INTELLECTUAL PROPERTY LAW CASES

1. MIGHTY CORP. v. E & J GALLO WINERY, G.R. NO. 154342

[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. 901011-00073599-PN but the
records do not disclose if it was ever approved by the Director of Patents.[7]
On the other hand, petitioners Mighty Corporation and La Campana and
their sister company, Tobacco Industries of the Philippines (Tobacco
Industries), are engaged in the cultivation, manufacture, distribution and sale
of tobacco products for which they have been using the GALLO cigarette
trademark since 1973. [8]
The Bureau of Internal Revenue (BIR) approved Tobacco Industries use of
GALLO 100s cigarette mark on September 14, 1973 and GALLO filter
cigarette mark on March 26, 1976, both for the manufacture and sale of its
cigarette products. In 1976, Tobacco Industries filed its manufacturers sworn
statement as basis for BIRs collection of specific tax on GALLO cigarettes.[9]
On February 5, 1974, Tobacco Industries applied for, but eventually did
not pursue, the registration of the GALLO cigarette trademark in the principal
register of the then Philippine Patent Office.[10]
In May 1984, Tobacco Industries assigned the GALLO cigarette trademark
to La Campana which, on July 16, 1985, applied for trademark registration in
the Philippine Patent Office.[11]On July 17, 1985, the National Library issued
Certificate of Copyright Registration No. 5834 for La Campanas lifetime
copyright claim over GALLO cigarette labels.[12]
Subsequently, La Campana authorized Mighty Corporation to manufacture
and sell cigarettes bearing the GALLO trademark.[13] BIR approved Mighty
Corporations use of GALLO 100s cigarette brand, under licensing agreement
with Tobacco Industries, on May 18, 1988, and GALLO SPECIAL MENTHOL
100s cigarette brand on April 3, 1989.[14]
Petitioners claim that GALLO cigarettes have been sold in the Philippines
since 1973, initially by Tobacco Industries, then by La Campana and finally by
Mighty Corporation.[15]
On the other hand, although the GALLO wine trademark was registered in
the Philippines in 1971, respondents claim that they first introduced and sold
the GALLO and ERNEST & JULIO GALLO wines in the Philippines circa 1974
within the then U.S. military facilities only. By 1979, they had expanded their
Philippine market through authorized distributors and independent outlets.[16]
Respondents claim that they first learned about the existence of GALLO
cigarettes in the latter part of 1992 when an Andresons employee saw such
cigarettes on display with GALLO wines in a Davao supermarket wine cellar
section.[17] Forthwith, respondents sent a demand letter to petitioners asking
them to stop using the GALLO trademark, to no avail.
II.

The Legal Dispute

On March 12, 1993, respondents sued petitioners in the Makati RTC for
trademark and tradename infringement and unfair competition, with a prayer
for damages and preliminary injunction.
Respondents charged petitioners with violating Article 6bis of the Paris
Convention for the Protection of Industrial Property (Paris Convention)[18] and
RA 166 (Trademark Law),[19]specifically, Sections 22 and 23 (for trademark
infringement),[20] 29 and 30[21] (for unfair competition and false designation of
origin) and 37 (for tradename infringement).[22] They claimed that petitioners
adopted the GALLO trademark to ride on Gallo Winerys GALLO and ERNEST
& JULIO GALLO trademarks established reputation and popularity, thus
causing 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
businesswherein 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 day-to-day
household items whereas ham is not necessarily so. Thus, the goods
of the parties are not of a character which purchasers would likely
attribute to a common origin.

The observations and conclusion of the Director of Patents are

correct. The particular goods of the parties are so unrelated that
consumers, would not, in any probability mistake one as the source
of origin of the product of the other. (Emphasis supplied).

The same is true in the present case. Wines and cigarettes are non-
competing and are totally unrelated products not likely to cause confusion vis-
-vis the goods or the business of the petitioners and respondents.
Wines are bottled and consumed by drinking while cigarettes are packed
in cartons or packages and smoked. There is a whale of a difference between
their descriptive properties, physical attributes or essential characteristics like
form, composition, texture and quality.
GALLO cigarettes are inexpensive items while GALLO wines are not.
GALLO wines are patronized by middle-to-high-income earners while GALLO
cigarettes appeal only to simple folks like farmers, fishermen, laborers and
other low-income workers.[116] Indeed, the big price difference of these two
products is an important factor in proving that they are in fact unrelated and
that they travel in different channels of trade. There is a distinct price
segmentation based on vastly different social classes of purchasers.[117]
GALLO cigarettes and GALLO wines are not sold through the same
channels of trade. GALLO cigarettes are Philippine-made and petitioners
neither claim nor pass off their goods as imported or emanating from Gallo
Winery. GALLO cigarettes are distributed, marketed and sold through
ambulant and sidewalk vendors, small local sari-sari stores and grocery stores
in Philippine rural areas, mainly in Misamis Oriental, Pangasinan, Bohol, and
Cebu.[118] On the other hand, GALLO wines are imported, distributed and sold
in the 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 quo should have
taken into consideration the subsequent case of IDV North America, Inc. and
R & A Bailey Co. Limited vs. S & M Brands, Inc.:[121]

IDV correctly acknowledges, however, that there is no per

se rule that the use of the same mark on alcohol and tobacco
products always will result in a likelihood of confusion. Nonetheless,
IDV relies heavily on the decision in John Walker & Sons, Ltd. vs.
Tampa Cigar Co., 124 F. Supp. 254, 256 (S.D. Fla.
1954), affd, 222 F. 2d 460 (5th Cir. 1955), wherein the court
enjoined the use of the mark JOHNNIE WALKER on cigars because
the fame of the plaintiffs mark for scotch whiskey and because the
plaintiff advertised its scotch whiskey on, or in connection with
tobacco products. The court, in John Walker & Sons, placed great
significance on the finding that the infringers use was a deliberate
attempt to capitalize on the senior marks fame. Id. At 256. IDV
also relies 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 6bis of the Treaty of Paris. These conditions are:

a) the mark must be internationally known;

b) the subject of the right must be a trademark, not a patent or copyright or
anything else;
c) the mark must be for use in the same or similar kinds of goods; and
d) the person claiming must be the owner of the mark (The Parties
Convention Commentary on the Paris Convention. Article by Dr.
Bogsch, Director General of the World Intellectual Property
Organization, Geneva, Switzerland, 1985)

From the set of facts found in the records, it is ruled that

the Petitioner failed to comply with the third requirement of the
said memorandum that is the mark must be for use in the same or
similar kinds of goods. The Petitioner is using the mark CANON for
products belonging to class 2 (paints, chemical products) while the
Respondent is using the same mark for sandals (class 25).

Hence, Petitioner's contention that its mark is well-known at the

time the Respondent filed its application for the same mark should
fail. (Emphasis supplied.)
Consent of the Registrant and
Other air, Just and Equitable
Considerations

Each trademark infringement case presents a unique problem which must

be answered by weighing the conflicting interests of the litigants.[124]
Respondents claim that GALLO wines and GALLO cigarettes flow through
the same channels of trade, that is, retail trade. If respondents assertion is
true, then both goods co-existed peacefully for a considerable period of
time. It took respondents almost 20 years to know about the existence of
GALLO cigarettes and sue petitioners for trademark infringement. Given, on
one hand, the long period of time that petitioners were engaged in the
manufacture, marketing, distribution and sale of GALLO cigarettes 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.

2. NELBAROSE R. SASOT & ALLANDALE R. SASOT v. PEOPLE OF THE

PHILIPPINES, G.R. NO. 143193

Republic of the Philippines

SUPREME COURT
Manila

SECOND DIVISION

G.R. No. 143193 June 29, 2005

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. 3The 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 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

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:

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 ACCUSED8

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.21Thus, 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 complaint-affidavit 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 Code34 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 Chico-Nazario, JJ., concur.

3. PEARL & DEAN (PHIL), INC. v. SHOEMART INC. & NORTH EDSA MARKETING
INC., G.R. NO. 148222

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

PEARL & DEAN (PHIL.), INCORPORATED, petitioner, vs. SHOEMART,

INCORPORATED, and NORTH EDSA
MARKETING, INCORPORATED,respondents.

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 defendant-appellant
North Edsa Marketing Inc. (NEMI), through its marketing arm,
Prime Spots Marketing Services, was set up primarily to sell
advertising space in lighted display units 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.

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 infringe-
ment 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

(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, the Court of Appeals reversed the trial court:

Since the light boxes cannot, by any stretch of the imagination, be

considered as either prints, pictorial illustrations, advertising copies,
labels, tags or box wraps, to be properly classified as a
copyrightable class O work, we have to agree with SMI when it
posited that what 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 defendants-appellants for their use of
the words Poster Ads, in the advertising display units in suit.
Jurisprudence has interpreted Section 20 of the Trademark Law as
an implicit permission to a manufacturer to venture into the
production of goods and allow that producer to appropriate the
brand name of the senior registrant on goods other than those
stated in the certificate of registration. The Supreme Court further
emphasized the restrictive meaning of Section 20 when it stated,
through Justice Conrado V. Sanchez, that:

Really, if the certificate of registration were to be deemed as

including goods not specified therein, then a situation may arise
whereby an applicant may be tempted to register a trademark on
any and all goods which his mind may conceive even if he had
never intended to use the trademark for the said goods. We believe
that such omnibus registration is not contemplated by our
Trademark Law.

While we do not discount the striking similarity between Pearl and

Deans registered trademark and defendants-appellants Poster Ads
design, as well as the parallel use by which said words were used in
the parties respective advertising copies, we cannot find
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 defendants-appellants

that the words Poster Ads are a simple contraction of the generic
term poster advertising. In the absence of any convincing proof
that Poster Ads has acquired a secondary meaning in this
jurisdiction, we find that Pearl and Deans exclusive right to the use
of Poster Ads is limited to what is written in its certificate of
registration, 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]

ISSUES

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

(1) if the engineering or technical drawings of an advertising

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

(2) or should the light box be registered separately and

protected by a patent issued by the Bureau of Patents
 Trademarks and Technology Transfer (now Intellectual
Property Office) in addition to the copyright of the
engineering drawings?

(3) can the owner of a registered trademark legally prevent

others from using such trademark if it is a mere abbreviation
of a term descriptive of his goods, services or business?

ON THE ISSUE OF COPYRIGHT INFRINGEMENT

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

SEC. 2. The rights granted by this Decree shall, from the moment
of creation, subsist with respect to any of the following works:

xxxxxxxxx

(O) Prints, pictorial illustrations, advertising copies, labels, tags,

and box wraps;

xxxxxxxxx
 Although petitioners copyright certificate was entitled Advertising Display Units
(which depicted the box-type electrical devices), its claim of copyright infringement
cannot be sustained.
Copyright, in the strict sense of the term, is purely a statutory right. Being a mere
statutory grant, the rights are limited to what the statute confers. It may be obtained and
enjoyed only with respect to the subjects and by the persons, and on terms and
conditions specified in the statute.[7] Accordingly, it can cover only the works falling within
the statutory enumeration or description.[8]
P & D secured its copyright under the classification class O work. This being so,
petitioners copyright protection extended only to the technical drawings and not to the
light box itself because the latter was not at all in the category of prints, pictorial
illustrations, advertising copies, labels, tags and box wraps. Stated otherwise, even as
we find that P & D indeed owned a valid copyright, the same could have referred only to
the technical drawings within the category of pictorial illustrations. It could not have
possibly stretched out to include the underlying light box. The strict application[9] of the
laws enumeration in Section 2 prevents us from giving petitioner even a little leeway,
that is, even if its copyright certificate was entitled Advertising Display Units. What the
law does not include, it excludes, and for the good reason: the light box was not a
literary or artistic piece which could be copyrighted under the copyright law. And no less
clearly, neither could the lack of statutory authority to 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 ex-parte claim of creation.
Therefore, not having gone through the arduous examination for patents, the
petitioner cannot exclude others from the manufacture, sale or commercial use of the
light boxes on the sole basis of its copyright certificate over the technical drawings.
Stated otherwise, what petitioner seeks is exclusivity without any opportunity for the
patent office (IPO) to scrutinize the light boxs eligibility as a patentable invention. The
irony here is that, had petitioner secured a patent instead, its exclusivity would have
been for 17 years only. But through the simplified procedure of copyright-registration
with the National Library without undergoing the rigor of defending the patentability of its
invention before the IPO and the public the petitioner would be protected for 50
years. This situation could not have been the intention of the law.
In the oft-cited case of Baker vs. Selden[21], the United States Supreme Court held
that only the expression of an idea is protected by copyright, not the idea itself. In that
case, the plaintiff held the copyright of a book which expounded on a new accounting
system he had developed. The publication illustrated blank forms of ledgers utilized in
such a system. The defendant reproduced forms similar to those illustrated in the
plaintiffs copyrighted book. The US Supreme Court ruled that:

There is no doubt that a work on the subject of book-keeping,

though only explanatory of well known systems, may be the subject
of a copyright; but, then, it is claimed only as a book. x x x. But
there is a clear distinction between the books, as such, and the art,
which it is, intended to illustrate. The mere statement of the
proposition is so evident that it requires hardly any argument to
support it. The same distinction may be predicated of every other
art as well as that of bookkeeping. A treatise on the composition
and use of medicines, be they old or new; on the construction and
use of ploughs or watches or churns; or on the mixture and
application of colors for painting or dyeing; or on the mode of
drawing lines to produce the effect of perspective, would be the
subject of copyright; but no one would contend that the copyright
of the treatise would give the exclusive right to the art or
manufacture described therein. The copyright of the book, if not
pirated from other works, would be valid without regard to the
novelty or want of novelty of its subject matter. The novelty of the
art or thing described or explained has nothing to do with the
validity of the copyright. To give to the author of the book an
exclusive property in the art described therein, when no
examination of its novelty has ever been officially made, would be
a surprise and a fraud upon the public. That is the province of
letters patent, not of copyright.The claim to an invention of
discovery of an art or manufacture must be subjected to the
examination of the Patent Office before an exclusive right therein
can be obtained; and a patent from the government can only
secure it.

The difference between the two things, letters patent and

copyright, may be illustrated by reference to the subjects just
enumerated. Take the case of medicines.Certain mixtures are found
to be of great value in the healing art. If the discoverer writes and
publishes a book on the subject (as regular physicians generally do),
he gains no exclusive right to the manufacture and sale of the
medicine; he gives that to the public. If he desires to acquire such
exclusive right, he must obtain a patent for the mixture as a new
art, manufacture or composition of matter. He may copyright his
book, if he pleases; but that only secures to him the exclusive right
of printing and publishing his book. So of all other inventions or
discoveries.
The copyright of a book on perspective, no matter how many
drawings and illustrations it may contain, gives no exclusive right
to the modes of drawing described, though they may never have
been known or used before. By publishing the book without getting
a patent for the art, the latter is given to the public.

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, Sandoval-Gutierrez, and Carpio-Morales,
JJ., concur.

4. ELIDAD C. KHO v. HON. COURT OF APPEALS & SUMMERVILLE GEN.

MERCHANDISING COMP. & ANG TIAM CHAY, G.R. NO. 115758

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 Orders 2 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 non-forum shopping for their
petition.

On May 24, 1993, the appellate court rendered a Decision in CA-G.R. SP No. 27803 ruling
in favor of the respondents, the dispositive portion of which reads:

WHEREFORE, the petition is hereby given due course and the orders of respondent
court dated February 10, 1992 and March 19, 1992 granting the writ of preliminary
injunction and denying petitioners' motion for reconsideration are hereby set aside
and declared null and void. Respondent court is directed to forthwith proceed with
the trial of Civil Case No. Q-91-10926 and resolve the issue raised by the parties on
the merits.

SO ORDERED.5

In granting the petition, the appellate court ruled that:

The registration of the trademark or brandname "Chin Chun Su" by KEC with the
supplemental register of the Bureau of Patents, Trademarks and Technology
Transfer cannot be equated with registration in the principal register, which is duly
protected by the Trademark Law. 1w phi1.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 declared an unfair competitor even if his competing trademark is
registered (Parke, Davis & Co. v. Kiu Foo & Co., et al., 60 Phil 928; La
Yebana Co. v. chua Seco & Co., 14 Phil 534)."6

The petitioner filed a motion for reconsideration. This she followed with several motions to
declare respondents in contempt of court for publishing advertisements notifying the public
of the promulgation of the assailed decision of the appellate court and stating that
genuine Chin Chun Su products could be obtained only from Summerville General
Merchandising and Co.

In the meantime, the trial court went on to hear petitioner's complaint for final injunction and
damages. On October 22, 1993, the trial court rendered a Decision7 barring the petitioner
from using the trademark Chin Chun Su and upholding the right of the respondents to use
the same, but recognizing the copyright of the petitioner over the oval shaped container of
her beauty cream. The trial court did not award damages and costs to any of the parties but
to their respective counsels were awarded Seventy-Five Thousand Pesos (P75,000.00)
each as attorney's fees. The petitioner duly appealed the said decision to the Court of
Appeals.

On June 3, 1994, the Court of Appeals promulgated a 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 non-compliance with the rule on forum shopping. We disagree. First, the
petitioner improperly raised the technical objection of non-compliance with Supreme Court
Circular No. 28-91 by filing a motion to dismiss the petition for certiorari filed in the appellate
court. This is prohibited by Section 6, Rule 66 of the Revised Rules of Civil Procedure which
provides that "(I)n petitions for certiorari before the Supreme Court and the Court of
Appeals, the provisions of Section 2, Rule 56, shall be observed. Before giving due course
thereto, the court may require the respondents to file their comment to, and not a motion to
dismiss, the petition xxx (italics supplied)". Secondly, the issue was raised one month after
petitioner had filed her answer/comment and after private respondent had replied thereto.
Under Section 1, Rule 16 of the Revised Rules of Civil Procedure, a motion to dismiss shall
be filed within the time for but before filing the answer to the complaint or pleading asserting
a claim. She therefore could no longer submit a motion to dismiss nor raise defenses and
objections not included in the answer/comment she had earlier tendered. Thirdly,
substantial justice and equity require this Court not to revive a dissolved writ of injunction in
favor of a party without any legal right thereto merely on a technical infirmity. The granting
of an injunctive writ based on a technical ground rather than compliance with the requisites
for the issuance of the same is contrary to the primary objective of legal procedure which is
to serve as a means to dispense justice to the deserving party.

The petitioner likewise contends that the appellate court unduly delayed the resolution of
her motion for reconsideration. But we find that petitioner contributed to this delay when she
filed successive contentious motions in the same proceeding, the last of which was on
October 27, 1993, necessitating counter-manifestations from private respondents with the
last one being filed on November 9, 1993. Nonetheless, it is well-settled that non-
observance of the period for deciding cases or their incidents does not render such
judgments ineffective or void.17 With respect to the purported damages she suffered due to
the alleged delay in resolving her motion for reconsideration, we find that the said issue has
likewise been rendered moot and academic by our ruling that she has no right over the
trademark and, consequently, to the issuance of a writ of preliminary injunction. 1wphi1.nt

Finally, we rule that the Court of Appeals correctly denied the petitioner's several motions
for contempt of court. There is nothing contemptuous about the advertisements complained
of which, as regards the proceedings in CA-G.R. SP No. 27803 merely announced in plain
and straightforward language the promulgation of the assailed Decision of the appellate
court. Moreover, pursuant to Section 4 of Rule 39 of the Revised Rules of Civil Procedure,
the said decision nullifying the injunctive writ was immediately executory.

WHEREFORE, the petition is DENIED. The Decision and Resolution of the Court of
Appeals dated May 24, 1993 and June 3, 1994, respectively, are hereby AFFIRMED. With
costs against the petitioner.

SO ORDERED.

Bellosillo, Mendoza, Quisumbing, and Buena, JJ., concur.