of August
2007 in Irving California.
Rachel
A.
Notary Public30

Blake

(Sgd.)

Respondents aver that the said Secretarys Certificate


cannot properly authorize Atty. Barranda to sign the
Verification/Certification on behalf of petitioner
because the notary public Rachel A. Blake failed to
state that: (1) petitioners Corporate Secretary, Mr.
Wensinger, was known to her; (2) he was the same
person who acknowledged the instrument; and (3) he
acknowledged the same to be his free act and deed, as
required under Section 2 of Act No. 2103 and Landingin
v. Republic of the Philippines.31
Respondents likewise impugn the validity of the
notarial certificate of Atty. Aldrich Fitz B. Uy, on Atty.
Barandas Verification/Certification attached to the
instant Petition, noting the absence of (1) the serial
number of the commission of the notary public; (2) the
office address of the notary public; (3) the roll of
attorneys number and the IBP membership number;
and (4) a statement that the Verification/Certification
was notarized within the notary publics territorial
jurisdiction, as required under the 2004 Rules on
Notarial Practice. 32
Section 2 of Act No. 2103 and Landingin v. Republic of
the Philippines are not applicable to the present case.
The requirements enumerated therein refer to
documents which require an acknowledgement, and
not a mere jurat.
A jurat is that part of an affidavit in which the notary
certifies that before him/her, the document was
subscribed and sworn to by the executor. Ordinarily,
the language of the jurat should avow that the
document was subscribed and sworn to before the
notary public. In contrast, an acknowledgment is the
act of one who has executed a deed in going before
some competent officer or court and declaring it to be
his act or deed. It involves an extra step undertaken
whereby the signor actually declares to the notary that
the executor of a document has attested to the notary
that the same is his/her own free act and deed. 33 A
Secretarys Certificate, as that executed by petitioner
in favor of the lawyers of the Angangco and Villaraza
law office, only requires a jurat.34
Even assuming that the Secretarys Certificate was
flawed, Atty. Barranda may still sign the Verification
attached to the Petition at bar. A pleading is verified by
an affidavit that the affiant has read the pleading and
that the allegations therein are true and correct of his
personal
knowledge
or
based
on
authentic
records. 35 The party itself need not sign the
verification. A partys representative, lawyer or any
other person who personally knows the truth of the
facts alleged in the pleading may sign the
verification.36 Atty. Barranda, as petitioners counsel,
was in the position to verify the truth and correctness
of the allegations of the present Petition. Hence, the
Verification signed by Atty. Barranda substantially
complies with the formal requirements for such.

Moreover, the Court deems it proper not to focus on


the supposed technical infirmities of Atty. Barandas
Verification. It must be borne in mind that the purpose
of requiring a verification is to secure an assurance
that the allegations of the petition has been made in
good faith; or are true and correct, not merely
speculative. This requirement is simply a condition
affecting the form of pleadings, and non-compliance
therewith does not necessarily render it fatally
defective. Indeed, verification is only a formal, not a
jurisdictional requirement. In the interest of substantial
justice, strict observance of procedural rules may be
dispensed with for compelling reasons. 37 The vital
issues raised in the instant Petition on the jurisdiction
of the IPO Director for Legal Affairs and the IPO Director
General over trademark cases justify the liberal
application of the rules, so that the Court may give the
said Petition due course and resolve the same on the
merits.
This Court agrees, nevertheless, that the notaries
public, Rachel A. Blake and Aldrich Fitz B. Uy, were less
than careful with their jurats or notarial certificates.
Parties and their counsel should take care not to abuse
the Courts zeal to resolve cases on their merits.
Notaries public in the Philippines are reminded to exert
utmost care and effort in complying with the 2004
Rules on Notarial Practice. Parties and their counsel are
further charged with the responsibility of ensuring that
documents notarized abroad be in their proper form
before presenting said documents before Philippine
courts.
Forum Shopping
Petitioner next avers that respondents are guilty of
forum shopping in filing the Petition in CA-G.R. SP No.
92785, following their earlier filing of the Petition in CAG.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.
There is no question that both Petitions involved
identical parties, and raised at least one similar ground
for which they sought the same relief. Among the
grounds stated by the respondents for their Petition in

CA-G.R SP No. 88004 was that "[T]he Bureau of Legal


Affairs (sic) Decision and Resolution (1) canceling
[herein respondent Sehwani, Incorporated]s certificate
of registration for the mark IN-N-OUT and (2) ordering
[herein respondents] to permanently cease and desist
from using the subject mark on its goods and business
are contrary to law and/or is (sic) not supported by
evidence."40 The same ground was again invoked by
respondents in their Petition in CA-G.R. SP No. 92785,
rephrased as follows: "The IPO Director General
committed grave error in affirming the Bureau of Legal
Affairs (sic) Decision (1) canceling [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.
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 aforestated 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
(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.)
Unquestionably, petitioners complaint, which seeks
the cancellation of the disputed mark in the name of
respondent Sehwani, Incorporated, and damages for
violation of petitioners intellectual property rights, falls
within the jurisdiction of the IPO Director of Legal
Affairs.
The Intellectual Property Code also expressly
recognizes the appellate jurisdiction of the IPO Director
General over the decisions of the IPO Director of Legal
Affairs, to wit:
Section 7. The Director General and Deputies Director
General. 7.1 Fuctions.The Director General shall
exercise the following powers and functions:
xxxx
b) Exercise exclusive appellate jurisdiction over all
decisions rendered by the Director of Legal Affairs, the

Director of Patents, the Director of Trademarks, and the


Director of Documentation, Information and Technology
Transfer Bureau. The decisions of the Director General
in the exercise of his appellate jurisdiction in respect of
the decisions of the Director of Patents, and the
Director of Trademarks shall be appealable to the Court
of Appeals in accordance with the Rules of Court; and
those in respect of the decisions of the Director of
Documentation, Information and Technology Transfer
Bureau shall be appealable to the Secretary of Trade
and Industry;
The Court of Appeals erroneously reasoned that
Section 10(a) of the Intellectual Property Code,
conferring upon the BLA-IPO jurisdiction over
administrative complaints for violations of intellectual
property rights, is a general provision, over which the
specific provision of Section 163 of the same Code,
found under Part III thereof particularly governing
trademarks, service marks, and tradenames, must
prevail. Proceeding therefrom, the Court of Appeals
incorrectly concluded that all actions involving
trademarks, including charges of unfair competition,
are under the exclusive jurisdiction of civil courts.
Such interpretation is not supported by the provisions
of the Intellectual Property Code. While Section 163
thereof vests in civil courts jurisdiction over cases of
unfair competition, nothing in the said section states
that the regular courts have sole jurisdiction over
unfair competition cases, to the exclusion of
administrative bodies. On the contrary, Sections 160
and 170, which are also found under Part III of the
Intellectual Property Code, recognize the concurrent
jurisdiction of civil courts and the IPO over unfair
competition cases. These two provisions read:
Section 160. Right of Foreign Corporation to Sue in
Trademark or Service Mark Enforcement Action.Any
foreign national or juridical person who meets the
requirements of Section 3 of this Act and does not
engage in business in the Philippines may bring a civil
or administrative action hereunder for opposition,
cancellation, infringement, unfair competition, or false
designation of origin and false description, whether or
not it is licensed to do business in the Philippines under
existing laws.
xxxx
Section 170. Penalties.Independent of the civil
and administrative sanctions imposed by law, a
criminal penalty of imprisonment from two (2) years to
five (5) years and a fine ranging from Fifty thousand
pesos (P50,000) to Two hundred thousand pesos
(P200,000), shall be imposed on any person who is
found guilty of committing any of the acts mentioned
in Section 155, Section168, and Subsection169.1.
Based on the foregoing discussion, the IPO Director of
Legal Affairs had jurisdiction to decide the petitioners
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.
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-NOUT" 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--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 [petitioners] registered mark DoubleDouble for use on hamburger products. In fact, the
burger wrappers and the French fries receptacles the
[respondents] are using do not bear the mark
registered by the [respondent], but the [petitioners]
IN-N-OUT Burgers name and trademark IN-N-OUT with
Arrow design.
There is no evidence that the [respondents] were
authorized by the [petitioner] to use the latters marks
in the business. [Respondents] explanation that they
are not using their own registered trademark due to
the difficulty in printing the "star" does not justify the
unauthorized use of the [petitioners] trademark
instead.
Further, [respondents] are giving their products the
general appearance that would likely influence
purchasers to believe that these products are those of
the [petitioner]. The intention to deceive may be
inferred from the similarity of the goods as packed and
offered for sale, and, thus, action will lie to restrain
such unfair competition. x x x.

xxxx
[Respondents] use of IN-N-OUT BURGER in busineses
signages reveals fraudulent intent to deceive
purchasers. Exhibit "GG," which shows the business
establishment of [respondents] illustrates the imitation
of [petitioners] corporate name IN-N-OUT and signage
IN-N-OUT BURGER. Even the Director noticed it and
held:
"We also note that In-N-Out Burger is likewise,
[petitioners] corporate name. It has used the "IN-NOUT" Burger name in its restaurant business in Baldwin
Park, California in the United States of America since
1948. Thus it has the exclusive right to use the
tradenems "In-N-Out" Burger in the Philippines and the
respondents are unlawfully using and appropriating
the same."
The Office cannot give credence to the [respondents]
claim of good faith and that they have openly and
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.
In the present case, the Court deems it just and fair
that the IPO Director General computed the damages
due to petitioner by applying the reasonable
percentage of 30% to the respondents gross sales,
and then doubling the amount thereof on account of
respondents actual intent to mislead the public or
defraud the petitioner,49 thus, arriving at the amount of
actual damages of P212,574.28.
Taking into account the deliberate intent of
respondents to engage in unfair competition, it is only
proper that petitioner be awarded exemplary damages.
Article 2229 of the Civil Code provides that such
damages may be imposed by way of example or
correction for the public good, such as the
enhancement of the protection accorded to intellectual
property and the prevention of similar acts of unfair
competition. However, exemplary damages are not
meant to enrich one party or to impoverish another,
but to serve as a deterrent against or as a negative
incentive to curb socially deleterious action. 50 While
there is no hard and fast rule in determining the fair
amount of exemplary damages, the award of
exemplary damages should be commensurate with the
actual loss or injury suffered.51 Thus, exemplary
damages
of P500,000.00
should
be
reduced
to P250,000.00 which more closely approximates the
actual damages awarded.
In accordance with Article 2208(1) of the Civil Code,
attorneys fees may likewise be awarded to petitioner
since exemplary 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 respondents
failure to present countervailing evidence. Considering
moreover the reputation of petitioners counsel, the
actual attorneys 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.
SO ORDERED.

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