[G.R. No. 110318.

August 28, 1996]

COLUMBIA PICTURES, INC., ORION PICTURES CORPORATION, PARAMOUNT PICTURES

CORPORATION, TWENTIETH CENTURY FOX FILM CORPORATION, UNITED ARTISTS
CORPORATION, UNIVERSAL CITY STUDIOS, INC., THE WALT DISNEY COMPANY, and
WARNER BROTHERS, INC., petitioners, vs. COURT OF APPEALS, SUNSHINE HOME
VIDEO, INC. and DANILO A. PELINDARIO, respondents.

DECISION

REGALADO, J.:

Before us is a petition for review on certiorari of the decision of the Court of

Appeals[1] promulgated on July 22, 1992 and its resolution[2] of May 10, 1993 denying petitioners
motion for reconsideration, both of which sustained the order[3] of the Regional Trial Court, Branch
133, Makati, Metro Manila, dated November 22, 1988 for the quashal of Search Warrant No. 87-053
earlier issued per its own order[4] on September 5, 1988 for violation of Section 56 of Presidential
Decree No. 49, as amended, otherwise known as the Decree on the Protection of Intellectual
Property.
The material facts found by respondent appellate court are as follows:
Complainants thru counsel lodged a formal complaint with the National Bureau of Investigation for
violation of PD No. 49, as amended, and sought its assistance in their anti-film piracy drive. Agents of
the NBI and private researchers made discreet surveillance on various video establishments in Metro
Manila including Sunshine Home Video Inc. (Sunshine for brevity), owned and operated by Danilo A.
Pelindario with address at No. 6 Mayfair Center, Magallanes, Makati, Metro Manila.
On November 14, 1987, NBI Senior Agent Lauro C. Reyes applied for a search warrant with the
court a quo against Sunshine seeking the seizure, among others, of pirated video tapes of
copyrighted films all of which were enumerated in a list attached to the application; and, television
sets, video cassettes and/or laser disc recordings equipment and other machines and paraphernalia
used or intended to be used in the unlawful exhibition, showing, reproduction, sale, lease or
disposition of videograms tapes in the premises above described. In the hearing of the application,
NBI Senior Agent Lauro C. Reyes, upon questions by the court a quo, reiterated in substance his
averments in his affidavit. His testimony was corroborated by another witness, Mr. Rene C.
Baltazar. Atty. Rico V. Domingos deposition was also taken. On the basis of the affidavits and
depositions of NBI Senior Agent Lauro C. Reyes, Rene C. Baltazar and Atty. Rico V. Domingo,
Search Warrant No 87-053 for violation of Section 56 of PD No. 49, as amended, was issued by the
court a quo.
The search warrant was served at about 1:45 p.m. on December 14, 1987 to Sunshine and/or
their representatives. In the course of the search of the premises indicated in the search warrant, the
NBI Agents found and seized various video tapes of duly copyrighted motion pictures/films owned or
exclusively distributed by private complainants, and machines, equipment, television sets,
paraphernalia, materials, accessories all of which were included in the receipt for properties
accomplished by the raiding team. Copy of the receipt was furnished and/or tendered to Mr. Danilo A.
Pelindario, registered owner-proprietor of Sunshine Home Video.
On December 16, 1987, a Return of Search Warrant was filed with the Court.
A Motion To Lift the Order of Search Warrant was filed but was later denied for lack of merit (p.
280, Records).
A Motion for reconsideration of the Order of denial was filed. The court a quo granted the said
motion for reconsideration and justified it in this manner:

It is undisputed that the master tapes of the copyrighted films from which the pirated films were
allegedly copies (sic), were never presented in the proceedings for the issuance of the search
warrants in question. The orders of the Court granting the search warrants and denying the urgent
motion to lift order of search warrants were, therefore, issued in error. Consequently, they must be set
aside. (p. 13, Appellants Brief)[5]

Petitioners thereafter appealed the order of the trial court granting private respondents motion for
reconsideration, thus lifting the search warrant which it had therefore issued, to the Court of
Appeals. As stated at the outset, said appeal was dismissed and the motion for reconsideration
thereof was denied.Hence, this petition was brought to this Court particularly challenging the validity
of respondent courts retroactive application of the ruling in 20th Century Fox Film Corporation vs.
Court of Appeals, et al.,[6] in dismissing petitioners appeal and upholding the quashal of the search
warrant by the trial court.
I
Inceptively, we shall settle the procedural considerations on the matter of and the challenge to
petitioners legal standing in our courts, they being foreign corporations not licensed to do business in
the Philippines.
Private respondents aver that being foreign corporations, petitioners should have such license to
be able to maintain an action in Philippine courts. In so challenging petitioners personality to sue,
private respondents point to the fact that petitioners are the copyright owners or owners of exclusive
rights of distribution in the Philippines of copyrighted motion pictures or films, and also to the
appointment of Atty. Rico V. Domingo as their attorney-in-fact, as being constitutive of doing business
in the Philippines under Section 1(f) (1) and (2), Rule 1 of the Rules of the Board of Investments. As
foreign corporations doing business in the Philippines, Section 133 of Batas Pambansa Blg. 68, or the
Corporation Code of the Philippines, denies them the right to maintain a suit in Philippine courts in the
absence of a license to do business. Consequently, they have no right to ask for the issuance of a
search warrant.[7]
In refutation, petitioners flatly deny that they are doing business in the Philippines, [8] and contend
that private respondents have not adduced evidence to prove that petitioners are doing such
business here, as would require them to be licensed by the Securities and Exchange Commission,
other than averments in the quoted portions of petitioners Opposition to Urgent Motion to Lift Order of
Search Warrant dated April 28, 1988 and Atty. Rico V. Domingos affidavit of December 14,
1987. Moreover, an exclusive right to distribute a product or the ownership of such exclusive right
does not conclusively prove the act of doing business nor establish the presumption of doing
business.[9]
The Corporation Code provides:

Sec. 133. Doing business without a license. No foreign corporation transacting business in the
Philippines without a license, or its successors or assigns, shall be permitted to maintain or intervene
in any action, suit or proceeding in any court or administrative agency of the Philippines; but such
corporation may be sued or proceeded against before Philippine courts or administrative tribunals on
any valid cause of action recognized under Philippine laws.

The obtainment of a license prescribed by Section 125 of the Corporation Code is not a condition
precedent to the maintenance of any kind of action in Philippine courts by a foreign
corporation. However, under the aforequoted provision, no foreign corporation shall be permitted to
transact business in the Philippines, as this phrase is understood under the Corporation Code, unless
it shall have the license required by law, and until it complies with the law in transacting business
here, it shall not be permitted to maintain any suit in local courts.[10] As thus interpreted, any foreign
corporation not doing business in the Philippines may maintain an action in our courts upon any
cause of action, provided that the subject matter and the defendant are within the jurisdiction of the
court. It is not the absence of the prescribed license but doing business in the Philippines without
such license which debars the foreign corporation from access to our courts. In other words, although
a foreign corporation is without license to transact business in the Philippines, it does not follow that it
has no capacity to bring an action. Such license is not necessary if it is not engaged in business in
the Philippines.[11]
Statutory provisions in many jurisdictions are determinative of what constitutes doing business or
transacting business within that forum, in which case said provisions are controlling there. In others
where no such definition or qualification is laid down regarding acts or transactions falling within its
purview, the question rests primarily on facts and intent. It is thus held that all the combined acts of a
foreign corporation in the State must be considered, and every circumstance is material which
indicates a purpose on the part of the corporation to engage in some part of its regular business in
the State.[12]
No general rule or governing principles can be laid down as to what constitutes doing or engaging
in or transacting business. Each case must be judged in the light of its own peculiar environmental
circumstances.[13] The true tests, however, seem to be whether the foreign corporation is continuing
the body or substance of the business or enterprise for which it was organized or whether it has
substantially retired from it and turned it over to another.[14]
As a general proposition upon which many authorities agree in principle, subject to such
modifications as may be necessary in view of the particular issue or of the terms of the statute
involved, it is recognized that a foreign corporation is doing, transacting, engaging in, or carrying on
business in the State when, and ordinarily only when, it has entered the State by its agents and is
there engaged in carrying on and transacting through them some substantial part of its ordinary or
customary business, usually continuous in the sense that it may be distinguished from merely casual,
sporadic, or occasional transactions and isolated acts.[15]
The Corporation Code does not itself define or categorize what acts constitute doing or
transacting business in the Philippines. Jurisprudence has, however, held that the term implies a
continuity of commercial dealings and arrangements, and contemplates, to that extent, the
performance of acts or works or the exercise of some of the functions normally incident to or in
progressive prosecution of the purpose and subject of its organization. [16]
This traditional case law definition has evolved into a statutory definition, having been adopted
with some qualifications in various pieces of legislation in our jurisdiction.
For instance, Republic Act No. 5455[17] provides:

SECTION 1. Definitions and scope of this Act. (1) x x x; and the phrase doing business shall include
soliciting orders, purchases, service contracts, opening offices, whether called liaison offices or
branches; appointing representatives or distributors who are domiciled in the Philippines or who in
any calendar year stay in the Philippines for a period or periods totalling one hundred eighty days or
more; participating in the management, supervision or control of any domestic business firm, entity or
corporation in the Philippines; and any other act or acts that imply a continuity of commercial dealings
or arrangements, and contemplate to that extent the performance of acts or works, or the exercise of
some of the functions normally incident to, and in-progressive prosecution of, commercial gain or of
the purpose and object of the business organization.

Presidential Decree No. 1789,[18] in Article 65 thereof, defines doing business to include soliciting
orders, purchases, service contracts, opening offices, whether called liaison offices or branches;
appointing representatives or distributors who are domiciled in the Philippines or who in any calendar
year stay in the Philippines for a period or periods totalling one hundred eighty days or more;
participating in the management, supervision or control of any domestic business firm, entity or
corporation in the Philippines, and any other act or acts that imply a continuity of commercial dealings
or arrangements and contemplate to that extent the performance of acts or works, or the exercise of
some of the functions normally incident to, and in progressive prosecution of, commercial gain or of
the purpose and object of the business organization.
The implementing rules and regulations of said presidential decree conclude the enumeration of
acts constituting doing business with a catch-all definition, thus:

Sec. 1(g). Doing Business shall be any act or combination of acts enumerated in Article 65 of the
Code. In particular doing business includes:

xxx xxx xxx

(10) Any other act or acts which imply a continuity of commercial dealings or arrangements, and
contemplate to that extent the performance of acts or works, or the exercise of some of the functions
normally incident to, or in the progressive prosecution of, commercial gain or of the purpose and
object of the business organization.

Finally, Republic Act No. 7042[19] embodies such concept in this wise:

SEC. 3. Definitions. As used in this Act:

xxx xxx xxx

(d) the phrase doing business shall include soliciting orders, service contracts, opening offices,
whether called liaison offices or branches; appointing representatives or distributors domiciled in the
Philippines or who in any calendar year stay in the country for a period or periods totalling one
hundred eight(y) (180) days or more; participating in the management, supervision or control of any
domestic business, firm, entity or corporation in the Philippines; and any other act or acts that imply a
continuity of commercial dealings or arrangements, and contemplate to that extent the performance
of acts or works, or the exercise of some of the functions normally incident to, and in progressive
prosecution of, commercial gain or of the purpose and object of the business
organization: Provided, however, That the phrase doing business shall not be deemed to include
mere investment as a shareholder by a foreign entity in domestic corporations duly registered to do
business, and/or the exercise of rights as such investors; nor having a nominee director or officer to
represent its interests in such corporation; nor appointing a representative or distributor domiciled in
the Philippines which transacts business in its own name and for its own account.

Based on Article 133 of the Corporation Code and gauged by such statutory standards,
petitioners are not barred from maintaining the present action.There is no showing that, under our
statutory or case law, petitioners are doing, transacting, engaging in or carrying on business in the
Philippines as would require obtention of a license before they can seek redress from our courts. No
evidence has been offered to show that petitioners have performed any of the enumerated acts or
any other specific act indicative of an intention to conduct or transact business in the Philippines.
Accordingly, the certification issued by the Securities and Exchange Commission[20] stating that
its records do not show the registration of petitioner film companies either as corporations or
partnerships or that they have been licensed to transact business in the Philippines, while undeniably
true, is of no consequence to petitioners right to bring action in the Philippines. Verily, no record of
such registration by petitioners can be expected to be found for, as aforestated, said foreign film
corporations do not transact or do business in the Philippines and, therefore, do not need to be
licensed in order to take recourse to our courts.
Although Section 1(g) of the Implementing Rules and Regulations of the Omnibus Investments
Code lists, among others

(1) Soliciting orders, purchases (sales) or service contracts. Concrete and specific solicitations by a
foreign firm, or by an agent of such foreign firm, not acting independently of the foreign firm
amounting to negotiations or fixing of the terms and conditions of sales or service contracts,
regardless of where the contracts are actually reduced to writing, shall constitute doing business even
if the enterprise has no office or fixed place of business in the Philippines. The arrangements agreed
upon as to manner, time and terms of delivery of the goods or the transfer of title thereto is
immaterial. A foreign firm which does business through the middlemen acting in their own names,
such as indentors, commercial brokers or commission merchants, shall not be deemed doing
business in the Philippines. But such indentors, commercial brokers or commission merchants shall
be the ones deemed to be doing business in the Philippines.

(2) Appointing a representative or distributor who is domiciled in the Philippines, unless said
representative or distributor has an independent status, i.e., it transacts business in its name and for
its own account, and not in the name or for the account of a principal. Thus, where a foreign firm is
represented in the Philippines by a person or local company which does not act in its name but in the
name of the foreign firm, the latter is doing business in the Philippines.

as acts constitutive of doing business, the fact that petitioners are admittedly copyright owners or
owners of exclusive distribution rights in the Philippines of motion pictures or films does not convert
such ownership into an indicium of doing business which would require them to obtain a license
before they can sue upon a cause of action in local courts.
Neither is the appointment of Atty. Rico V. Domingo as attorney-in-fact of petitioners, with
express authority pursuant to a special power of attorney, inter alia

To lay criminal complaints with the appropriate authorities and to provide evidence in support of both
civil and criminal proceedings against any person or persons involved in the criminal infringement of
copyright, or concerning the unauthorized importation, duplication, exhibition or distribution of any
cinematographic work(s) films or video cassettes of which x x x is the owner of copyright or the owner
of exclusive rights of distribution in the Philippines pursuant to any agreement(s) between x x x and
the respective owners of copyright in such cinematographic work(s), to initiate and prosecute on
behalf of x x x criminal or civil actions in the Philippines against any person or persons unlawfully
distributing, exhibiting, selling or offering for sale any films or video cassettes of which x x x is the
owner of copyright or the owner of exclusive rights of distribution in the Philippines pursuant to any
agreement(s) between x x x and the respective owners of copyright in such works. [21]

tantamount to doing business in the Philippines. We fail to see how exercising ones legal and
property rights and taking steps for the vigilant protection of said rights, particularly the appointment
of an attorney-in-fact, can be deemed by and of themselves to be doing business here.
As a general rule, a foreign corporation will not be regarded as doing business in the State simply
because it enters into contracts with residents of the State, where such contracts are consummated
outside the State.[22] In fact, a view is taken that a foreign corporation is not doing business in the
state merely because sales of its product are made there or other business furthering its interests is
transacted there by an alleged agent, whether a corporation or a natural person, where such activities
are not under the direction and control of the foreign corporation but are engaged in by the alleged
agent as an independent business.[23]
It is generally held that sales made to customers in the State by an independent dealer who has
purchased and obtained title from the corporation to the products sold are not a doing of business by
the corporation.[24] Likewise, a foreign corporation which sells its products to persons styled
distributing agents in the State, for distribution by them, is not doing business in the State so as to
render it subject to service of process therein, where the contract with these purchasers is that they
shall buy exclusively from the foreign corporation such goods as it manufactures and shall sell them
at trade prices established by it.[25]
It has moreover been held that the act of a foreign corporation in engaging an attorney to
represent it in a Federal court sitting in a particular State is not doing business within the scope of the
minimum contact test.[26] With much more reason should this doctrine apply to the mere retainer of
Atty. Domingo for legal protection against contingent acts of intellectual piracy.
In accordance with the rule that doing business imports only acts in furtherance of the purposes
for which a foreign corporation was organized, it is held that the mere institution and prosecution or
defense of a suit, particularly if the transaction which is the basis of the suit took place out of the
State, do not amount to the doing of business in the State. The institution of a suit or the removal
thereof is neither the making of a contract nor the doing of business within a constitutional provision
placing foreign corporations licensed to do business in the State under the same regulations,
limitations and liabilities with respect to such acts as domestic corporations. Merely engaging in
litigation has been considered as not a sufficient minimum contact to warrant the exercise of
jurisdiction over a foreign corporation.[27]
As a consideration aside, we have perforce to comment on private respondents basis for arguing
that petitioners are barred from maintaining suit in the Philippines. For allegedly being foreign
corporations doing business in the Philippines without a license, private respondents repeatedly
maintain in all their pleadings that petitioners have thereby no legal personality to bring an action
before Philippine courts.[28]
Among the grounds for a motion to dismiss under the Rules of Court are lack of legal capacity to
sue[29] and that the complaint states no cause of action.[30] Lack of legal capacity to sue means that
the plaintiff is not in the exercise of his civil rights, or does not have the necessary qualification to
appear in the case, or does not have the character or representation he claims. [31] On the other hand,
a case is dismissible for lack of personality to sue upon proof that the plaintiff is not the real party-in-
interest, hence grounded on failure to state a cause of action.[32] The term lack of capacity to sue
should not be confused with the term lack of personality to sue. While the former refers to a plaintiffs
general disability to sue, such as on account of minority, insanity, incompetence, lack of juridical
personality or any other general disqualifications of a party, the latter refers to the fact that the plaintiff
is not the real party- in-interest. Correspondingly, the first can be a ground for a motion to dismiss
based on the ground of lack of legal capacity to sue;[33] whereas the second can be used as a ground
for a motion to dismiss based on the fact that the complaint, on the face thereof, evidently states no
cause of action.[34]
Applying the above discussion to the instant petition, the ground available for barring recourse to
our courts by an unlicensed foreign corporation doing or transacting business in the Philippines
should properly be lack of capacity to sue, not lack of personality to sue. Certainly, a corporation
whose legal rights have been violated is undeniably such, if not the only, real party-in-interest to bring
suit thereon although, for failure to comply with the licensing requirement, it is not capacitated to
maintain any suit before our courts.
Lastly, on this point, we reiterate this Courts rejection of the common procedural tactics of erring
local companies which, when sued by unlicensed foreign corporations not engaged in business in the
Philippines, invoke the latters supposed lack of capacity to sue. The doctrine of lack of capacity to
sue based on failure to first acquire a local license is based on considerations of public policy. It was
never intended to favor nor insulate from suit unscrupulous establishments or nationals in case of
breach of valid obligations or violations of legal rights of unsuspecting foreign firms or entities simply
because they are not licensed to do business in the country.[35]
II
We now proceed to the main issue of the retroactive application to the present controversy of the
ruling in 20th Century Fox Film Corporation vs. Court of Appeals, et al., promulgated on August 19,
1988,[36] that for the determination of probable cause to support the issuance of a search warrant in
copyright infringement cases involving videograms, the production of the master tape for comparison
with the allegedly pirated copies is necessary.
Petitioners assert that the issuance of a search warrant is addressed to the discretion of the court
subject to the determination of probable cause in accordance with the procedure prescribed therefor
under Sections 3 and 4 of Rule 126. As of the time of the application for the search warrant in
question, the controlling criterion for the finding of probable cause was that enunciated in Burgos vs.
Chief of Staff[37] stating that:
Probable cause for a search warrant is defined as such facts and circumstances which would
lead a reasonably discrete and prudent man to believe that an offense has been committed and that
the objects sought in connection with the offense are in the place sought to be searched.
According to petitioners, after complying with what the law then required, the lower court
determined that there was probable cause for the issuance of a search warrant, and which
determination in fact led to the issuance and service on December 14, 1987 of Search Warrant No.
87-053. It is further argued that any search warrant so issued in accordance with all applicable legal
requirements is valid, for the lower court could not possibly have been expected to apply, as the basis
for a finding of probable cause for the issuance of a search warrant in copyright infringement cases
involving videograms, a pronouncement which was not existent at the time of such determination, on
December 14, 1987, that is, the doctrine in the 20th Century Fox case that was promulgated only on
August 19, 1988, or over eight months later.
Private respondents predictably argue in support of the ruling of the Court of Appeals sustaining
the quashal of the search warrant by the lower court on the strength of that 20th Century Fox ruling
which, they claim, goes into the very essence of probable cause. At the time of the issuance of the
search warrant involved here, although the 20th Century Fox case had not yet been decided, Section
2, Article III of the Constitution and Section 3, Rule 126 of the 1985 Rules on Criminal Procedure
embodied the prevailing and governing law on the matter. The ruling in 20th Century Fox was merely
an application of the law on probable cause. Hence, they posit that there was no law that was
retrospectively applied, since the law had been there all along. To refrain from applying the 20th
Century Fox ruling, which had supervened as a doctrine promulgated at the time of the resolution of
private respondents motion for reconsideration seeking the quashal of the search warrant for failure
of the trial court to require presentation of the master tapes prior to the issuance of the search
warrant, would have constituted grave abuse of discretion.[38]
Respondent court upheld the retroactive application of the 20th Century Fox ruling by the trial
court in resolving petitioners motion for reconsideration in favor of the quashal of the search warrant,
on this renovated thesis:

And whether this doctrine should apply retroactively, it must be noted that in the 20th Century Fox
case, the lower court quashed the earlier search warrant it issued. On certiorari, the Supreme Court
affirmed the quashal on the ground among others that the master tapes or copyrighted films were not
presented for comparison with the purchased evidence of the video tapes to determine whether the
latter is an unauthorized reproduction of the former.

If the lower court in the Century Fox case did not quash the warrant, it is Our view that the Supreme
Court would have invalidated the warrant just the same considering the very strict requirement set by
the Supreme Court for the determination of probable cause in copyright infringement cases as
enunciated in this 20th Century Fox case. This is so because, as was stated by the Supreme Court in
the said case, the master tapes and the pirated tapes must be presented for comparison to satisfy the
requirement of probable cause. So it goes back to the very existence of probable cause. x x x[39]

Mindful as we are of the ramifications of the doctrine of stare decisis and the rudiments of fair
play, it is our considered view that the 20th Century Foxruling cannot be retroactively applied to the
instant case to justify the quashal of Search Warrant No. 87-053. Herein petitioners consistent
position that the order of the lower court of September 5, 1988 denying therein defendants motion to
lift the order of search warrant was properly issued, there having been satisfactory compliance with
the then prevailing standards under the law for determination of probable cause, is indeed well
taken. The lower court could not possibly have expected more evidence from petitioners in their
application for a search warrant other than what the law and jurisprudence, then existing and judicially
accepted, required with respect to the finding of probable cause.
Article 4 of the Civil Code provides that (l)aws shall have no retroactive effect, unless the contrary
is provided. Correlatively, Article 8 of the same Code declares that (j)udicial decisions applying the
laws or the Constitution shall form part of the legal system of the Philippines.
Jurisprudence, in our system of government, cannot be considered as an independent source of
law; it cannot create law.[40] While it is true that judicial decisions which apply or interpret the
Constitution or the laws are part of the legal system of the Philippines, still they are not laws. Judicial
decisions, though not laws, are nonetheless evidence of what the laws mean, and it is for this reason
that they are part of the legal system of the Philippines.[41]Judicial decisions of the Supreme Court
assume the same authority as the statute itself.[42]
Interpreting the aforequoted correlated provisions of the Civil Code and in light of the above
disquisition, this Court emphatically declared in Co vs. Court of Appeals, et al.[43] that the principle of
prospectivity applies not only to original amendatory statutes and administrative rulings and circulars,
but also, and properly so, to judicial decisions. Our holding in the earlier case of People vs.
Jubinal[44] echoes the rationale for this judicial declaration, viz.:

Decisions of this Court, although in themselves not laws, are nevertheless evidence of what the laws
mean, and this is the reason why under Article 8 of the New Civil Code, Judicial decisions applying or
interpreting the laws or the Constitution shall form part of the legal system. The interpretation upon a
law by this Court constitutes, in a way, a part of the law as of the date that the law was originally
passed, since this Courts construction merely establishes the contemporaneous legislative intent that
the law thus construed intends to effectuate. The settled rule supported by numerous authorities is a
restatement of the legal maxim legis interpretation legis vim obtinet the interpretation placed upon the
written law by a competent court has the force of law. x x x, but when a doctrine of this Court is
overruled and a different view is adopted, the new doctrine should be applied prospectively, and
should not apply to parties who had relied on the old doctrine and acted on the faith thereof. x x x.
(Stress supplied).

This was forcefully reiterated in Spouses Benzonan vs. Court of Appeals, et al.,[45] where the
Court expounded:

x x x. But while our decisions form part of the law of the land, they are also subject to Article 4 of the
Civil Code which provides that laws shall have no retroactive effect unless the contrary is provided.
This is expressed in the familiar legal maximum lex prospicit, non respicit, the law looks forward not
backward. The rationale against retroactivity is easy to perceive. The retroactive application of a law
usually divests rights that have already become vested or impairs the obligations of contract and
hence, is unconstitutional (Francisco v. Certeza, 3 SCRA 565 [1961]). The same consideration
underlies our rulings giving only prospective effect to decisions enunciating newdoctrines. x x x.

The reasoning behind Senarillos vs. Hermosisima[46] that judicial interpretation of a statute
constitutes part of the law as of the date it was originally passed, since the Courts construction merely
establishes the contemporaneous legislative intent that the interpreted law carried into effect, is all too
familiar.Such judicial doctrine does not amount to the passage of a new law but consists merely of a
construction or interpretation of a pre-existing one, and that is precisely the situation obtaining in this
case.
It is consequently clear that a judicial interpretation becomes a part of the law as of the date that
law was originally passed, subject only to the qualification that when a doctrine of this Court is
overruled and a different view is adopted, and more so when there is a reversal thereof, the new
doctrine should be applied prospectively and should not apply to parties who relied on the old
doctrine and acted in good faith.[47] To hold otherwise would be to deprive the law of its quality of
fairness and justice then, if there is no recognition of what had transpired prior to such adjudication.[48]
There is merit in petitioners impassioned and well-founded argumentation:

The case of 20th Century Fox Film Corporation vs. Court of Appeals, et al., 164 SCRA 655 (August
19, 1988) (hereinafter 20th Century Fox) was inexistent in December of 1987 when Search Warrant
87-053 was issued by the lower court. Hence, it boggles the imagination how the lower court could be
expected to apply the formulation of 20th Century Fox in finding probable cause when the formulation
was yet non-existent.

xxx xxx xxx

In short, the lower court was convinced at that time after conducting searching examination questions
of the applicant and his witnesses that an offense had been committed and that the objects sought in
connection with the offense (were) in the place sought to be searched (Burgos v. Chief of Staff, et al.,
133 SCRA 800). It is indisputable, therefore, that at the time of the application, or on December 14,
1987, the lower court did not commit any error nor did it fail to comply with any legal requirement for
the valid issuance of search warrant.

x x x. (W)e believe that the lower court should be considered as having followed the requirements of
the law in issuing Search Warrant No. 87-053. The search warrant is therefore valid and binding. It
must be noted that nowhere is it found in the allegations of the Respondents that the lower court
failed to apply the law as then interpreted in 1987. Hence, we find it absurd that it is (sic) should be
seen otherwise, because it is simply impossible to have required the lower court to apply a
formulation which will only be defined six months later.

Furthermore, it is unjust and unfair to require compliance with legal and/or doctrinal requirements
which are inexistent at the time they were supposed to have been complied with.

xxx xxx xxx

x x x. If the lower courts reversal will be sustained, what encouragement can be given to courts and
litigants to respect the law and rules if they can expect with reasonable certainty that upon the
passage of a new rule, their conduct can still be open to question? This certainly breeds instability in
our system of dispensing justice. For Petitioners who took special effort to redress their grievances
and to protect their property rights by resorting to the remedies provided by the law, it is most unfair
that fealty to the rules and procedures then obtaining would bear but fruits of injustice. [49]

Withal, even the proposition that the prospectivity of judicial decisions imports application thereof
not only to future cases but also to cases still ongoing or not yet final when the decision was
promulgated, should not be countenanced in the jural sphere on account of its inevitably unsettling
repercussions.More to the point, it is felt that the reasonableness of the added requirement in 20th
Century Fox calling for the production of the master tapes of the copyrighted films for determination of
probable cause in copyright infringement cases needs revisiting and clarification.
It will be recalled that the 20th Century Fox case arose from search warrant proceedings in
anticipation of the filing of a case for the unauthorized sale or renting out of copyrighted films in
videotape format in violation of Presidential Decree No. 49. It revolved around the meaning of
probable cause within the context of the constitutional provision against illegal searches and seizures,
as applied to copyright infringement cases involving videotapes.
Therein it was ruled that

The presentation of master tapes of the copyrighted films from which the pirated films were allegedly
copied, was necessary for the validity of search warrants against those who have in their possession
the pirated films. The petitioners argument to the effect that the presentation of the master tapes at
the time of application may not be necessary as these would be merely evidentiary in nature and not
determinative of whether or not a probable cause exists to justify the issuance of the search warrants
is not meritorious. The court cannot presume that duplicate or copied tapes were necessarily
reproduced from master tapes that it owns.
The application for search warrants was directed against video tape outlets which allegedly were
engaged in the unauthorized sale and renting out of copyrighted films belonging to the petitioner
pursuant to P.D. 49.

The essence of a copyright infringement is the similarity or at least substantial similarity of the
purported pirated works to the copyrighted work. Hence, the applicant must present to the court the
copyrighted films to compare them with the purchased evidence of the video tapes allegedly pirated
to determine whether the latter is an unauthorized reproduction of the former. This linkage of the
copyrighted films to the pirated films must be established to satisfy the requirements of probable
cause. Mere allegations as to the existence of the copyrighted films cannot serve as basis for the
issuance of a search warrant.

For a closer and more perspicuous appreciation of the factual antecedents of 20th Century Fox,
the pertinent portions of the decision therein are quoted hereunder, to wit:

In the instant case, the lower court lifted the three questioned search warrants against the private
respondents on the ground that it acted on the application for the issuance of the said search
warrants and granted it on the misrepresentations of applicant NBI and its witnesses that infringement
of copyright or a piracy of a particular film have been committed. Thus the lower court stated in its
questioned order dated January 2, 1986:

According to the movant, all three witnesses during the proceedings in the application for the three
search warrants testified of their own personal knowledge. Yet, Atty. Albino Reyes of the NBI stated
that the counsel or representative of the Twentieth Century Fox Corporation will testify on the video
cassettes that were pirated, so that he did not have personal knowledge of the alleged piracy. The
witness Bacani also said that the video cassettes were pirated without stating the manner it was
pirated and that it was Atty. Domingo that has knowledge of that fact.

On the part of Atty. Domingo, he said that the re-taping of the allegedly pirated tapes was from
master tapes allegedly belonging to the Twentieth Century Fox, because, according to him it is of his
personal knowledge.

At the hearing of the Motion for Reconsideration, Senior NBI Agent Atty. Albino Reyes testified
that when the complaint for infringement was brought to the NBI, the master tapes of the allegedly
pirated tapes were shown to him and he made comparisons of the tapes with those purchased by
their man Bacani. Why the master tapes or at least the film reels of the allegedly pirated tapes were
not shown to the Court during the application gives some misgivings as to the truth of that bare
statement of the NBI agent on the witness stand.

Again as the application and search proceedings is a prelude to the filing of criminal cases under P.D.
49, the copyright infringement law, and although what is required for the issuance thereof is merely
the presence of probable cause, that probable cause must be satisfactory to the Court, for it is a time-
honored precept that proceedings to put a man to task as an offender under our laws should be
interpreted in strictissimi juris against the government and liberally in favor of the alleged offender.

xxx xxx xxx

This doctrine has never been overturned, and as a matter of fact it had been enshrined in the Bill of
Rights in our 1973 Constitution.

So that lacking in persuasive effect, the allegation that master tapes were viewed by the NBI and
were compared to the purchased and seized video tapes from the respondents establishments, it
should be dismissed as not supported by competent evidence and for that matter the probable cause
hovers in that grey debatable twilight zone between black and white resolvable in favor of
respondents herein.

But the glaring fact is that Cocoon, the first video tape mentioned in the search warrant, was not even
duly registered or copyrighted in the Philippines. (Annex C of Opposition, p. 152, record.) So that
lacking in the requisite presentation to the Court of an alleged master tape for purposes of
comparison with the purchased evidence of the video tapes allegedly pirated and those seized from
respondents, there was no way to determine whether there really was piracy, or copying of the film of
the complainant Twentieth Century Fox.
xxx xxx xxx

The lower court, therefore, lifted the three (3) questioned search warrants in the absence of probable
cause that the private respondents violated P.D. 49. As found by the court, the NBI agents who acted
as witnesses did not have personal knowledge of the subject matter of their testimony which was the
alleged commission of the offense by the private respondents. Only the petitioners counsel who was
also a witness during the application for the issuance of the search warrants stated that he had
personal knowledge that the confiscated tapes owned by the private respondents were pirated tapes
taken from master tapes belonging to the petitioner. However, the lower court did not give much
credence to his testimony in view of the fact that the master tapes of the allegedly pirated tapes were
not shown to the court during the application (Italics ours).

The italicized passages readily expose the reason why the trial court therein required the
presentation of the master tapes of the allegedly pirated films in order to convince itself of the
existence of probable cause under the factual milieu peculiar to that case. In the case at bar,
respondent appellate court itself observed:

We feel that the rationale behind the aforequoted doctrine is that the pirated copies as well as the
master tapes, unlike the other types of personal properties which may be seized, were available for
presentation to the court at the time of the application for a search warrant to determine the existence
of the linkage of the copyrighted films with the pirated ones. Thus, there is no reason not to present
them (Italics supplied for emphasis).[50]

In fine, the supposed pronunciamento in said case regarding the necessity for the presentation of
the master tapes of the copyrighted films for the validity of search warrants should at most be
understood to merely serve as a guidepost in determining the existence of probable cause in
copyright infringement cases where there is doubt as to the true nexus between the master tape and
the pirated copies. An objective and careful reading of the decision in said case could lead to no other
conclusion than that said directive was hardly intended to be a sweeping and inflexible requirement in
all or similar copyright infringement cases. Judicial dicta should always be construed within the factual
matrix of their parturition, otherwise a careless interpretation thereof could unfairly fault the writer with
the vice of overstatement and the reader with the fallacy of undue generalization.
In the case at bar, NBI Senior Agent Lauro C. Reyes who filed the application for search warrant
with the lower court following a formal complaint lodged by petitioners, judging from his
affidavit[51] and his deposition,[52] did testify on matters within his personal knowledge based on said
complaint of petitioners as well as his own investigation and surveillance of the private respondents
video rental shop. Likewise, Atty. Rico V. Domingo, in his capacity as attorney-in-fact, stated in his
affidavit[53] and further expounded in his deposition[54] that he personally knew of the fact that private
respondents had never been authorized by his clients to reproduce, lease and possess for the
purpose of selling any of the copyrighted films.
Both testimonies of Agent Reyes and Atty. Domingo were corroborated by Rene C. Baltazar, a
private researcher retained by Motion Pictures Association of America, Inc. (MPAA, Inc.), who was
likewise presented as a witness during the search warrant proceedings. [55] The records clearly reflect
that the testimonies of the abovenamed witnesses were straightforward and stemmed from matters
within their personal knowledge. They displayed none of the ambivalence and uncertainty that the
witnesses in the 20th Century Fox case exhibited. This categorical forthrightness in their statements,
among others, was what initially and correctly convinced the trial court to make a finding of the
existence of probable cause.
There is no originality in the argument of private respondents against the validity of the search
warrant, obviously borrowed from 20th Century Fox, that petitioners witnesses NBI Agent Lauro C.
Reyes, Atty. Rico V. Domingo and Rene C. Baltazar did not have personal knowledge of the subject
matter of their respective testimonies and that said witnesses claim that the video tapes were pirated,
without stating the manner by which these were pirated, is a conclusion of fact without basis. [56] The
difference, it must be pointed out, is that the records in the present case reveal that (1) there is no
allegation of misrepresentation, much less a finding thereof by the lower court, on the part of
petitioners witnesses; (2) there is no denial on the part of private respondents that the tapes seized
were illegitimate copies of the copyrighted ones nor have they shown that they were given any
authority by petitioners to copy, sell, lease, distribute or circulate, or at least, to offer for sale, lease,
distribution or circulation the said video tapes; and (3) a discreet but extensive surveillance of the
suspected area was undertaken by petitioners witnesses sufficient to enable them to execute
trustworthy affidavits and depositions regarding matters discovered in the course thereof and of which
they have personal knowledge.
It is evidently incorrect to suggest, as the ruling in 20th Century Fox may appear to do, that in
copyright infringement cases, the presentation of master tapes of the copyrighted films is always
necessary to meet the requirement of probable cause and that, in the absence thereof, there can be
no finding of probable cause for the issuance of a search warrant. It is true that such master tapes are
object evidence, with the merit that in this class of evidence the ascertainment of the controverted fact
is made through demonstrations involving the direct use of the senses of the presiding
magistrate.[57] Such auxiliary procedure, however, does not rule out the use of testimonial or
documentary evidence, depositions, admissions or other classes of evidence tending to prove
the factum probandum,[58] especially where the production in court of object evidence would result in
delay, inconvenience or expenses out of proportion to its evidentiary value.[59]
Of course, as a general rule, constitutional and statutory provisions relating to search warrants
prohibit their issuance except on a showing of probable cause, supported by oath or
affirmation. These provisions prevent the issuance of warrants on loose, vague, or doubtful bases of
fact, and emphasize the purpose to protect against all general searches. [60] Indeed, Article III of our
Constitution mandates in Sec. 2 thereof that no search warrant shall issue except upon probable
cause to be determined personally by the judge after examination under oath or affirmation of the
complainant and the witnesses he may produce, and particularly describing the place to be searched
and the things to be seized; and Sec. 3 thereof provides that any evidence obtained in violation of the
preceding section shall be inadmissible for any purpose in any proceeding.
These constitutional strictures are implemented by the following provisions of Rule 126 of the
Rules of Court:

Sec. 3. Requisites for issuing search warrant. A search warrant shall not issue but upon probable
cause in connection with one specific offense to be determined personally by the judge after
examination under oath or affirmation of the complainant and the witnesses he may produce, and
particularly describing the place to be searched and the things to be seized.

Sec. 4. Examination of complainant; record. The judge must, before issuing the warrant, personally
examine in the form of searching questions and answers, in writing and under oath the complainant
and any witnesses he may produce on facts personally known to them and attach to the record their
sworn statements together with any affidavits submitted.

Sec. 5. Issuance and form of search warrant. If the judge is thereupon satisfied of the existence of
facts upon which the application is based, or that there is probable cause to believe that they exist, he
must issue the warrant, which must be substantially in the form prescribed by these Rules.

The constitutional and statutory provisions of various jurisdictions requiring a showing of probable
cause before a search warrant can be issued are mandatory and must be complied with, and such a
showing has been held to be an unqualified condition precedent to the issuance of a warrant. A
search warrant not based on probable cause is a nullity, or is void, and the issuance thereof is, in
legal contemplation, arbitrary.[61] It behooves us, then, to review the concept of probable cause, firstly,
from representative holdings in the American jurisdiction from which we patterned our doctrines on
the matter.
Although the term probable cause has been said to have a well-defined meaning in the law, the
term is exceedingly difficult to define, in this case, with any degree of precision; indeed, no definition
of it which would justify the issuance of a search warrant can be formulated which would cover every
state of facts which might arise, and no formula or standard, or hard and fast rule, may be laid down
which may be applied to the facts of every situation. [62] As to what acts constitute probable cause
seem incapable of definition.[63] There is, of necessity, no exact test.[64]
At best, the term probable cause has been understood to mean a reasonable ground of
suspicion, supported by circumstances sufficiently strong in themselves to warrant a cautious man in
the belief that the person accused is guilty of the offense with which he is charged; [65] or the existence
of such facts and circumstances as would excite an honest belief in a reasonable mind acting on all
the facts and circumstances within the knowledge of the magistrate that the charge made by the
applicant for the warrant is true.[66]
Probable cause does not mean actual and positive cause, nor does it import absolute
certainty. The determination of the existence of probable cause is not concerned with the question of
whether the offense charged has been or is being committed in fact, or whether the accused is guilty
or innocent, but only whether the affiant has reasonable grounds for his belief.[67] The requirement
is less than certainty or proof, but more than suspicion or possibility.[68]
In Philippine jurisprudence, probable cause has been uniformly defined as such facts and
circumstances which would lead a reasonable, discreet and prudent man to believe that an offense
has been committed, and that the objects sought in connection with the offense are in the place
sought to be searched.[69] It being the duty of the issuing officer to issue, or refuse to issue, the
warrant as soon as practicable after the application therefor is filed, [70] the facts warranting the
conclusion of probable cause must be assessed at the time of such judicial determination by
necessarily using legal standards then set forth in law and jurisprudence, and not those that have yet
to be crafted thereafter.
As already stated, the definition of probable cause enunciated in Burgos, Sr. vs. Chief of Staff, et
al., supra, vis-a-vis the provisions of Sections 3 and 4 of Rule 126, were the prevailing and controlling
legal standards, as they continue to be, by which a finding of probable cause is tested. Since the
proprietary of the issuance of a search warrant is to be determined at the time of the application
therefor, which in turn must not be too remote in time from the occurrence of the offense alleged to
have been committed, the issuing judge, in determining the existence of probable cause, can and
should logically look to the touchstones in the laws therefore enacted and the decisions already
promulgated at the time, and not to those which had not yet even been conceived or formulated.
It is worth noting that neither the Constitution nor the Rules of Court attempt to define probable
cause, obviously for the purpose of leaving such matter to the courts discretion within the particular
facts of each case. Although the Constitution prohibits the issuance of a search warrant in the
absence of probable cause, such constitutional inhibition does not command the legislature to
establish a definition or formula for determining what shall constitute probable cause. [71] Thus,
Congress, despite its broad authority to fashion standards of reasonableness for searches and
seizures,[72] does not venture to make such a definition or standard formulation of probable cause, nor
categorize what facts and circumstances make up the same, much less limit the determination
thereof to and within the circumscription of a particular class of evidence, all in deference to judicial
discretion and probity.[73]
Accordingly, to restrict the exercise of discretion by a judge by adding a particular requirement
(the presentation of master tapes, as intimated by 20th Century Fox) not provided nor implied in the
law for a finding of probable cause is beyond the realm of judicial competence or statemanship. It
serves no purpose but to stultify and constrict the judicious exercise of a court's prerogatives and to
denigrate the judicial duty of determining the existence of probable cause to a mere ministerial or
mechanical function. There is, to repeat, no law or rule which requires that the existence of probable
cause is or should be determined solely by a specific kind of evidence. Surely, this could not have
been contemplated by the framers of the Constitution, and we do not believe that the Court intended
the statement in 20th Century Fox regarding master tapes as the dictum for all seasons and reasons
in infringement cases.
Turning now to the case at bar, it can be gleaned from the records that the lower court followed
the prescribed procedure for the issuances of a search warrant: (1) the examination under oath or
affirmation of the complainant and his witnesses, with them particularly describing the place to be
searched and the things to be seized; (2) an examination personally conducted by the judge in the
form of searching questions and answers, in writing and under oath of the complainant and witnesses
on facts personally known to them; and, (3) the taking of sworn statements, together with the
affidavits submitted, which were duly attached to the records.
Thereafter, the court a quo made the following factual findings leading to the issuance of the
search warrant now subject to this controversy:

In the instant case, the following facts have been established: (1) copyrighted video tapes bearing
titles enumerated in Search Warrant No. 87-053 were being sold, leased, distributed or circulated, or
offered for sale, lease, distribution, or transferred or caused to be transferred by defendants at their
video outlets, without the written consent of the private complainants or their assignee; (2) recovered
or confiscated from defendants' possession were video tapes containing copyrighted motion picture
films without the authority of the complainant; (3) the video tapes originated from spurious or
unauthorized persons; and (4) said video tapes were exact reproductions of the films listed in the
search warrant whose copyrights or distribution rights were owned by complainants.
The basis of these facts are the affidavits and depositions of NBI Senior Agent Lauro C. Reyes, Atty.
Rico V. Domingo, and Rene C. Baltazar. Motion Pictures Association of America, Inc. (MPAA) thru
their counsel, Atty. Rico V. Domingo, filed a complaint with the National Bureau of Investigation
against certain video establishments one of which is defendant, for violation of PD No. 49 as
amended by PD No, 1988. Atty. Lauro C. Reyes led a team to conduct discreet surveillance
operations on said video establishments. Per information earlier gathered by Atty. Domingo,
defendants were engaged in the illegal sale, rental, distribution, circulation or public exhibition of
copyrighted films of MPAA without its written authority or its members. Knowing that defendant
Sunshine Home Video and its proprietor, Mr. Danilo Pelindario, were not authorized by MPAA to
reproduce, lease, and possess for the purpose of selling any of its copyrighted motion pictures, he
instructed his researcher, Mr. Rene Baltazar to rent two video cassettes from said defendants on
October 21, 1987. Rene C. Baltazar proceeded to Sunshine Home Video and rented tapes containing
Little Shop of Horror.He was issued rental slip No. 26362 dated October 21, 1987 for P10.00 with a
deposit of P100.00. Again, on December 11, 1987, he returned to Sunshine Home Video and rented
Robocop with a rental slip No. 25271 also for P10.00. On the basis of the complaint of MPAA thru
counsel, Atty. Lauro C. Reyes personally went to Sunshine Home Video at No. 6 Mayfair Center,
Magallanes Commercial Center, Makati. His last visit was on December 7, 1987. There, he found the
video outlet renting, leasing, distributing video cassette tapes whose titles were copyrighted and
without the authority of MPAA.

Given these facts, a probable cause exists. x x x.[74]

The lower court subsequently executed a volte-face, despite its prior detailed and substantiated
findings, by stating in its order of November 22, 1988 denying petitioners motion for reconsideration
and quashing the search warrant that

x x x. The two (2) cases have a common factual milieu; both involve alleged pirated copyrighted films
of private complainants which were found in the possession or control of the defendants. Hence, the
necessity of the presentation of the master tapes from which the pirated films were allegedly copied is
necessary in the instant case, to establish the existence of probable cause.[75]

Being based solely on an unjustifiable and improper retroactive application of the master tape
requirement generated by 20th Century Fox upon a factual situation completely different from that in
the case at bar, and without anything more, this later order clearly defies elemental fair play and is a
gross reversible error. In fact, this observation of the Court in La Chemise Lacoste, S.A. vs.
Fernandez, et al., supra, may just as easily apply to the present case:

A review of the grounds invoked x x x in his motion to quash the search warrants reveals the fact that
they are not appropriate for quashing a warrant. They are matters of defense which should be
ventilated during the trial on the merits of the case. x x x

As correctly pointed out by petitioners, a blind espousal of the requisite of presentation of the
master tapes in copyright infringement cases, as the prime determinant of probable cause, is too
exacting and impracticable a requirement to be complied with in a search warrant application which, it
must not be overlooked, is only an ancillary proceeding. Further, on realistic considerations, a strict
application of said requirement militates against the elements of secrecy and speed which underlie
covert investigative and surveillance operations in police enforcement campaigns against all forms of
criminality, considering that the master tapes of a motion picture required to be presented before the
court consists of several reels contained in circular steel casings which, because of their bulk, will
definitely draw attention, unlike diminutive objects like video tapes which can be easily
concealed.[76] With hundreds of titles being pirated, this onerous and tedious imposition would be
multiplied a hundredfold by judicial fiat, discouraging and preventing legal recourses in foreign
jurisdictions.
Given the present international awareness and furor over violations in large scale of intellectual
property rights, calling for transnational sanctions, it bears calling to mind the Courts admonition also
in La Chemise Lacoste, supra, that

x x x. Judges all over the country are well advised to remember that court processes should not be
used as instruments to, unwittingly or otherwise, aid counterfeiters and intellectual pirates, tie the
hands of the law as it seeks to protect the Filipino consuming public and frustrate executive and
administrative implementation of solemn commitments pursuant to international conventions and
treaties.

III
The amendment of Section 56 of Presidential Decree No. 49 by Presidential Decree No.
1987,[77] which should here be publicized judicially, brought about the revision of its penalty structure
and enumerated additional acts considered violative of said decree on intellectual property, namely,
(1) directly or indirectly transferring or causing to be transferred any sound recording or motion picture
or other audio-visual works so recorded with intent to sell, lease, publicly exhibit or cause to be sold,
leased or publicly exhibited, or to use or cause to be used for profit such articles on which sounds,
motion pictures, or other audio-visual works are so transferred without the written consent of the
owner or his assignee; (2) selling, leasing, distributing, circulating, publicly exhibiting, or offering for
sale, lease, distribution, or possessing for the purpose of sale, lease, distribution, circulation or public
exhibition any of the abovementioned articles, without the written consent of the owner or his
assignee; and, (3) directly or indirectly offering or making available for a fee, rental, or any other form
of compensation any equipment, machinery, paraphernalia or any material with the knowledge that
such equipment, machinery, paraphernalia or material will be used by another to reproduce, without
the consent of the owner, any phonograph record, disc, wire, tape, film or other article on which
sounds, motion pictures or other audio-visual recordings may be transferred, and which provide
distinct bases for criminal prosecution, being crimes independently punishable under Presidential
Decree No. 49, as amended, aside from the act of infringing or aiding or abetting such infringement
under Section 29.
The trial courts finding that private respondents committed acts in blatant transgression of
Presidential Decree No. 49 all the more bolsters its findings of probable cause, which determination
can be reached even in the absence of master tapes by the judge in the exercise of sound
discretion. The executive concern and resolve expressed in the foregoing amendments to the decree
for the protection of intellectual property rights should be matched by corresponding judicial vigilance
and activism, instead of the apathy of submitting to technicalities in the face of ample evidence of
guilt.
The essence of intellectual piracy should be essayed in conceptual terms in order to underscore
its gravity by an appropriate understanding thereof.Infringement of a copyright is a trespass on a
private domain owned and occupied by the owner of the copyright, and, therefore, protected by law,
and infringement of copyright, or piracy, which is a synonymous term in this connection, consists in
the doing by any person, without the consent of the owner of the copyright, of anything the sole right
to do which is conferred by statute on the owner of the copyright. [78]
A copy of a piracy is an infringement of the original, and it is no defense that the pirate, in such
cases, did not know what works he was indirectly copying, or did not know whether or not he was
infringing any copyright; he at least knew that what he was copying was not his, and he copied at his
peril.In determining the question of infringement, the amount of matter copied from the copyrighted
work is an important consideration. To constitute infringement, it is not necessary that the whole or
even a large portion of the work shall have been copied. If so much is taken that the value of the
original is sensibly diminished, or the labors of the original author are substantially and to an injurious
extent appropriated by another, that is sufficient in point of law to constitute a piracy.[79] The question
of whether there has been an actionable infringement of a literary, musical, or artistic work in motion
pictures, radio or television being one of fact,[80] it should properly be determined during the trial. That
is the stage calling for conclusive or preponderating evidence, and not the summary proceeding for
the issuance of a search warrant wherein both lower courts erroneously require the master tapes.
In disregarding private respondents argument that Search Warrant No. 87-053 is a general
warrant, the lower court observed that it was worded in a manner that the enumerated seizable items
bear direct relation to the offense of violation of Sec. 56 of PD 49 as amended. It authorized only the
seizur(e) of articles used or intended to be used in the unlawful sale, lease and other unconcerted
acts in violation of PD 49 as amended. x x x.[81]
On this point, Bache and Co., (Phil.), Inc., et al. vs. Ruiz, et al.,[82] instructs and enlightens:

A search warrant may be said to particularly describe the things to be seized when the description
therein is as specific as the circumstances will ordinarily allow (People vs. Rubio, 57 Phil. 384); or
when the description expresses a conclusion of fact not of law by which the warrant officer may be
guided in making the search and seizure (idem., dissent of Abad Santos, J.,); or when the things
described are limited to those which bear direct relation to the offense for which the warrant is being
issued (Sec. 2, Rule 126, Revised Rules of Court). x x x. If the articles desired to be seized have any
direct relation to an offense committed, the applicant must necessarily have some evidence, other
than those articles, to prove the said offense; and the articles subject of search and seizure should
come in handy merely to strengthen such evidence. x x x.

On private respondents averment that the search warrant was made applicable to more than one
specific offense on the ground that there are as many offenses of infringement as there are rights
protected and, therefore, to issue one search warrant for all the movie titles allegedly pirated violates
the rule that a search warrant must be issued only in connection with one specific offense, the lower
court said:

x x x. As the face of the search warrant itself indicates, it was issued for violation of Section 56, PD 49
as amended only. The specifications therein (in Annex A) merely refer to the titles of the copyrighted
motion pictures/films belonging to private complainants which defendants were in control/possession
for sale, lease, distribution or public exhibition in contravention of Sec. 56, PD 49 as amended. [83]

That there were several counts of the offense of copyright infringement and the search warrant
uncovered several contraband items in the form of pirated video tapes is not to be confused with the
number of offenses charged. The search warrant herein issued does not violate the one-specific-
offense rule.
It is pointless for private respondents to insist on compliance with the registration and deposit
requirements under Presidential Decree No. 49 as prerequisites for invoking the courts protective
mantle in copyright infringement cases. As explained by the court below:

Defendants-movants contend that PD 49 as amended covers only producers who have complied with
the requirements of deposit and notice (in other words registration) under Sections 49 and 50
thereof. Absent such registration, as in this case, there was no right created, hence, no infringement
under PD 49 as amended. This is not well-taken.

As correctly pointed out by private complainants-oppositors, the Department of Justice has resolved
this legal question as far back as December 12, 1978 in its Opinion No. 191 of the then Secretary of
Justice Vicente Abad Santos which stated that Sections 26 and 50 do not apply to cinematographic
works and PD No. 49 had done away with the registration and deposit of cinematographic works and
that even without prior registration and deposit of a work which may be entitled to protection under
the Decree, the creator can file action for infringement of its rights. He cannot demand, however,
payment of damages arising from infringement. The same opinion stressed that the requirements of
registration and deposit are thus retained under the Decree, not as conditions for the acquisition of
copyright and other rights, but as prerequisites to a suit for damages. The statutory interpretation of
the Executive Branch being correct, is entitled (to) weight and respect.

xxx xxx xxx

Defendants-movants maintain that complainant and his witnesses led the Court to believe that a
crime existed when in fact there was none. This is wrong. As earlier discussed, PD 49 as amended,
does not require registration and deposit for a creator to be able to file an action for infringement of
his rights. These conditions are merely pre-requisites to an action for damages. So, as long as the
proscribed acts are shown to exist, an action for infringement may be initiated. [84]

Accordingly, the certifications[85] from the Copyright Section of the National Library, presented as
evidence by private respondents to show non-registration of some of the films of petitioners, assume
no evidentiary weight or significance, whatsoever.
Furthermore, a closer review of Presidential Decree No. 49 reveals that even with respect to
works which are required under Section 26 thereof to be registered and with copies to be deposited
with the National Library, such as books, including composite and cyclopedic works, manuscripts,
directories and gazetteers; and periodicals, including pamphlets and newspapers; lectures, sermons,
addresses, dissertations prepared for oral delivery; and letters, the failure to comply with said
requirements does not deprive the copyright owner of the right to sue for infringement. Such non-
compliance merely limits the remedies available to him and subjects him to the corresponding
sanction.
 The reason for this is expressed in Section 2 of the decree which prefaces its enumeration of
copyrightable works with the explicit statement that the rights granted under this Decree shall, from
the moment of creation, subsist with respect to any of the following classes of works. This means that
under the present state of the law, the copyright for a work is acquired by an intellectual creator from
the moment of creation even in the absence of registration and deposit. As has been authoritatively
clarified:

The registration and deposit of two complete copies or reproductions of the work with the National
Library within three weeks after the first public dissemination or performance of the work, as provided
for in Section 26 (P.D. No. 49, as amended), is not for the purpose of securing a copyright of the
work, but rather to avoid the penalty for non-compliance of the deposit of said two copies and in order
to recover damages in an infringement suit.[86]

One distressing observation. This case has been fought on the basis of, and its resolution long
delayed by resort to, technicalities to a virtually abusive extent by private respondents, without so
much as an attempt to adduce any credible evidence showing that they conduct their business
legitimately and fairly. The fact that private respondents could not show proof of their authority or that
there was consent from the copyright owners for them to sell, lease, distribute or circulate petitioners
copyrighted films immeasurably bolsters the lower courts initial finding of probable cause. That private
respondents are licensed by the Videogram Regulatory Board does not insulate them from criminal
and civil liability for their unlawful business practices. What is more deplorable is that the
reprehensible acts of some unscrupulous characters have stigmatized the Philippines with an
unsavory reputation as a hub for intellectual piracy in this part of the globe, formerly in the records of
the General Agreement on Tariffs and Trade and, now, of the World Trade Organization.Such acts
must not be glossed over but should be denounced and repressed lest the Philippines become an
international pariah in the global intellectual community.
WHEREFORE, the assailed judgment and resolution of respondent Court of Appeals, and
necessarily inclusive of the order of the lower court dated November 22, 1988, are hereby
REVERSED and SET ASIDE. The order of the court a quo of September 5, 1988 upholding the
validity of Search Warrant No. 87-053 is hereby REINSTATED, and said court is DIRECTED to take
and expeditiously proceed with such appropriate proceedings as may be called for in this
case. Treble costs are further assessed against private respondents.
SO ORDERED.
Narvasa, C.J., Padilla, Davide, Jr., Romero, Melo, Puno, Vitug, Kapunan, Mendoza, Francisco,
Hermosisima, Jr., Panganiban, and Torres, Jr., JJ., concur.
Bellosillo, J., no part in deliberations.
[G.R. No. 130360. August 15, 2001]

WILSON ONG CHING KIAN CHUAN, petitioner, vs. HON. COURT OF APPEALS and LORENZO
TAN, respondents.

DECISION
QUISUMBING, J.:

This petition for review[1]seeks to annul the decision[2] dated August 27, 1997 of the Court of
Appeals which set aside the resolutions[3] dated October 13 and December 15, 1993 as well as the
order dated March 1, 1994 of the Regional Trial Court of Quezon City, Branch 94.[4]
Petitioner Wilson Ong Ching Kian Chuan (Ong), imports vermicelli from China National Cereals
Oils and Foodstuffs Import and Export Corporation, based in Beijing, China, under the firm name
C.K.C. Trading. He repacks it in cellophane wrappers with a design of two-dragons and the TOWER
trademark on the uppermost portion. Ong acquired a Certificate of Copyright Registration from the
National Library on June 9, 1993 on the said design.
Ong discovered that private respondent Lorenzo Tan repacked his vermicelli he imports from the
same company but based in Qingdao, China in a nearly identical wrapper. On September 16, 1993,
Ong filed against Tan a verified complaint for infringement of copyright with damages and prayer for
temporary restraining order or writ of preliminary injunction with the Regional Trial Court in Quezon
City. Ong alleged that he was the holder of a Certificate of Copyright Registration over the cellophane
wrapper with the two-dragon design, and that Tan used an identical wrapper in his business. In his
prayer for a preliminary injunction in addition to damages, he asked that Tan be restrained from using
the wrapper. He said he would post a bond to guarantee the payment of damages resulting from the
issuance of the writ of preliminary injunction.
The trial court issued a temporary restraining order on the same date the complaint was filed. Tan
filed an opposition to Ongs application for a writ of preliminary injunction with counter-application for
the issuance of a similar writ against Ong. Tan alleged that Ong was not entitled to an
injunction. According to Tan, Ong did not have a clear right over the use of the trademark Pagoda
and Lungkow vermicelli as these were registered in the name of CHINA NATIONAL CEREALS OIL
AND FOODSTUFFS IMPORT AND EXPORT CORPORATION, SHANDONG CEREALS AND OILS
BRANCH (hereafter Ceroilfood Shandong), based in Qingdao, China.Further, Tan averred that he
was the exclusive distributor in the Philippines of the Pagoda and Lungkow vermicelli and was solely
authorized to use said trademark. He added that Ong merely copied the two-dragon design from
Ceroilfood Shandong which had the Certificates of Registration issued by different countries. He
concluded that Ongs Certificate of Copyright Registration was not valid for lack of originality.
On September 30, 1993, Ong countered Tans opposition to the issuance of the writ of preliminary
injunction.
On October 13, 1993, the court issued the writ in Ongs favor upon his filing of a P100,000.00
bond.[5]
Tan filed a motion to dissolve the writ of preliminary injunction, but the trial court denied it on
December 15, 1993.[6] The motion for reconsideration was also denied on March 1, 1994.
Tan elevated the case to the Court of Appeals via a special civil action for certiorari with a prayer
for the issuance of a TRO and/or writ of preliminary injunction. Ong filed an opposition to Tans prayer
for an issuance of TRO and/or writ of preliminary injunction on the ground that the trial court did not
commit a grave abuse of discretion in issuing the writ in his favor.
After oral argument, the Court of Appeals rendered a decision on August 8, 1994, setting aside
the trial courts order. It decreed:

WHEREFORE, the petition is GIVEN DUE COURSE, and GRANTED. The order dated October 13,
1993 and related orders, as well as the writ of preliminary injunction issued by the respondent court,
are SET ASIDE as issued with grave abuse of discretion. No costs.

SO ORDERED.[7]
 Ong filed a motion for reconsideration and on January 3, 1995, the Court of Appeals modified its
August 8, 1994 order as follows:

WHEREFORE the phrase the order dated October 13, 1993 and related orders, as well as the writ of
preliminary injunction issued by the respondent court, are SET ASIDE as issued with grave abuse of
discretion is hereby deleted in our resolution dated 08 August 1994. In all other respects, said
resolution must be maintained.

However, let a writ of preliminary injunction be issued enjoining the herein respondents and any and
all persons acting for and in their behalf from enforcing and/or implementing the Writ of Preliminary
Injunction issued on October 15, 1993 pursuant to the Resolution dated October 13, 1993 of the
PUBLIC RESPONDENT in Civil Case No. Q-93-17628 entitled WILSON ONG CHING KIAN CHUAN,
ETC. vs. LORENZO TAN, ETC. upon petitioners filing of a bond of P200,000.00.

The Branch Clerk of Court of the RTC, Branch 94, Quezon City is directed to elevate the records of
Civil Case No. 293-17128 within TEN (10) DAYS from notice.

The parties are given THIRTY (30) DAYS from notice to file their memorandum or any pertinent
manifestation on the matter, after which the case shall be considered submitted for decision.

SO ORDERED.[8]

Pursuant to the Court of Appeals resolution on January 16, 1996, the parties submitted their
memoranda. On August 27, 1997, the appellate court promulgated its decision, decreeing as follows:

WHEREFORE, the resolutions dated October 13, 1993 and December 15, 1993 as well as the order
dated March 1, 1994 - all in Civil Case No. Q-93-17628 are hereby SET ASIDE and our injunction
heretofore issued made permanent.

IT IS SO ORDERED.[9]

On October 17, 1997, Ong filed the instant petition for review, claiming that the Court of Appeals
committed grave and serious errors tantamount to acting with grave abuse of discretion and/or acting
without or in excess of its jurisdiction:
I. WHEN IT ISSUED A PERMANENT PRELIMINARY INJUNCTION IN FAVOR OF THE
PRIVATE RESPONDENT WHEN THE LATTERS RIGHT TO SUCH A RELIEF IS NOT
CLEAR, DOUBTFUL AND HAS NO LEGAL OR FACTUAL BASIS.

A. CERTIFICATE OF COPYRIGHT REGISTRATION JUSTIFY ISSUANCE OF WRIT OF

PRELIMINARY INJUNCTION UNDER P.D. NO. 49.

B. ISSUANCE OF PRELIMINARY INJUNCTION MUST BE BASED ON CLEAR AND

UNMISTAKABLE RIGHT WHICH PETITIONER HAD AND WHICH RIGHT WAS INVADED
BY THE PRIVATE RESPONDENT.

C. COURT OF APPEALS DECISION OF AUGUST 8, 1994 AND ITS RESOLUTION OF

JANUARY 3, 1995 RESULTS IN CONFUSION.

II. BY INTERFERING WITH THE JUDICIAL DISCRETION OF THE TRIAL COURT.

A. RESPONDENT COURT OF APPEALS INTERFERENCE WITH THE DISCRETION OF

TRIAL COURT CONSTITUTES GRAVE ABUSE OF DISCRETION.

III. BY ISSUING A WRIT OF PRELIMINARY INJUNCTION IN FAVOR OF THE PRIVATE

RESPONDENT AND DISREGARDING THE WRIT OF PRELIMINARY INJUNCTION
ISSUED BY THE TRIAL COURT WHOM (SIC), UNDER THE JANUARY 13, 1995
RESOLUTION OF RESPONDENT COURT OF APPEALS, WAS JUDICIALLY HELD NOT
TO HAVE COMMITTED ANY GRAVE ABUSE OF DISCRETION IN THE ISSUANCE OF
THE OCTOBER 13, 1993 AND RELATED ORDERS.
 A. ISSUANCE OF WRIT OF PRELIMINARY INJUNCTION ADDRESSED TO THE SOUND
DISCRETION OF THE TRIAL COURT.

IV. WHEN IT MADE ITS OWN FINDINGS AND CONCLUSIONS, PRE-EMPTING THE TRIAL
COURT AND PRE-JUDGING THE CASE, THUS LEAVING THE TRIAL COURT WITH
NOTHING TO RULE UPON.

A. COURT OF APPEALS PREJUDGED THE CASE REMANDED TO THE TRIAL COURT

The issues for our determination are: Was the issuance of the writ of preliminary injunction
proper? Was there grave abuse of discretion committed by the Court of Appeals when it set aside the
order of the trial court, then issued a judgment touching on the merits?
Petitioner avers that the CA erred in issuing a preliminary injunction in private respondents
favor. He says, firstly, that he is more entitled to it. He states that as holder of the Certificate of
Copyright Registration of the twin-dragon design, he has the protection of P.D. No. 49. [10] Said law
allows an injunction in case of infringement. Petitioner asserts that private respondent has no
registered copyright and merely relies on the trademark of his principal abroad, which insofar as
Philippine laws is concerned, cannot prevail over the petitioners copyright.
Private respondent, for his part, avers that petitioner has no clear right over the use of the
copyrighted wrapper since the PAGODA trademark and label were first adopted and used and have
been duly registered by Ceroilfood Shandong not only in China but in nearly 20 countries and regions
worldwide. Petitioner was not the original creator of the label, but merely copied the design of
Ceroilfood Shandong. Private respondent presented copies of the certificates of copyright registration
in the name of Ceroilfood Shandong issued by at least twenty countries and regions worldwide which
although unauthenticated are, according to him, sufficient to provide a sampling of the evidence
needed in the determination of the grant of preliminary injunction. [11] Private respondent alleges, that
the trademark PAGODA BRAND was registered in China on October 31, 1979 [12] while the trademark
LUNGKOW VERMICELLI WITH TWO-DRAGON DEVICE was registered on August 15, 1985.[13]
To resolve this controversy, we have to return to basics. A person to be entitled to a copyright
must be the original creator of the work. He must have created it by his own skill, labor and judgment
without directly copying or evasively imitating the work of another. [14] The grant of preliminary
injunction in a case rests on the sound discretion of the court with the caveat that it should be made
with extreme caution.[15] Its grant depends chiefly on the extent of doubt on the validity of the
copyright, existence of infringement, and the damages sustained by such infringement. [16] In our view,
the copies of the certificates of copyright registered in the name of Ceroilfood Shandong sufficiently
raise reasonable doubt. With such a doubt, the preliminary injunction is unavailing.[17] In Medina vs.
City Sheriff, Manila, 276 SCRA 133, 139 (1997), where the complainants title was disputed, we held
that injunction was not proper.
Petitioner Ong argues that the Court of Appeals erred and contradicted itself in its January 3,
1995 Resolution, where it deleted the phrase the order dated October 13, 1993 and related orders, as
well as the writ of preliminary injunction issued by the respondent court, are SET ASIDE as issued
with grave abuse of discretion in its August 8, 1994 decision, and at the same time issued a writ of
preliminary injunction in Tans favor.
Ongs claim (that the Court of Appeals in deleting the aforequoted phrase in the August 8, 1994
decision abandoned its earlier finding of grave abuse of discretion on the part of the trial court),
however, is without logical basis. The appellate court merely restated in its own words the issue
raised in the petition: from a) whether the RTC committed grave abuse of discretion, to b) whether
Tan was entitled to an injunctive relief. Then it clarified that the relief sought is a prohibition against
Ong and his agents from enforcing the writ of preliminary injunction. Properly understood, an order
enjoining the enforcement of a writ of preliminary injunction issued by the RTC in
a certiorari proceeding under Rule 65 of the Rules of Court effectively sets aside the RTC order for
being issued with grave abuse of discretion.
To be entitled to an injunctive writ, petitioner must show, inter alia, the existence of a clear and
unmistakable right and an urgent and paramount necessity for the writ to prevent serious
damage.[18] From the above discussion, we find that petitioners right has not been clearly and
unmistakably demonstrated. That right is what is in dispute and has yet to be determined.
In Developers Group of Companies, Inc. vs. Court of Appeals, 219 SCRA 715, 722-723 (1993), we
held that in the absence of proof of a legal right and the injury sustained by the plaintiff, an order of
the trial court granting the issuance of an injunctive writ will be set aside, for having been issued with
grave abuse of discretion. Conformably, there was no abuse of discretion by the Court of Appeals
when it issued its own order to restrain the enforcement of the preliminary injunction issued by the
trial court.
Finally, we note that the complaint initially filed with the RTC was for infringement of copyright.
The trial courts resolution subject of Tans petition under Rule 65 before the CA concerns the
correctness of the grant of the writ of preliminary injunction. The only issue brought before the CA
involved the grave abuse of discretion allegedly committed by the trial court in granting the writ of
preliminary injunction. The Court of Appeals in declaring that the wrapper of petitioner is a copy of
Ceroilfood Shandongs wrapper went beyond that issue and touched on the merits of the infringement
case, which remains to be decided by the trial court.[19] In our view, it was premature for the Court of
Appeals to declare that the design of petitioners wrapper is a copy of the wrapper allegedly registered
by Ceroilfood Shandong. That matter remains for decision after appropriate proceedings at the trial
court.
WHEREFORE, the instant petition is PARTIALLY GRANTED. The prayer for a writ of preliminary
injunction to prohibit Tan from using the cellophane wrapper with two-dragon device is denied, but the
finding of the respondent appellate court that Ongs copyrighted wrapper is a copy of that of
Ceroilfood Shandong is SET ASIDE for being premature. The Regional Trial Court of Quezon City,
Branch 94, is directed to proceed with the trial to determine the merits of Civil Case No. 33779
expeditiously. Let the records of this case be REMANDED to said trial court promptly.
No pronouncement as to costs.
SO ORDERED.
Bellosillo, (Chairman), Mendoza, Buena, and De Leon, Jr., JJ., concur.
Republic of the Philippines
SUPREME COURT
Manila

SECOND DIVISION

G.R. No. 195956 March 11, 2015

ABS-CBN CORPORATION, Petitioner,

vs.
FELIPE GOZON, GILBERTO R. DUAVIT, JR., MARISSA L. FLORES, JESSICA A. SORO, GRACE
DELA PENA-REYES, JOHN OLIVER T. MANALASTAS, JOHN DOES AND JANE
DOES, Respondents.

DECISION

LEONEN, J.:

The main issue in this case is whether there is probable cause to charge respondents with
infringement under Republic Act No. 8293, otherwise known as the Intellectual Property Code. The
resolution of this issue requires clarification of the concept of "copyrightable material" in relation to
material that is rebroadcast live as a news story. We are also asked to rule on whether criminal
prosecution for infringement of copyrightable material, such as live rebroadcast, can be negated by
good faith.

ABS-CBN Corporation (ABS-CBN) filed the Petition for Review on Certiorari1 to assail the November
9, 2010 Decision2 and the March 3, 2011 Resolution3 of the Court of Appeals. The Court of Appeals
reinstated the Department of Justice Resolution dated August 1, 2005 that ordered the withdrawal of
the Information finding probable cause for respondents’ violation of Sections 177 4 and 2115 of the
Intellectual Property Code.6 Respondents are officers and employees of GMA Network, Inc. (GMA-7).
They are: Felipe Gozon (Gozon), GMA-7 President; Gilberto R. Duavit, Jr. (Duavit, Jr.), Executive
Vice-President; Marissa L. Flores (Flores), Vice-President for New and Public Affairs; Jessica A.
Soho (Soho), Director for News; Grace Dela Peña-Reyes (Dela Peña-Reyes), Head of News and
Public Affairs; John Oliver Manalastas (Manalastas), Program Manager; and others.

The controversy arose from GMA-7’s news coverage on the homecoming of Filipino overseas worker
and hostage victim Angelo dela Cruz on July 22, 2004. As summarized by the Court of Appeals:

Overseas Filipino worker Angelo dela Cruz was kidnapped by Iraqi militants and as a condition for his
release, a demand was made for the withdrawal of Filipino troops in Iraq. After negotiations, he was
released by his captors and was scheduled to return to the country in the afternoon of 22 July 2004.
Occasioned by said homecoming and the public interest it generated, both . . . GMA Network, Inc. . . .
and [petitioner] made their respective broadcasts and coverage of the live event.7

ABS-CBN "conducted live audio-video coverage of and broadcasted the arrival of Angelo dela Cruz at
the Ninoy Aquino International Airport (NAIA) and the subsequent press conference."8 ABS-CBN
allowed Reuters Television Service (Reuters) to air the footages it had taken earlier under a special
embargo agreement.9

ABS-CBN alleged that under the special embargo agreement, any of the footages it took would be for
the "use of Reuter’s international subscribers only, and shall be considered and treated by Reuters
under ‘embargo’ against use by other subscribers in the Philippines. . . . [N]o other Philippine
subscriber of Reuters would be allowed to use ABS-CBN footage without the latter’s consent."10

GMA-7, to which Gozon, Duavit, Jr., Flores, Soho, Dela Peña-Reyes, and Manalastas are connected,
"assigned and stationed news reporters and technical men at the NAIA for its live broadcast and non-
live news coverage of the arrival of dela Cruz." 11 GMA-7 subscribes to both Reuters and Cable News
Network (CNN). It received a live video feed of the coverage of Angelo dela Cruz’s arrival from
Reuters.12

GMA-7 immediately carried the live news feed in its program "Flash Report," together with its live
broadcast.13Allegedly, GMA-7 did not receive any notice or was not aware that Reuters was airing
footages of ABS-CBN.14 GMA-7’s news control room staff saw neither the "No Access Philippines"
notice nor a notice that the video feed was under embargo in favor of ABS-CBN.15

On August 13, 2004, ABS-CBN filed the Complaint for copyright infringement under Sections
17716 and 21117 of the Intellectual Property Code.18

On December 3, 2004, Assistant City Prosecutor Dindo Venturanza issued the Resolution 19 finding
probable cause to indict Dela Peña-Reyes and Manalastas.20 Consequently, the Information21 for
violation of the Intellectual Property Code was filed on December 17, 2004. It reads:

That on or about the 22nd of July 2004, in Quezon City, Philippines, the above-named accused,
conspiring together, confederating with and mutually helping each other, being the Head of News
Operations and the Program Manager, respectively, for the News and Public Affairs Department of
GMA Network, Inc., did then and there, willfully, unlawfully and feloniously use and broadcast the
footage of the arrival of Angelo [d]ela Cruz at the Ninoy Aquino International Airport of which ABS-
CBN holds the exclusive ownership and copyright by then and there using, airing, and broadcasting
the said footage in its news program "FLASH REPORT" without first obtaining the consent or
authority of said copyright owner, to their damage and prejudice.

Contrary to law.22

On January 4, 2005, respondents filed the Petition for Review before the Department of Justice. 23 In
the Resolution (Gonzalez Resolution) dated August 1, 2005, Department of Justice Secretary Raul M.
Gonzalez (Secretary Gonzalez) ruled in favor of respondents and held that good faith may be raised
as a defense in the case.24 The dispositive portion of the Resolution reads:

WHEREFORE, THE PETITION FOR REVIEW FILED BY GMA-7 in I.S. No. 04-10458 is considered
meritorious and is hereby GRANTED. This case is hereby Dismissed, the resolution of the City
Prosecutor of Quezon City is hereby reversed and the same is ordered to withdraw the information if
any and report action taken to this office within ten (10) days.25 (Emphasis in the original)

Both parties moved for reconsideration of the Gonzalez Resolution. 26

Meanwhile, on January 19, 2005, the trial court granted the Motion to Suspend Proceedings filed
earlier by Dela Peña-Reyes and Manalastas.27 The trial court Order reads:

Perusing the motion, the court finds that a petition for review was filed with the Department of Justice
on January 5, 2005 as confirmed by the public prosecutor. Under Section 11 (c), Rule 116 of the
Rules of Criminal Procedure, once a petition for review is filed with the Department of Justice, a
suspension of the criminal proceedings may be allowed by the court.

Accordingly, to allow the Department of Justice the opportunity to act on said petition for review, let
the proceedings on this case be suspended for a period of sixty (60) days counted from January 5,
2005, the date the petition was filed with the Department of Justice. The arraignment of the accused
on February 1, 2005 is accordingly cancelled. Let the arraignment be rescheduled to March 8, 2005
at 8:30 a.m. The accused through counsel are notified in open court.

SO ORDERED.28

On June 29, 2010, Department of Justice Acting Secretary Alberto C. Agra (Secretary Agra) issued
the Resolution (Agra Resolution) that reversed the Gonzalez Resolution and found probable cause to
charge Dela Peña-Reyes and Manalastas for violation of the Intellectual Property Code.29 Secretary
Agra also found probable cause to indict Gozon, Duavit, Jr., Flores, and Soho for the same
violation.30 He ruled that:

[w]hile good faith may be a defense in copyright infringement, the same is a disputable presumption
that must be proven in a full-blown trial. Disputable presumptions may be contradicted and overcome
by other evidence. Thus, a full-blown trial is the proper venue where facts, issues and laws are
evaluated and considered. The very purpose of trial is to allow a party to present evidence to
overcome the disputable presumptions involved.31

The dispositive portion of the Agra Resolution provides:

WHEREFORE, premises considered:

(a) The Motion for Reconsideration filed by appellees ABS-CBN Broadcasting Corporation
(ABS-CBN) of our Resolution promulgated on August 1, 2005 (Resolution No. 364, Series of
2005) and the Petition for Review filed by complainant-appellant ABS-CBN in I.S. No. 04-
10458 on April10, 2006, are GRANTED and the City Prosecutor of Quezon City is hereby
ordered to file the necessary Information for violation of Section 177 and 211 of Republic Act
No. 8293 against GMA-7. Felipe L. Gozon, Gilberto R. Duavit, Jr., Marissa L.Flores, Jessica A.
Soho, Grace Dela Pena-Reyes, John Oliver T. Manalastas[.]

....

SO ORDERED.32 (Emphasis in the original)

Respondents assailed the Agra Resolution through the Petition for Certiorari with prayer for issuance
of a temporary restraining order and/or Writ of Preliminary Injunction on September 2, 2010 before
the Court of Appeals. In the Resolution dated September 13, 2010, the Court of Appeals granted the
temporary restraining order preventing the Department of Justice from enforcing the Agra
Resolution.33

On November 9, 2010, the Court of Appeals rendered the Decision granting the Petition and
reversing and setting aside the Agra Resolution.34 The Court of Appeals held that Secretary Agra
committed errors of jurisdiction in issuing the assailed Resolution. Resolving the issue of copyright
infringement, the Court of Appeals said:

Surely, private respondent has a copyright of its news coverage. Seemingly, for airing said video
feed, petitioner GMA is liable under the provisions of the Intellectual Property Code, which was
enacted purposely to protect copyright owners from infringement. However, it is an admitted fact that
petitioner GMA had only aired a five (5) second footage of the disputed live video feed that it had
received from Reuters and CNN as a subscriber. Indeed, petitioners had no notice of the right of
ownership of private respondent over the same. Without notice of the "No Access Philippines"
restriction of the live video feed, petitioner cannot be faulted for airing a live video feed from Reuters
and CNN.

Verily, as aptly opined by Secretary Gonzalez in his earlier Resolution, the act of petitioners in airing
the five (5) second footage was undeniably attended by good faith and it thus serves to exculpate
them from criminal liability under the Code. While the Intellectual Property Code is a special law, and
thus generally categorized as malum prohibitum, it bears to stress that the provisions of the Code
itself do not ipso facto penalize a person or entity for copyright infringement by the mere fact that one
had used a copyrighted work or material.

Certainly so, in the exercise of one’s moral and economic or copyrights, the very provisions of Part IV
of the Intellectual Property Code provide for the scope and limitations on copyright protection under
Section 184 and in fact permit fair use of copyrighted work under Section 185. With the aforesaid
statutory limitations on one’s economic and copyrights and the allowable instances where the other
persons can legally use a copyrighted work, criminal culpability clearly attaches only when the
infringement had been knowingly and intentionally committed. 35 (Emphasis supplied)

The dispositive portion of the Decision reads:

WHEREFORE, the foregoing considered, the instant petition is hereby GRANTED and the assailed
Resolution dated 29 June 2010 REVERSED and SET ASIDE. Accordingly, the earlier Resolution
dated 1 August 2005, which ordered the withdrawal of the Information filed, if any, against the
petitioners for violation of Sections 177 and 211 of the Intellectual Property Code, is hereby
REINSTATED. No costs.

SO ORDERED.36 (Emphasis in the original)

ABS-CBN’s Motion for Reconsideration was denied.37 It then filed its Petition for Review before this
court assailing the Decision and Resolution of the Court of Appeals. 38

The issues for this court’s consideration are:

First, whether Secretary Agra committed errors of jurisdiction in the Resolution dated June 29, 2010
and, therefore, whether a petition for certiorari was the proper remedy in assailing that Resolution;

Second, whether news footage is copyrightable under the law;

Third, whether there was fair use of the broadcast material;

Fourth, whether lack of knowledge that a material is copyrighted is a defense against copyright
infringement;

Fifth, whether good faith is a defense in a criminal prosecution for violation of the Intellectual Property
Code; and

Lastly, whether the Court of Appeals was correct in overturning Secretary Agra’s finding of probable
cause.

The trial court granted respondents’ Motion to Suspend Proceedings and deferred respondents Dela
Peña-Reyes and Manalastas’ arraignment for 60 days in view of the Petition for Review filed before
the Department of Justice.

Rule 116, Section 11 (c) of the Rules of Criminal Procedure allows

the suspension of the accused’s arraignment in certain circumstances only:

SEC. 11. Suspension of arraignment.–Upon motion by the proper party, the arraignment shall be
suspended in the following cases:

(a) The accused appears to be suffering from an unsound mental condition which effectively
renders him unable to fully understand the charge against him and to plead intelligently
thereto. In such case, the court shall order his mental examination and, if necessary, his
confinement for such purpose;

(b) There exists a prejudicial question; and

(c) A petition for review of the resolution of the prosecutor is pending at either the Department
of Justice, or the Office of the President; provided, that the period of suspension shall not
exceed sixty (60) days counted from the filing of the petition with the reviewing office. (12a)
(Emphasis supplied)

In Samson v. Daway,39 this court acknowledged the applicability of Rule 116, Section (c) in a criminal
prosecution for infringement under the Intellectual Property Code. However, this court emphasized
the limits of the order of deferment under the Rule:

While the pendency of a petition for review is a ground for suspension of the arraignment, the . . .
provision limits the deferment of the arraignment to a period of 60 days reckoned from the filing of the
petition with the reviewing office. It follows, therefore, that after the expiration of said period, the trial
court is bound to arraign the accused or to deny the motion to defer arraignment. 40

We clarify that the suspension of the arraignment should always be within the limits allowed by law. In
Crespo v. Judge Mogul,41 this court outlined the effects of filing an information before the trial court,
which includes initiating a criminal action and giving this court "authority to hear and determine the
case":42

The preliminary investigation conducted by the fiscal for the purpose of determining whether a prima
facie case exists warranting the prosecution of the accused is terminated upon the filing of the
information in the proper court. In turn, as above stated, the filing of said information sets in motion
the criminal action against the accused in Court. Should the fiscal find it proper to conduct a
reinvestigation of the case, at such stage, the permission of the Court must be secured. After such
reinvestigation the finding and recommendations of the fiscal should be submitted to the Court for
appropriate action. While it is true that the fiscal has the quasi judicial discretion to determine whether
or not a criminal case should be filed in court or not, once the case had already been brought to Court
whatever disposition the fiscal may feel should be proper in the case thereafter should be addressed
for the consideration of the Court, the only qualification is that the action of the Court must not impair
the substantial rights of the accused or the right of the People to due process of law.

Whether the accused had been arraigned or not and whether it was due to a reinvestigation by the
fiscal or a review by the Secretary of Justice whereby a motion to dismiss was submitted to the Court,
the Court in the exercise of its discretion may grant the motion or deny it and require that the trial on
the merits proceed for the proper determination of the case.

However, one may ask, if the trial court refuses to grant the motion to dismiss filed by the fiscal upon
the directive of the Secretary of Justice will there not be a vacuum in the prosecution? A state
prosecutor to handle the case cannot possibly be designated by the Secretary of Justice who does
not believe that there is a basis for prosecution nor can the fiscal be expected to handle the
prosecution of the case thereby defying the superior order of the Secretary of Justice. The answer is
simple. The role of the fiscal or prosecutor as We all know is to see that justice is done and not
necessarily to secure the conviction of the person accused before the Courts. Thus, in spite of his
opinion to the contrary, it is the duty of the fiscal to proceed with the presentation of evidence of the
prosecution to the Court to enable the Court to arrive at its own independent judgment as to whether
the accused should be convicted or acquitted. The fiscal should not shirk from the responsibility of
appearing for the People of the Philippines even under such circumstances much less should he
abandon the prosecution of the case leaving it to the hands of a private prosecutor for then the entire
proceedings will be null and void. The least that the fiscal should do is to continue to appear for the
prosecution although he may turn over the presentation of the evidence to the private prosecutor but
still under his direction and control.

The rule therefore in this jurisdiction is that once a complaint or information is filed in Court any
disposition of the case as to its dismissal or the conviction or acquittal of the accused rests in the
sound discretion of the Court. Although the fiscal retains the direction and control of the prosecution
of criminal cases even while the case is already in Court he cannot impose his opinion on the trial
court. The Court is the best and sole judge on what to do with the case before it. The determination of
the case is within its exclusive jurisdiction and competence. A motion to dismiss the case filed by the
fiscal should be addressed to the Court who has the option to grant or deny the same. It does not
matter if this is done before or after the arraignment of the accused or that the motion was filed after a
reinvestigation or upon instructions of the Secretary of Justice who reviewed the records of the
investigation.43 (Emphasis supplied, citations omitted)

The doctrine in Crespo was reiterated in Mayor Balindong v. Court of Appeals, 44 where this court
reminded the Department of Justice Secretary to refrain from entertaining petitions for review when
the case is already pending with this court:

[I]n order to avoid a situation where the opinion of the Secretary of Justice who reviewed the action of
the fiscal may be disregarded by the trial court, the Secretary of Justice should, as far as practicable,
refrain from entertaining a petition for review or appeal from the action of the fiscal, when the
complaint or information has already been filed in the Court. The matter should be left entirely for the
determination of the Court.45

The trial court should have proceeded with respondents Dela Peña-Reyes and Manalastas’
arraignment after the 60-day period from the filing of the Petition for Review before the Department of
Justice on March 8, 2005. It was only on September 13, 2010 that the temporary restraining order
was issued by the Court of Appeals. The trial court erred when it did not act on the criminal case
during the interim period. It had full control and direction of the case. As Judge Mogul reasoned in
denying the motion to dismiss in Crespo, failure to proceed with the arraignment "disregards the
requirements of due process [and] erodes the Court’s independence and integrity." 46

II

According to ABS-CBN, the Court of Appeals erred in finding that: a motion for reconsideration was
not necessary before a petition for certiorari could be filed; the Department of Justice Secretary
committed errors of jurisdiction since the Agra Resolution was issued within its authority and in
accordance with settled laws and jurisprudence; and respondents were not liable for copyright
infringement.
In its assailed Decision, the Court of Appeals found that respondents committed a procedural error
when they failed to file a motion for reconsideration before filing the Petition for Certiorari. However,
the Court of Appeals held that a motion for reconsideration was unnecessary since the Agra
Resolution was a patent nullity and it would have been useless under the circumstances: Given that a
reading of the assailed Resolution and the instant records readily reveals errors of jurisdiction on the
part of respondent Secretary, direct judicial recourse is warranted under the circumstances. Aside
from the fact that said Resolution is a patent nullity having been issued in grave abuse of discretion
amounting to lack or excess of jurisdiction, the filing of a motion for reconsideration is evidently
useless on account of the fact that the issues and arguments before this Court have already been
duly raised and accordingly delved into by respondent Secretary in his disposition of the petition a
quo.47 (Emphasis in the original)

In Elma v. Jacobi,48 this court ruled that a petition for certiorari under Rule 65 of the Rules of Court is
proper when assailing adverse resolutions of the Department of Justice stemming from the
determination of probable cause.49However, grave abuse of discretion must be alleged.50

In Sanrio Company Limited v. Lim,51 this court stressed the prosecutor’s role in determining probable
cause. Judicial review will only lie when it is shown that the prosecutor acted with grave abuse of
discretion amounting to lack or excess of jurisdiction:

A prosecutor alone determines the sufficiency of evidence that will establish probable cause justifying
the filing of a criminal information against the respondent. By way of exception, however, judicial
review is allowed where respondent has clearly established that the prosecutor committed grave
abuse of discretion. Otherwise stated, such review is appropriate only when the prosecutor has
exercised his discretion in an arbitrary, capricious, whimsical or despotic manner by reason of
passion or personal hostility, patent and gross enough to amount to an evasion of a positive duty or
virtual refusal to perform a duty enjoined by law.52 (Citations omitted)

Grave abuse of discretion refers to:

such capricious and whimsical exercise of judgment as is equivalent to lack of jurisdiction. The abuse
of discretion must be grave as where the power is exercised in an arbitrary or despotic manner by
reason of passion or personal hostility and must be so patent and gross as to amount to an evasion
of positive duty or to a virtual refusal to perform the duty enjoined by or to act at all in contemplation
of law.53

Resorting to certiorari requires that there be there be "no appeal, or any plain, speedy, and adequate
remedy in the ordinary course of law[,]"54 such as a motion for reconsideration. Generally, "a motion
for reconsideration is a condition sine qua non before a petition for certiorari may lie, its purpose
being to grant an opportunity for the [tribunal or officer] to correct any error attributed to it by a re-
examination of the legal and factual circumstances of the case." 55 However, exceptions to the rule
exist:

(a) where the order is a patent nullity, as where the Court a quo had no jurisdiction; (b) where the
questions raised in the certiorari proceeding have been duly raised and passed upon by the lower
court, or are the same as those raised and passed upon in the lower court; (c) where there is an
urgent necessity for the resolution of the question and any further delay would prejudice the interests
of the Government or of the petitioner or the subject matter of the action is perishable; (d) where,
under the circumstances, a motion for reconsideration would be useless; (e) where petitioner was
deprived of due process and there is extreme urgency for relief; (f) where, in a criminal case, relief
from an order of arrest is urgent and the granting of such relief by the trial Court is improbable; (g)
where the proceedings in the lower court are a nullity for lack of due process; (h) where the
proceedings was ex parte or in which the petitioner had no opportunity to object; and (i) where the
issue raised is one purely of law or where public interest is involved.56(Emphasis in the original,
citations omitted)

As argued by respondents, "[a] second motion for reconsideration would have been useless and futile
since the D[epartment] [of] J[ustice] had already passed upon the same issues twice." 57 Equally
pressing under the circumstances was the need to resolve the matter, as the Information’s filing
would lead to respondents’ imminent arrest.58
Moreover, Department of Justice Department Circular No. 70 dated July 3, 2000, or the 2000 NPS
Rules on Appeal, provides that no second motion for reconsideration of the Department of Justice
Secretary’s resolution shall be entertained:

SECTION 13. Motion for reconsideration. The aggrieved party may file a motion for reconsideration
within a non-extendible period of ten (10) days from receipt of the resolution on appeal, furnishing the
adverse party and the Prosecution Office concerned with copies thereof and submitting proof of such
service. No second or further motion for reconsideration shall be entertained.

The Agra Resolution was the result of respondents’ Motion for Reconsideration assailing the
Gonzalez Resolution. To file a motion for reconsideration of the Agra Resolution would be
superfluous. Respondents were, therefore, correct in filing the Petition for Certiorari of the Agra
Resolution before the Court of Appeals.

III

The Court of Appeals ruled that Secretary Agra committed errors of jurisdiction, which then required
the grant of the writ of certiorari:

So viewed, by ordering the filing of information without proof that probable cause exists to charge
petitioners with a crime, respondent Secretary clearly committed an error of jurisdiction thus
warranting the issuance of the writ of certiorari. Surely, probable cause cannot be had when the very
provisions of the statute exculpates criminal liability in cases classified as fair use of copyrighted
materials. The fact that they admittedly used the Reuters live video feed is not, as a matter of course,
tantamount to copyright infringement that would justify the filing of an information against the
petitioners.59

Error of jurisdiction must be distinguished from error of judgment:

A line must be drawn between errors of judgment and errors of jurisdiction. An error of judgment is
one which the court may commit in the exercise of its jurisdiction. An error of jurisdiction renders an
order or judgment void or voidable. Errors of jurisdiction are reviewable on certiorari; errors of
judgment, only by appeal.60

In People v. Hon. Sandiganbayan61:

An error of judgment is one which the court may commit in the exercise of its jurisdiction. An error of
jurisdictionis one where the act complained of was issued by the court without or in excess of
jurisdiction, or with grave abuse of discretion, which is tantamount to lack or in excess of jurisdiction
and which error is correctible only by the extraordinary writ of certiorari. Certiorari will not be issued to
cure errors of the trial court in its appreciation of the evidence of the parties, or its conclusions
anchored on the said findings and its conclusions of law.62 (Emphasis supplied)

This court has adopted a deferential attitude towards review of the executive’s finding of probable
cause.63 This is based "not only upon the respect for the investigatory and [prosecutorial] powers
granted by the Constitution to the executive department but upon practicality as well." 64 Review of the
Department of Justice Secretary’s decision or resolution will be allowed only when grave abuse of
discretion is alleged:

The full discretionary authority to determine probable cause in a preliminary investigation to ascertain
sufficient ground for the filing of information rests with the executive branch. Hence, judicial review of
the resolution of the Secretary of Justice is limited to a determination whether there has been a grave
abuse of discretion amounting to lack or excess of jurisdiction. Courts cannot substitute the executive
branch’s judgment.

....

It is only where the decision of the Justice Secretary is tainted with grave abuse of discretion
amounting to lack or excess of jurisdiction that the Court of Appeals may take cognizance of the case
in a petition for certiorari under Rule 65 of the Revised Rules of Civil Procedure. The Court of Appeals
decision may then be appealed to this Court by way of a petition for review on certiorari. 65 (Emphasis
supplied, citations omitted)
In this case, it must be shown that Secretary Agra exceeded his authority when he reversed the
findings of Secretary Gonzalez. This court must determine whether there is probable cause to file an
information for copyright infringement under the Intellectual Property Code.

IV

Probable cause pertains to "such facts as are sufficient to engender a well-founded belief that a crime
has been committed and that respondent is probably guilty thereof." 66 Preliminary investigation is the
inquiry or proceeding to determine whether there is probable cause. 67

In Webb v. De Leon,68 this court ruled that determination of probable cause during preliminary
investigation does not require trial-like evaluation of evidence since existence of probable cause does
not equate to guilt:

It ought to be emphasized that in determining probable cause, the average man weighs facts and
circumstances without resorting to the calibrations of our technical rules of evidence of which his
knowledge is nil. Rather, he relies on the calculus of common sense of which all reasonable men
have an abundance.

....

. . . A finding of probable cause merely binds over the suspect to stand trial. It is not a pronouncement
of guilt.69

In Reyes v. Pearlbank Securities, Inc.,70 finding probable cause is not equivalent to finding with moral
certainty that the accused committed the crime:

A finding of probable cause needs only to rest on evidence showing that more likely than not a crime
has been committed by the suspects. It need not be based on clear and convincing evidence of guilt,
not on evidence establishing guilt beyond reasonable doubt, and definitely not on evidence
establishing absolute certainty of guilt. In determining probable cause, the average man weighs facts
and circumstances without resorting to the calibrations of the rules of evidence of which he has no
technical knowledge. He relies on common sense.71

During preliminary investigation, a public prosecutor does not adjudicate on the parties’ rights,
obligations, or liabilities.72

In the recent case of Estrada v. Office of the Ombudsman, et al.,73 we reiterated Webb on the
determination of probable cause during preliminary investigation and traced the history of probable
cause as borrowed from American jurisprudence:

The purpose in determining probable cause is to make sure that the courts are not clogged with weak
cases that will only be dismissed, as well as to spare a person from the travails of a needless
prosecution.

....

. . . In the United States, from where we borrowed the concept of probable cause, the prevailing
definition of probable cause is this:

In dealing with probable cause, however, as the very name implies, we deal with probabilities. These
are not technical; they are the factual and practical considerations of everyday life on which
reasonable and prudent men, not legal technicians, act. The standard of proof is accordingly
correlative to what must be proved.

"The substance of all the definitions" of probable cause "is a reasonable ground for belief of guilt."
McCarthy v. De Armit, 99 Pa. St. 63, 69, quoted with approval in the Carroll opinion. 267 U. S. at 161.
And this "means less than evidence which would justify condemnation" or conviction, as Marshall, C.
J., said for the Court more than a century ago in Locke v. United States, 7 Cranch 339, 348. Since
Marshall’s time, at any rate, it has come to mean more than bare suspicion: Probable cause exists
where "the facts and circumstances within their [the officers’] knowledge and of which they had
reasonably trustworthy information [are] sufficient in themselves to warrant a man of reasonable
caution in the belief that" an offense has been or is being committed. Carroll v. United States, 267 U.
S. 132, 162.

These long-prevailing standards seek to safeguard citizens from rash and unreasonable interferences
with privacy and from unfounded charges of crime. They also seek to give fair leeway for enforcing
the law in the community’s protection. Because many situations which confront officers in the course
of executing their duties are more or less ambiguous, room must be allowed for some mistakes on
their part. But the mistakes must be those of reasonable men, acting on facts leading sensibly to their
conclusions of probability. The rule of probable cause is a practical, non technical conception
affording the best compromise that has been found for accommodating these often opposing
interests. Requiring more would unduly hamper law enforcement. To allow less would be to leave
law-abiding citizens at the mercy of the officers’ whim or caprice.

In the Philippines, there are four instances in the Revised Rules of Criminal Procedure where
probable cause is needed to be established:

(1) In Sections 1 and 3 of Rule 112: By the investigating officer, to determine whether there is
sufficient ground to engender a well-founded belief that a crime has been committed and the
respondent is probably guilty thereof, and should be held for trial. A preliminary investigation is
required before the filing of a complaint or information for an offense where the penalty
prescribed by law is at least four years, two months and one day without regard to the fine;

(2) In Sections 6 and 9 of Rule 112: By the judge, to determine whether a warrant of arrest or a
commitment order, if the accused has already been arrested, shall be issued and that there is
a necessity of placing the respondent under immediate custody in order not to frustrate the
ends of justice;

(3) In Section 5(b) of Rule 113:By a peace officer or a private person making a warrantless
arrest when an offense has just been committed, and he has probable cause to believe based
on personal knowledge of facts or circumstances that the person to be arrested has committed
it; and

(4) In Section 4 of Rule 126: By the judge, to determine whether a search warrant shall be
issued, and only upon probable cause in connection with one specific offense to be determined
personally by the judge after examination under oath or affirmation of the complainant and the
witnesses he may produce, and particularly describing the place to be searched and the things
to be seized which may be anywhere in the Philippines.

In all these instances, the evidence necessary to establish probable cause is based only on the
likelihood, or probability, of guilt.74

Estrada also highlighted that a "[p]reliminary investigation is not part of the criminal action. It is merely
preparatory and may even be disposed of in certain situations." 75

To determine whether there is probable cause that respondents committed copyright infringement, a
review of the elements of the crime, including the existing facts, is required.

ABS-CBN claims that news footage is subject to copyright and prohibited use of copyrighted material
is punishable under the Intellectual Property Code. It argues that the new footage is not a
"newsworthy event" but "merely an account of the arrival of Angelo dela Cruz in the Philippines — the
latter being the newsworthy event":76

To be clear, it is the event itself or the arrival of Angelo dela Cruz which is not copyrightable because
that is the newsworthy event. However, any footage created from the event itself, in this case the
arrival of Angelo dela Cruz, are intellectual creations which are copyrightable. Thus, the footage
created by ABS-CBN during the arrival of Angelo dela Cruz, which includes the statements of Dindo
Amparo, are copyrightable and protected by the laws on copyright. 77

On the other hand, respondents argue that ABS-CBN’s news footage of Angelo dela Cruz’s arrival is
not copyrightable or subject to protection:
Certainly, the arrival of Angelo [d]ela Cruz, which aroused public attention and the consciousness of
the Filipino people with regard to their countrymen, OFWs working in foreign countries and how the
Philippine government responds to the issues concerning them, is "news". There is no ingenuity or
inventiveness added in the said news footage. The video footage of this "news" is not copyrightable
by any legal standard as facts of everyday life depicted in the news and items of press information is
part of the public domain.78 (Emphasis in the original)

The news footage is copyrightable.

The Intellectual Property Code is clear about the rights afforded to authors of various kinds of work.
Under the Code, "works are protected by the sole fact of their creation, irrespective of their mode or
form of expression, as well as of their content, quality and purpose." 79 These include "[a]udiovisual
works and cinematographic works and works produced by a process analogous to cinematography or
any process for making audiovisual recordings."80

Contrary to the old copyright law,81 the Intellectual Property Code does not require registration of the
work to fully recover in an infringement suit. Nevertheless, both copyright laws provide that copyright
for a work is acquired by an intellectual creator from the moment of creation. 82

It is true that under Section 175 of the Intellectual Property Code, "news of the day and other
miscellaneous facts having the character of mere items of press information" are considered
unprotected subject matter.83 However, the Code does not state that expression of the news of the
day, particularly when it underwent a creative process, is not entitled to protection.

An idea or event must be distinguished from the expression of that idea or event. An idea has been
likened to a ghost in that it "must be spoken to a little before it will explain itself." 84 It is a concept that
has eluded exact legal definition.85To get a better grasp of the idea/expression dichotomy, the
etymology of the term "idea" is traced:

The word "idea" is derived from a Greek term, meaning "a form, the look or appearance of a thing as
opposed to its reality, from idein, to see." In the Timaeus, Plato saw ideas as eternal paradigms,
independent objects to which the divine demiurge looks as patterns in forming the world. This was
later modified to the religious conception of ideas as the thoughts of God. "It is not a very long step to
extend the term ‘idea’ to cover patterns, blueprints, or plans in anyone's mind, not only in God’s." The
word entered the French and English vernacular in the 1600s and possessed two meanings. The first
was the Platonic meaning of a perfect exemplar or paradigm. The second, which probably has its
origin with Descartes, is of a mental concept or image or, more broadly, any object of the mind when
it is active. Objects of thought may exist independently. The sun exists (probably) before and after
you think of it. But it is also possible to think of things that have never existed, such as a unicorn or
Pegasus. John Locke defined ideas very comprehensively, to include: all objects of the mind.
Language was a way of translating the invisible, hidden ideas that make up a person’s thoughts into
the external, perceptible world of articulate sounds and visible written symbols that others can
understand.86 (Citations omitted) There is no one legal definition of "idea" in this jurisdiction. The term
"idea" is mentioned only once in the Intellectual Property Code. 87 In Joaquin, Jr. v. Drilon,88 a
television format (i.e., a dating show format) is not copyrightable under Section 2 of Presidential
Decree No. 49;89 it is a mere concept:

P.D. No. 49, §2, in enumerating what are subject to copyright, refers to finished works and not to
concepts. The copyright does not extend to an idea, procedure, process, system, method of
operation, concept, principle, or discovery, regardless of the form in which it is described, explained,
illustrated, or embodied in such work. Thus, the new INTELLECTUAL PROPERTY CODE OF THE
PHILIPPINES provides:

SEC. 175. Unprotected Subject Matter.—Notwithstanding the provisions of Sections 172 and 173, no
protection shall extend, under this law, to any idea, procedure, system, method or operation, concept,
principle, discovery or mere data as such, even if they are expressed, explained, illustrated or
embodied in a work; news of the day and other miscellaneous facts having the character of mere
items of press information; or any official text of a legislative, administrative or legal nature, as well as
any official translation thereof.
What then is the subject matter of petitioners’ copyright? This Court is of the opinion that petitioner
BJPI’s copyright covers audio-visual recordings of each episode of Rhoda and Me, as falling within
the class of works mentioned in P.D. 49, §2(M),to wit:

Cinematographic works and works produced by a process analogous to cinematography or any

process for making audio-visual recordings;

The copyright does not extend to the general concept or format of its dating game show. Accordingly,
by the very nature of the subject of petitioner BJPI’s copyright, the investigating prosecutor should
have the opportunity to compare the videotapes of the two shows.

Mere description by words of the general format of the two dating game shows is insufficient; the
presentation of the master videotape in evidence was indispensable to the determination of the
existence of probable cause. As aptly observed by respondent Secretary of Justice:

A television show includes more than mere words can describe because it involves a whole spectrum
of visuals and effects, video and audio, such that no similarity or dissimilarity may be found by merely
describing the general copyright/format of both dating game shows.90 (Emphasis supplied, citations
omitted)

Ideas can be either abstract or concrete.91 It is the concrete ideas that are generally referred to as
expression:

The words "abstract" and "concrete" arise in many cases dealing with the idea/expression distinction.
The Nichols court, for example, found that the defendant’s film did not infringe the plaintiff’s play
because it was "too generalized an abstraction from what plaintiff wrote . . . only a part of her ideas."
In Eichel v. Marcin, the court said that authors may exploit facts, experiences, field of thought, and
general ideas found in another’s work, "provided they do not substantially copy a concrete form, in
which the circumstances and ideas have been developed, arranged, and put into shape." Judge
Hand, in National Comics Publications, Inc. v. Fawcett Publications, Inc. said that "no one infringes,
unless he descends so far into what is concrete as to invade. . . ‘expression.’"

These cases seem to be distinguishing "abstract" ideas from "concrete" tangible embodiments of
these abstractions that may be termed expression. However, if the concrete form of a work means
more than the literal expression contained within it, it is difficult to determine what is meant by
"concrete." Webster's New Twentieth Century Dictionary of the English Language provides several
meanings for the word concrete. These include: "having a material, perceptible existence; of,
belonging to, or characterized by things or events that can be perceived by the senses; real; actual;"
and "referring to a particular; specific, not general or abstract."92

In Pearl & Dean (Phil.), Incorporated v. Shoemart, Incorporated, 93 this court, citing the American case
of Baker v. Selden, distinguished copyright from patents and illustrated how an idea or concept is
different from the expression of that idea:

In the oft-cited case of Baker vs. Selden, 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 plaintiff’s 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.

....

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."94 (Emphasis supplied)

News or the event itself is not copyrightable. However, an event can be captured and presented in a
specific medium. As recognized by this court in Joaquin, television "involves a whole spectrum of
visuals and effects, video and audio."95 News coverage in television involves framing shots, using
images, graphics, and sound effects.96 It involves creative process and originality. Television news
footage is an expression of the news.

In the United States, a line of cases dwelt on the possibility of television newscasts to be
copyrighted.97 Most of these cases focused on private individuals’ sale or resale of tapes of news
broadcasts. Conflicting decisions were rendered by its courts. Noteworthy, however, is the District
Court’s pronouncement in Pacific & Southern Co. v. Duncan, 98 which involves a News Monitoring
Service’s videotaping and sale of WXIA-TV’s news broadcasts:

It is axiomatic that copyright protection does not extend to news "events" or the facts or ideas which
are the subject of news reports. Miller v. Universal City Studios, Inc., 650 F.2d 1365, 1368 (5th Cir.
1981); Wainwright Securities, Inc. v. Wall Street Transcript Corp., 558 F.2d 91, 95 (2d Cir. 1977),
cert. denied, 434 U.S. 1014, 98 S.Ct. 730, 54 L.Ed.2d 759 (1978). But it is equally well-settled that
copyright protection does extend to the reports themselves, as distinguished from the substance of
the information contained in the reports. Wainwright, 558 F.2d at 95; International News Service v.
Associated Press, 248 U.S. 215, 39 S.Ct. 68, 63 L.Ed. 211 (1918); see Chicago Record-Herald Co. v.
Tribune Assn., 275 F. 797 (7th Cir.1921); 1 Nimmer on Copyright § 2.11[B] (1983). Copyright protects
the manner of expression of news reports, "the particular form or collocation of words in which the
writer has communicated it." International News Service, 248 U.S. at 234, 39 S.Ct. at 70. Such
protection extends to electronic news reports as well as written reports. See17 U.S.C. § 102(a) (5),
(6), and (7); see also Iowa State University Research Foundations, Inc. v. American Broadcasting
Cos., 621 F.2d 57, 61 (2d Cir. 1980).99 (Emphasis supplied)

The idea/expression dichotomy has long been subject to debate in the field of copyright law.
Abolishing the dichotomy has been proposed, in that non-protectibility of ideas should be re-
examined, if not stricken, from decisions and the law:

If the underlying purpose of the copyright law is the dual one expressed by Lord Mansfield, the only
excuse for the continuance of the idea-expression test as a judicial standard for determining
protectibility would be that it was or could be a truly useful method of determining the proper balance
between the creator’s right to profit from his work and the public's right that the "progress of the arts
not be retarded."

. . . [A]s used in the present-day context[,] the dichotomy has little or no relationship to the policy
which it should effectuate. Indeed, all too often the sweeping language of the courts regarding the
non-protectibility of ideas gives the impression that this is of itself a policy of the law, instead of
merely a clumsy and outdated tool to achieve a much more basic end. 100

The idea/expression dichotomy is a complex matter if one is trying to determine whether a certain
material is a copy of another.101 This dichotomy would be more relevant in determining, for instance,
whether a stage play was an infringement of an author’s book involving the same characters and
setting. In this case, however, respondents admitted that the material under review — which is the
subject of the controversy — is an exact copy of the original. Respondents did not subject ABS-
CBN’s footage to any editing of their own. The news footage did not undergo any transformation
where there is a need to track elements of the original.

Having established the protectible nature of news footage, we now discuss the concomitant rights
accorded to authors. The authors of a work are granted several rights in relation to it, including
copyright or economic rights:

SECTION 177. Copyright or Economic Rights. — Subject to the provisions of Chapter VIII, copyright
or economic rights shall consist of the exclusive right to carry out, authorize or prevent the following
acts:

177.1. Reproduction of the work or substantial portion of the work;

177.2. Dramatization, translation, adaptation, abridgment, arrangement or other transformation

of the work;

177.3. The first public distribution of the original and each copy of the work by sale or other
forms of transfer of ownership;

177.4. Rental of the original or a copy of an audiovisual or cinematographic work, a work

embodied in a sound recording, a computer program, a compilation of data and other materials
or a musical work in graphic form, irrespective of the ownership of the original or the copy
which is the subject of the rental; (n)

177.5. Public display of the original or a copy of the work;

177.6. Public performance of the work; and

177.7. Other communication to the public of the work.(Sec. 5, P. D. No. 49a) (Emphasis
supplied)

Under Section 211 of the Intellectual Property Code, broadcasting organizations are granted a more
specific set of rights called related or neighboring rights:

SECTION 211. Scope of Right. — Subject to the provisions of Section 212, broadcasting
organizations shall enjoy the exclusive right to carry out, authorize or prevent any of the following
acts:
 211.1. The rebroadcasting of their broadcasts;

211.2. The recording in any manner, including the making of films or the use of video tape, of
their broadcasts for the purpose of communication to the public of television broadcasts of the
same; and

211.3. The use of such records for fresh transmissions or for fresh recording. (Sec. 52, P.D.
No. 49) (Emphasis supplied)

Section 212 of the Code provides:

CHAPTER XV
LIMITATIONS ON PROTECTION

Section 212. Limitations on Rights. - Sections 203, 208 and 209 shall not apply where the acts
referred to in those Sections are related to:

212.1. The use by a natural person exclusively for his own personal purposes;

212.2. Using short excerpts for reporting current events;

212.3. Use solely for the purpose of teaching or for scientific research; and

212.4. Fair use of the broadcast subject to the conditions under Section 185. (Sec. 44, P.D.
No. 49a)

The Code defines what broadcasting is and who broadcasting organizations include:

202.7. "Broadcasting" means the transmission by wireless means for the public reception of
sounds or of images or of representations thereof; such transmission by satellite is also
"broadcasting" where the means for decrypting are provided to the public by the broadcasting
organization or with its consent;

202.8. "Broadcasting organization" shall include a natural person or a juridical entity duly
authorized to engage in broadcasting[.]

Developments in technology, including the process of preserving once ephemeral works and
disseminating them, resulted in the need to provide a new kind of protection as distinguished from
copyright.102 The designation "neighboring rights" was abbreviated from the phrase "rights
neighboring to copyright."103 Neighboring or related rights are of equal importance with copyright as
established in the different conventions covering both kinds of rights.104

Several treaties deal with neighboring or related rights of copyright. 105 The most prominent of these is
the "International Convention for the Protection of Performers, Producers of Phonograms and
Broadcasting Organizations" (Rome Convention).106

The Rome Convention protects the rights of broadcasting organizations in relation to their broadcasts.
Article XIII of the Rome Convention enumerates the minimum rights accorded to broadcasting
organizations:

Article 13

Minimum Rights for Broadcasting Organizations

Broadcasting organisations shall enjoy the right to authorize or prohibit:

(a) the rebroadcasting of their broadcasts;

(b) the fixation of their broadcasts;

(c) the reproduction:

 (i) of fixations, made without their consent, of their broadcasts;

(ii) of fixations, made in accordance with the provisions of Article 15, of their broadcasts,
if the reproduction is made for purposes different from those referred to in those
provisions;

(d) the communication to the public of their television broadcasts if such communication is
made in places accessible to the public against payment of an entrance fee; it shall be a
matter for the domestic law of the State where protection of this right is claimed to determine
the conditions under which it may be exercised.

With regard to the neighboring rights of a broadcasting organization in this jurisdiction, this court has
discussed the difference between broadcasting and rebroadcasting:

Section 202.7 of the IP Code defines broadcasting as "the transmission by wireless means for the
public reception of sounds or of images or of representations thereof; such transmission by satellite is
also ‘broadcasting’ where the means for decrypting are provided to the public by the broadcasting
organization or with its consent."

On the other hand, rebroadcasting as defined in Article 3(g) of the International Convention for the
Protection of Performers, Producers of Phonograms and Broadcasting Organizations, otherwise
known as the 1961 Rome Convention, of which the Republic of the Philippines is a signatory, is "the
simultaneous broadcasting by one broadcasting organization of the broadcast of another
broadcasting organization."

....

Under the Rome Convention, rebroadcasting is "the simultaneous broadcasting by one broadcasting
organization of the broadcast of another broadcasting organization." The Working Paper prepared by
the Secretariat of the Standing Committee on Copyright and Related Rights defines broadcasting
organizations as "entities that take the financial and editorial responsibility for the selection and
arrangement of, and investment in, the transmitted content." 107 (Emphasis in the original, citations
omitted)

Broadcasting organizations are entitled to several rights and to the protection of these rights under
the Intellectual Property Code. Respondents’ argument that the subject news footage is not
copyrightable is erroneous. The Court of Appeals, in its assailed Decision, correctly recognized the
existence of ABS-CBN’s copyright over the news footage:

Surely, private respondent has a copyright of its news coverage. Seemingly, for airing said video
feed, petitioner GMA is liable under the provisions of the Intellectual Property Code, which was
enacted purposely to protect copyright owners from infringement. 108

News as expressed in a video footage is entitled to copyright protection. Broadcasting organizations

have not only copyright on but also neighboring rights over their broadcasts. Copyrightability of a
work is different from fair use of a work for purposes of news reporting.

VI

ABS-CBN assails the Court of Appeals’ ruling that the footage shown by GMA-7 falls under the scope
of Section 212.2 and 212.4 of the Intellectual Property Code:

The evidence on record, as well as the discussions above, show that the footage used
by[respondents] could hardlybe characterized as a short excerpt, as it was aired over one and a half
minutes.

Furthermore, the footage used does not fall under the contemplation of Section 212.2 of the
Intellectual Property Code. A plain reading of the provision would reveal that copyrighted material
referred to in Section 212 are short portions of an artist’s performance under Section 203, or a
producer’s sound recordings under Sections 208 and 209. Section 212 does not refer to actual use of
video footage of another as its own.
The Angelo dela Cruz footage does not fall under the rule on Section 212.4 of the Intellectual
Property Code on fair use of the broadcast.

....

In determining fair use, several factors are considered, including the nature of the copyrighted work,
and the amount and substantiality of the person used in relation to the copyrighted work as a whole.

In the business of television news reporting, the nature of the copyrighted work or the video footages,
are such that, footage created, must be a novelty to be a good report. Thus, when the . . . Angelo
dela Cruz footage was used by [respondents], the novelty of the footage was clearly affected.

Moreover, given that a substantial portion of the Angelo dela Cruz footage was utilized by GMA-7 for
its own, its use can hardly be classified as fair use.

Hence, [respondents] could not be considered as having used the Angelo dela Cruz [footage]
following the provisions on fair use.

It is also worthy to note that the Honorable Court of Appeals seem to contradict itself when it relied on
the provisions of fair use in its assailed rulings considering that it found that the Angelo dela Cruz
footage is not copyrightable, given that the fair use presupposes an existing copyright. Thus, it is
apparent that the findings of the Honorable Court of Appeals are erroneous and based on wrong
assumptions.109 (Underscoring in the original)

On the other hand, respondents counter that GMA-7’s use of ABS-CBN’s news footage falls under
fair use as defined in the Intellectual Property Code. Respondents, citing the Court of Appeals
Decision, argue that a strong statutory defense negates any finding of probable cause under the
same statute.110 The Intellectual Property Code provides that fair use negates infringement.

Respondents point out that upon seeing ABS-CBN’s reporter Dindo Amparo on the footage, GMA-7
immediately shut off the broadcast. Only five (5) seconds passed before the footage was cut. They
argue that this shows that GMA-7 had no prior knowledge of ABS-CBN’s ownership of the footage or
was notified of it. They claim that the Angelo dela Cruz footage is considered a short excerpt of an
event’s "news" footage and is covered by fair use.111

Copyright protection is not absolute.112 The Intellectual Property Code provides the limitations on
copyright:

CHAPTER VIII
LIMITATIONS ON COPYRIGHT

Section 184. Limitations on Copyright. - 184.1. Notwithstanding the provisions of Chapter V, the
following acts shall not constitute infringement of copyright:

....

184.2. The provisions of this section shall be interpreted in such a way as to allow the work to be
used in a manner which does not conflict with the normal exploitation of the work and does not
unreasonably prejudice the right holder's legitimate interests.

....

CHAPTER XV
LIMITATIONS ON PROTECTION

Section 212. Limitations on Rights. - Sections 203, 208 and 209 shall not apply where the acts
referred to in those Sections are related to:

....

212.2. Using short excerpts for reporting current events;

....

212.4. Fair use of the broadcast subject to the conditions under Section 185.(Sec. 44, P.D. No. 49a)
(Emphasis supplied)

The determination of what constitutes fair use depends on several factors. Section 185 of the
Intellectual Property Code states:

SECTION 185. Fair Use of a Copyrighted Work. —

185.1. The fair use of a copyrighted work for criticism, comment, news reporting, teaching including
multiple copies for classroom use, scholarship, research, and similar purposes is not an infringement
of copyright. . . . In determining whether the use made of a work in any particular case is fair use, the
factors to be considered shall include:

a. The purpose and character of the use, including whether such use is of a commercial nature
or is for non-profit educational purposes;

b. The nature of the copyrighted work;

c. The amount and substantiality of the portion used in relation to the copyrighted work as a
whole; and

d. The effect of the use upon the potential market for or value of the copyrighted work.
Respondents allege that the news footage was only five (5) seconds long, thus falling under
fair use. ABS-CBN belies this contention and argues that the footage aired for two (2) minutes
and 40 seconds.113 According to the Court of Appeals, the parties admitted that only five (5)
seconds of the news footage was broadcasted by GMA-7.114

This court defined fair use as "aprivilege to use the copyrighted material in a reasonable manner
without the consent of the copyright owner or as copying the theme or ideas rather than their
expression."115 Fair use is an exception to the copyright owner’s monopoly of the use of the work to
avoid stifling "the very creativity which that law is designed to foster." 116

Determining fair use requires application of the four-factor test. Section 185 of the Intellectual
Property Code lists four (4) factors to determine if there was fair use of a copyrighted work:

a. The purpose and character of the use, including whether such use is of a commercial nature
or is for non-profit educational purposes;

b. The nature of the copyrighted work;

c. The amount and substantiality of the portion used in relation to the copyrighted work as a
whole; and

d. The effect of the use upon the potential market for or value of the copyrighted work.

First, the purpose and character of the use of the copyrighted material must fall under those listed in
Section 185, thus: "criticism, comment, news reporting, teaching including multiple copies for
classroom use, scholarship, research, and similar purposes." 117 The purpose and character
requirement is important in view of copyright’s goal to promote creativity and encourage creation of
works. Hence, commercial use of the copyrighted work can be weighed against fair use.

The "transformative test" is generally used in reviewing the purpose and character of the usage of the
copyrighted work.118 This court must look into whether the copy of the work adds "new expression,
meaning or message" to transform it into something else. 119 "Meta-use" can also occur without
necessarily transforming the copyrighted work used.120

Second, the nature of the copyrighted work is significant in deciding whether its use was fair. If the
nature of the work is more factual than creative, then fair use will be weighed in favor of the user.
Third, the amount and substantiality of the portion used is important to determine whether usage falls
under fair use. An exact reproduction of a copyrighted work, compared to a small portion of it, can
result in the conclusion that its use is not fair. There may also be cases where, though the entirety of
the copyrighted work is used without consent, its purpose determines that the usage is still fair.121 For
example, a parody using a substantial amount of copyrighted work may be permissible as fair use as
opposed to a copy of a work produced purely for economic gain. Lastly, the effect of the use on the
copyrighted work’s market is also weighed for or against the user. If this court finds that the use had
or will have a negative impact on the copyrighted work’s market, then the use is deemed unfair.

The structure and nature of broadcasting as a business requires assigned values for each second of
broadcast or airtime. In most cases, broadcasting organizations generate revenue through sale of
time or timeslots to advertisers, which, in turn, is based on market share:122 Once a news broadcast
has been transmitted, the broadcast becomes relatively worthless to the station. In the case of the
aerial broadcasters, advertising sales generate most of the profits derived from news reports.
Advertising rates are, in turn, governed by market share. Market share is determined by the number
of people watching a show at any particular time, relative to total viewers at that time. News is by
nature time-limited, and so re-broadcasts are generally of little worth because they draw few viewers.
Newscasts compete for market share by presenting their news in an appealing format that will
capture a loyal audience. Hence, the primary reason for copyrighting newscasts by broadcasters
would seem to be to prevent competing stations from rebroadcasting current news from the station
with the best coverage of a particular news item, thus misappropriating a portion of the market share.

Of course, in the real world there are exceptions to this perfect economic view. However, there are
also many caveats with these exceptions. A common exception is that some stations rebroadcast the
news of others. The caveat is that generally, the two stations are not competing for market share.
CNN, for example, often makes news stories available to local broadcasters. First, the local
broadcaster is often not affiliated with a network (hence its need for more comprehensive
programming), confining any possible competition to a small geographical area. Second, the local
broadcaster is not in competition with CNN. Individuals who do not have cable TV (or a satellite dish
with decoder) cannot receive CNN; therefore there is no competition. . . . Third, CNN sells the right of
rebroadcast to the local stations. Ted Turner, owner of CNN, does not have First Amendment
freedom of access argument foremost on his mind. (Else he would give everyone free cable TV so
everyone could get CNN.) He is in the business for a profit. Giving away resources does not a profit
make.123 (Emphasis supplied)

The high value afforded to limited time periods is also seen in other media. In social media site
Instagram, users are allowed to post up to only 15 seconds of video.124 In short-video sharing website
Vine,125 users are allowed a shorter period of six (6) seconds per post. The mobile application 1
Second Everyday takes it further by capturing and stitching one (1) second of video footage taken
daily over a span of a certain period.126

Whether the alleged five-second footage may be considered fair use is a matter of defense. We
emphasize that the case involves determination of probable cause at the preliminary investigation
stage. Raising the defense of fair use does not automatically mean that no infringement was
committed. The investigating prosecutor has full discretion to evaluate the facts, allegations, and
evidence during preliminary investigation. Defenses raised during preliminary investigation are
subject to further proof and evaluation before the trial court. Given the insufficiency of available
evidence, determination of whether the Angelo dela Cruz footage is subject to fair use is better left to
the trial court where the proceedings are currently pending. GMA-7’s rebroadcast of ABS-CBN’s
news footage without the latter’s consent is not an issue. The mere act of rebroadcasting without
authority from the owner of the broadcast gives rise to the probability that a crime was committed
under the Intellectual Property Code.

VII

Respondents cannot invoke the defense of good faith to argue that no probable cause exists.

Respondents argue that copyright infringement is malum in se, in that "[c]opying alone is not what is
being prohibited, but its injurious effect which consists in the lifting from the copyright owners’ film or
materials, that were the result of the latter’s creativity, work and productions and without authority,
reproduced, sold and circulated for commercial use to the detriment of the latter." 127
Infringement under the Intellectual Property Code is malum prohibitum. The Intellectual Property
Code is a special law. Copyright is a statutory creation:

Copyright, in the strict sense of the term, is purely a statutory right. It is a new or independent right
granted by the statute, and not simply a pre-existing right regulated by the statute. Being a statutory
grant, the rights are only such as the statute confers, and may be obtained and enjoyed only with
respect to the subjects and by the persons, and on terms and conditions specified in the statute.128

The general rule is that acts punished under a special law are malum prohibitum. 129 "An act which is
declared malum prohibitum, malice or criminal intent is completely immaterial." 130

In contrast, crimes mala in seconcern inherently immoral acts:

Not every criminal act, however, involves moral turpitude. It is for this reason that "as to what crime
involves moral turpitude, is for the Supreme Court to determine". In resolving the foregoing question,
the Court is guided by one of the general rules that crimes mala in se involve moral turpitude, while
crimes mala prohibita do not, the rationale of which was set forth in "Zari v. Flores," to wit:

It (moral turpitude) implies something immoral in itself, regardless of the fact that it is punishable by
law or not. It must not be merely mala prohibita, but the act itself must be inherently immoral. The
doing of the act itself, and not its prohibition by statute fixes the moral turpitude. Moral turpitude does
not, however, include such acts as are not of themselves immoral but whose illegality lies in their
being positively prohibited. (Emphasis supplied)

[These] guidelines nonetheless proved short of providing a clear cut solution, for in International Rice
Research Institute v. NLRC, the Court admitted that it cannot always be ascertained whether moral
turpitude does or does not exist by merely classifying a crime as malum in se or as malum
prohibitum. There are crimes which are mala in se and yet but rarely involve moral turpitude and
there are crimes which involve moral turpitude and are mala prohibita only. In the final analysis,
whether or not a crime involves moral turpitude is ultimately a question of fact and frequently depends
on all the circumstances surrounding the violation of the statue.131 (Emphasis in the original)

"Implicit in the concept of mala in se is that of mens rea." 132 Mens reais defined as "the nonphysical
element which, combined with the act of the accused, makes up the crime charged. Most frequently it
is the criminal intent, or the guilty mind[.]"133

Crimes mala in sepre suppose that the person who did the felonious act had criminal intent to do so,
while crimes mala prohibita do not require knowledge or criminal intent:

In the case of mala in se it is necessary, to constitute a punishable offense, for the person doing the
act to have knowledge of the nature of his act and to have a criminal intent; in the case of mala
prohibita, unless such words as "knowingly" and "willfully" are contained in the statute, neither
knowledge nor criminal intent is necessary. In other words, a person morally quite innocent and with
every intention of being a law abiding citizen becomes a criminal, and liable to criminal penaltes, if he
does an act prohibited by these statutes.134 (Emphasis supplied) Hence, "[i]ntent to commit the crime
and intent to perpetrate the act must be distinguished. A person may not have consciously intended
to commit a crime; but he did intend to commit an act, and that act is, by the very nature of things, the
crime itself[.]"135When an act is prohibited by a special law, it is considered injurious to public welfare,
and the performance of the prohibited act is the crime itself. 136

Volition, or intent to commit the act, is different from criminal intent. Volition or voluntariness refers to
knowledge of the act being done. On the other hand, criminal intent — which is different from motive,
or the moving power for the commission of the crime 137 — refers to the state of mind beyond
voluntariness. It is this intent that is being punished by crimes mala in se.

Unlike other jurisdictions that require intent for a criminal prosecution of copyright infringement, the
Philippines does not statutorily support good faith as a defense. Other jurisdictions provide in their
intellectual property codes or relevant laws that mens rea, whether express or implied, is an element
of criminal copyright infringement.138

In Canada, criminal offenses are categorized under three (3) kinds: "the full mens rea offence,
meaning the accused’s actual or subjective state of mind has to be proved; strict liability offences
where no mens rea has to be proved but the accused can avoid liability if he can prove he took all
reasonable steps to avoid the particular event; [and] absolute liability offences where Parliament has
made it clear that guilt follows proof of the prescribed act only." 139 Because of the use of the word
"knowingly" in Canada’s Copyright Act, it has been held that copyright infringement is a full mens rea
offense.140

In the United States, willful intent is required for criminal copyright infringement. 141 Before the
passage of the No Electronic Theft Act, "civil copyright infringements were violations of criminal
copyright laws only if a defendant willfully infringed a copyright ‘for purposes of commercial
advantage or private financial gain.’"142 However, the No Electronic Theft Act now allows criminal
copyright infringement without the requirement of commercial gain. The infringing act may or may not
be for profit.143

There is a difference, however, between the required liability in civil copyright infringement and that in
criminal copyright infringement in the United States. Civil copyright infringement does not require
culpability and employs a strict liability regime144 where "lack of intention to infringe is not a defense to
an action for infringement."145

In the Philippines, the Intellectual Property Code, as amended, provides for the prosecution of
criminal actions for the following violations of intellectual property rights: Repetition of Infringement of
Patent (Section 84); Utility Model (Section 108); Industrial Design (Section 119); Trademark
Infringement (Section 155 in relation to Section 170); Unfair Competition (Section 168 in relation to
Section 170); False Designations of Origin, False Description or Representation (Section 169.1 in
relation to Section 170); infringement of copyright, moral rights, performers’ rights, producers’ rights,
and broadcasting rights (Section 177, 193, 203, 208 and 211 in relation to Section 217); and other
violations of intellectual property rights as may be defined by law.

The Intellectual Property Code requires strict liability for copyright infringement whether for a civil
action or a criminal prosecution; it does not require mens rea or culpa: 146

SECTION 216. Remedies for Infringement. —

216.1. Any person infringing a right protected under this law shall be liable:

a. To an injunction restraining such infringement. The court may also order the
defendant to desist from an infringement, among others, to prevent the entry into the
channels of commerce of imported goods that involve an infringement, immediately
after customs clearance of such goods.

b. Pay to the copyright proprietor or his assigns or heirs such actual damages, including
legal costs and other expenses, as he may have incurred due to the infringement as
well as the profits the infringer may have made due to such infringement, and in proving
profits the plaintiff shall be required to prove sales only and the defendant shall be
required to prove every element of cost which he claims, or, in lieu of actual damages
and profits, such damages which to the court shall appear to be just and shall not be
regarded as penalty.

c. Deliver under oath, for impounding during the pendency of the action, upon such
terms and conditions as the court may prescribe, sales invoices and other documents
evidencing sales, all articles and their packaging alleged to infringe a copyright and
implements for making them.

d. Deliver under oath for destruction without any compensation all infringing copies or
devices, as well as all plates, molds, or other means for making such infringing copies
as the court may order.

e. Such other terms and conditions, including the payment of moral and exemplary
damages, which the court may deem proper, wise and equitable and the destruction of
infringing copies of the work even in the event of acquittal in a criminal case.
 216.2. In an infringement action, the court shall also have the power to order the seizure and
impounding of any article which may serve as evidence in the court proceedings. (Sec. 28,
P.D. No. 49a)

SECTION 217. Criminal Penalties. — 217.1. Any person infringing any right secured by provisions of
Part IV of this Actor aiding or abetting such infringement shall be guilty of a crime punishable by:

a. Imprisonment of one (1) year to three (3) years plus a fine ranging from Fifty
thousand pesos (₱50,000) to One hundred fifty thousand pesos (₱150,000) for the first
offense.

b. Imprisonment of three (3) years and one (1) day to six (6) years plus a fine ranging
from One hundred fifty thousand pesos (₱150,000) to Five hundred thousand pesos
(₱500,000) for the second offense.

c. Imprisonment of six (6) years and one (1) day to nine (9) years plus a fine ranging
from Five hundred thousand pesos (₱500,000) to One million five hundred thousand
pesos (₱1,500,000) for the third and subsequent offenses.

d. In all cases, subsidiary imprisonment in cases of insolvency.

217.2. In determining the number of years of imprisonment and the amount of fine, the court
shall consider the value of the infringing materials that the defendant has produced or
manufactured and the damage that the copyright owner has suffered by reason of the
infringement.

217.3. Any person who at the time when copyright subsists in a work has in his possession an
article which he knows, or ought to know, to be an infringing copy of the work for the purpose
of: a. Selling, letting for hire, or by way of trade offering or exposing for sale, or hire, the article;

b. Distributing the article for purpose of trade, or for any other purpose to an extent that
will prejudice the rights of the copyright owner in the work; or

c. Trade exhibit of the article in public, shall be guilty of an offense and shall be liable on
conviction to imprisonment and fine as above mentioned. (Sec. 29, P.D. No. 49a)
(Emphasis supplied)

The law is clear. Inasmuch as there is wisdom in prioritizing the flow and exchange of ideas as
opposed to rewarding the creator, it is the plain reading of the law in conjunction with the actions of
the legislature to which we defer. We have continuously "recognized the power of the legislature . . .
to forbid certain acts in a limited class of cases and to make their commission criminal without regard
to the intent of the doer. Such legislative enactments are based on the experience that repressive
measures which depend for their efficiency upon proof of the dealer’s knowledge or of his intent are
of little use and rarely accomplish their purposes."147

Respondents argue that live broadcast of news requires a different treatment in terms of good faith,
intent, and knowledge to commit infringement. To argue this point, they rely on the differences of the
media used in Habana et al. v. Robles, Columbia Pictures v. Court of Appeals, and this case:

Petitioner ABS-CBN argues that lack of notice that the Angelo dela Cruz was under embargo is not a
defense in copyright infringement and cites the case of Columbia Pictures vs. Court of Appeals and
Habana et al. vs. Robles(310 SCRA 511). However, these cases refer to film and literary work where
obviously there is "copying" from an existing material so that the copier knew that he is copying from
an existing material not owned by him. But, how could respondents know that what they are "copying
was not [theirs]" when they were not copying but merely receiving live video feed from Reuters and
CNN which they aired? What they knew and what they aired was the Reuters live video feed and the
CNN feed which GMA-7 is authorized to carry in its news broadcast, it being a subscriber of these
companies[.]

It is apt to stress that the subject of the alleged copyright infringement is not a film or literary work but
live broadcast of news footage. In a film or literary work, the infringer is confronted face to face with
the material he is allegedly copying and therefore knows, or is presumed to know, that what he is
copying is owned by another. Upon the other hand, in live broadcast, the alleged infringer is not
confronted with the fact that the material he airs or re-broadcasts is owned by another, and therefore,
he cannot be charged of knowledge of ownership of the material by another. This specially obtains in
the Angelo dela Cruz news footage which GMA-7 received from Reuters and CNN. Reuters and CNN
were beaming live videos from the coverage which GMA-7 received as a subscriber and, in the
exercise of its rights as a subscriber, GMA-7 picked up the live video and simultaneously re-
broadcast it. In simultaneously broadcasting the live video footage of Reuters, GMA-7 did not copy
the video footage of petitioner ABS-CBN[.]148 (Emphasis in the original)

Respondents’ arguments must fail.

Respondents are involved and experienced in the broadcasting business. They knew that there would
be consequences in carrying ABS-CBN’s footage in their broadcast. That is why GMA-7 allegedly cut
the feed from Reuters upon seeing ABS-CBN’s ogo and reporter. To admit a different treatment for
broadcasts would mean abandonment of a broadcasting organization’s minimum rights, including
copyright on the broadcast material and the right against unauthorized rebroadcast of copyrighted
material. The nature of broadcast technology is precisely why related or neighboring rights were
created and developed. Carving out an exception for live broadcasts would go against our
commitments under relevant international treaties and agreements, which provide for the same
minimum rights.149

Contrary to respondents’ assertion, this court in Habana,150 reiterating the ruling in Columbia
Pictures,151 ruled that lack of knowledge of infringement is not a valid defense. Habana and Columbia
Pictures may have different factual scenarios from this case, but their rulings on copyright
infringement are analogous. In Habana, petitioners were the authors and copyright owners of English
textbooks and workbooks. The case was anchored on the protection of literary and artistic creations
such as books. In Columbia Pictures, video tapes of copyrighted films were the subject of the
copyright infringement suit.

In Habana, knowledge of the infringement is presumed when the infringer commits the prohibited act:

The essence of intellectual piracy should be essayed in conceptual terms in order to underscore its
gravity by an appropriate understanding thereof. Infringement of a copyright is a trespass on a private
domain owned and occupied by the owner of the copyright, and, therefore, protected by law, and
infringement of copyright, or piracy, which is a synonymous term in this connection, consists in the
doing by any person, without the consent of the owner of the copyright, of anything the sole right to
do which is conferred by statute on the owner of the copyright.

....

A copy of a piracy is an infringement of the original, and it is no defense that the pirate, in such cases,
did not know whether or not he was infringing any copyright; he at least knew that what he was
copying was not his, and he copied at his peril.

....

In cases of infringement, copying alone is not what is prohibited. The copying must produce an
"injurious effect". Here, the injury consists in that respondent Robles lifted from petitioners’ book
materials that were the result of the latter’s research work and compilation and misrepresented them
as her own. She circulated the book DEP for commercial use and did not acknowledge petitioners as
her source.152 (Emphasis supplied)

Habana and Columbia Pictures did not require knowledge of the infringement to constitute a violation
of the copyright. One does not need to know that he or she is copying a work without consent to
violate copyright law. Notice of fact of the embargo from Reuters or CNN is not material to find
probable cause that respondents committed infringement. Knowledge of infringement is only material
when the person is charged of aiding and abetting a copyright infringement under Section 217 of the
Intellectual Property Code.153

We look at the purpose of copyright in relation to criminal prosecutions requiring willfulness: Most
importantly, in defining the contours of what it means to willfully infringe copyright for purposes of
criminal liability, the courts should remember the ultimate aim of copyright. Copyright is not primarily
about providing the strongest possible protection for copyright owners so that they have the highest
possible incentive to create more works. The control given to copyright owners is only a means to an
end: the promotion of knowledge and learning. Achieving that underlying goal of copyright law also
requires access to copyrighted works and it requires permitting certain kinds of uses of copyrighted
works without the permission of the copyright owner. While a particular defendant may appear to be
deserving of criminal sanctions, the standard for determining willfulness should be set with reference
to the larger goals of copyright embodied in the Constitution and the history of copyright in this
country.154

In addition, "[t]he essence of intellectual piracy should be essayed in conceptual terms in order to
underscore its gravity by an appropriate understanding thereof. Infringement of a copyright is a
trespass on a private domain owned and occupied by the owner of the copyright, and, therefore,
protected by law, and infringement of copyright, or piracy, which is a synonymous term in this
connection, consists in the doing by any person, without the consent of the owner of the copyright, of
anything the sole right to do which is conferred by statute on the owner of the copyright."155

Intellectual property rights, such as copyright and the neighboring right against rebroadcasting,
establish an artificial and limited monopoly to reward creativity. Without these legally enforceable
rights, creators will have extreme difficulty recovering their costs and capturing the surplus or profit of
their works as reflected in their markets. This, in turn, is based on the theory that the possibility of
gain due to creative work creates an incentive which may improve efficiency or simply enhance
consumer welfare or utility. More creativity redounds to the public good.

These, however, depend on the certainty of enforcement. Creativity, by its very nature, is vulnerable
to the free rider problem. It is easily replicated despite the costs to and efforts of the original creator.
The more useful the creation is in the market, the greater the propensity that it will be copied. The
most creative and inventive individuals are usually those who are unable to recover on their creations.

Arguments against strict liability presuppose that the Philippines has a social, historical, and
economic climate similar to those of Western jurisdictions. As it stands, there is a current need to
strengthen intellectual property protection.

Thus, unless clearly provided in the law, offenses involving infringement of copyright protections
should be considered malum prohibitum. It is the act of infringement, not the intent, which causes the
damage. To require or assume the need to prove intent defeats the purpose of intellectual property
protection.

Nevertheless, proof beyond reasonable doubt is still the standard for criminal prosecutions under the
Intellectual Property Code.

VIII

Respondents argue that GMA-7’s officers and employees cannot be held liable for infringement under
the Intellectual Property Code since it does not expressly provide direct liability of the corporate
officers. They explain that "(i) a corporation may be charged and prosecuted for a crime where the
penalty is fine or both imprisonment and fine, and if found guilty, may be fined; or (ii) a corporation
may commit a crime but if the statute prescribes the penalty therefore to be suffered by the corporate
officers, directors or employees or other persons, the latter shall be responsible for the offense." 156

Section 217 of the Intellectual Property Code states that "any person" may be found guilty of
infringement. It also imposes the penalty of both imprisonment and fine:

Section 217. Criminal Penalties. - 217.1. Any person infringing any right secured by provisions of Part
IV of this Act or aiding or abetting such infringement shall be guilty of a crime punishable by:

(a) Imprisonment of one (1) year to three (3) years plus a fine ranging from Fifty thousand
pesos (₱50,000) to One hundred fifty thousand pesos (₱150,000) for the first offense.

(b) Imprisonment of three (3) years and one (1) day to six (6) years plus a fine ranging from
One hundred fifty thousand pesos (₱150,000) to Five hundred thousand pesos (₱500,000) for
the second offense.
 (c) Imprisonment of six (6) years and one (1) day to nine (9) years plus a fine ranging from five
hundred thousand pesos (₱500,000) to One million five hundred thousand pesos (₱1,500,000)
for the third and subsequent offenses.

(d) In all cases, subsidiary imprisonment in cases of insolvency. (Emphasis supplied)

Corporations have separate and distinct personalities from their officers or directors. 157 This
court has ruled that corporate officers and/or agents may be held individually liable for a crime
committed under the Intellectual Property Code:158

Petitioners, being corporate officers and/or directors, through whose act, default or omission the
corporation commits a crime, may themselves be individually held answerable for the crime. . . . The
existence of the corporate entity does not shield from prosecution the corporate agent who knowingly
and intentionally caused the corporation to commit a crime. Thus, petitioners cannot hide behind the
cloak of the separate corporate personality of the corporation to escape criminal liability. A corporate
officer cannot protect himself behind a corporation where he is the actual, present and efficient
actor.159

However, the criminal liability of a corporation’s officers or employees stems from their active
participation in the commission of the wrongful act:

The principle applies whether or not the crime requires the consciousness of wrongdoing. It applies to
those corporate agents who themselves commit the crime and to those, who, by virtue of their
managerial positions or other similar relation to the corporation, could be deemed responsible for its
commission, if by virtue of their relationship to the corporation, they had the power to prevent the act.
Moreover, all parties active in promoting a crime, whether agents or not, are principals. Whether such
officers or employees are benefited by their delictual acts is not a touchstone of their criminal liability.
Benefit is not an operative fact.160 (Emphasis supplied) An accused’s participation in criminal acts
involving violations of intellectual property rights is the subject of allegation and proof. The showing
that the accused did the acts or contributed in a meaningful way in the commission of the
infringements is certainly different from the argument of lack of intent or good faith. Active
participation requires a showing of overt physical acts or intention to commit such acts. Intent or good
faith, on the other hand, are inferences from acts proven to have been or not been committed.

We find that the Department of Justice committed grave abuse of discretion when it resolved to file
the Information against respondents despite lack of proof of their actual participation in the alleged
crime.

Ordering the inclusion of respondents Gozon, GMA-7 President; Duavit, Jr., Executive Vice-
President; Flores, Vice-President for News and Public Affairs; and Soho, Director for News, as
respondents, Secretary Agra overturned the City Prosecutor’s finding that only respondents Dela
Peña-Reyes and Manalastas are responsible for the crime charged due to their duties. 161 The Agra
Resolution reads:

Thus, from the very nature of the offense and the penalty involved, it is necessary that GMA-7’s
directors, officers, employees or other officers thereof responsible for the offense shall be charged
and penalized for violation of the Sections 177 and 211 of Republic Act No. 8293. In their complaint
for libel, respondents Felipe L Gozon, Gilberto R. Duavit, Jr., Marissa L. Flores, Jessica A.Soho,
Grace Dela Pena-Reyes, John Oliver T. Manalastas felt they were aggrieved because they were "in
charge of the management, operations and production of news and public affairs programs of the
network" (GMA-7). This is clearly an admission on respondents’ part. Of course, respondents may
argue they have no intention to infringe the copyright of ABS-CBN; that they acted in good faith; and
that they did not directly cause the airing of the subject footage, but again this is preliminary
investigation and what is required is simply probable cause. Besides, these contentions can best be
addressed in the course of trial.162 (Citation omitted)

In contrast, the Office of the City Prosecutor, in the Resolution dated December 3, 2004, found that
respondents Gozon, Duavit, Jr., Flores, and Soho did not have active participation in the commission
of the crime charged:

This Office, however, does not subscribe to the view that respondents Atty. Felipe Gozon, Gilberto
Duavit, Marissa Flores and Jessica Soho should be held liable for the said offense. Complainant
failed to present clear and convincing evidence that the said respondents conspired with Reyes and
Manalastas. No evidence was adduced to prove that these respondents had an active participation in
the actual commission of the copyright infringement or they exercised their moral ascendancy over
Reyes and Manalastas in airing the said footage. It must be stressed that, conspiracy must be
established by positive and conclusive evidence. It must be shown to exist as clearly and convincingly
as the commission of the offense itself.163 (Emphasis supplied, citations omitted)

The City Prosecutor found respondents Dela Peña-Reyes and Manalastas liable due to the nature of
their work and responsibilities. He found that:

[t]his Office however finds respondents Grace Dela Peña-Reyes and John Oliver T. Manalastas liable
for copyright infringement penalized under Republic Act No. 8293. It is undisputed that complainant
ABSCBN holds the exclusive ownership and copyright over the "Angelo [d]ela Cruz news footage".
Hence, any airing and re-broadcast of the said footage without any consent and authority from ABS-
CBN will be held as an infringement and violation of the intellectual property rights of the latter.
Respondents Grace Dela Peña-Reyes as the Head of the News Operation and John Oliver T.
Manalastas as the Program Manager cannot escape liability since the news control room was under
their direct control and supervision. Clearly, they must have been aware that the said footage coming
from Reuters or CNN has a "No Access Philippines" advisory or embargo thus cannot be re-
broadcast. We find no merit to the defense of ignorance interposed by the respondents. It is simply
contrary to human experience and logic that experienced employees of an established broadcasting
network would be remiss in their duty in ascertaining if the said footage has an
embargo.164 (Emphasis supplied)

We agree with the findings as to respondents Dela Peña-Reyes and Manalastas. Both respondents
committed acts that promoted infringement of ABS-CBN’s footage. We note that embargoes are
common occurrences in and between news agencies and/or broadcast organizations. 165 Under its
Operations Guide, Reuters has two (2) types of embargoes: transmission embargo and publication
embargo.166 Under ABS-CBN’s service contract with Reuters, Reuters will embargo any content
contributed by ABS-CBN from other broadcast subscribers within the same geographical location:

4a. Contributed Content

You agree to supply us at our request with news and sports news stories broadcast on the Client
Service of up to three (3) minutes each for use in our Services on a non-exclusive basis and at a cost
of US$300.00 (Three Hundred United States Dollars) per story. In respect of such items we agree to
embargo them against use by other broadcast subscribers in the Territory and confirm we will
observe all other conditions of usage regarding Contributed Content, as specified in Section 2.5 of the
Reuters Business Principles for Television Services. For the purposes of clarification, any
geographical restriction imposed by you on your use of Contributed Content will not prevent us or our
clients from including such Contributed Content in online transmission services including the internet.
We acknowledge Contributed Content is your copyright and we will not acquire any intellectual
property rights in the Contributed Content.167 (Emphasis supplied)

Respondents Dela Peña-Reyes and Manalastas merely denied receiving the advisory sent by
Reuters to its clients, including GMA-7. As in the records, the advisory reads:

ADVISORY - - +++LIVE COVER PLANS+++

PHILIPPINES: HOSTAGE RETURN

**ATTENTION ALL CLIENTS**

PLEASE BE ADVISED OF THE FOLLOWING LIVE COVER

PLANNED FOR THURSDAY, JULY 22:

....

SOURCE: ABS-CBN
TV AND WEB RESTRICTIONS: NO ACCESS PHILIPPINES.168

There is probable cause that respondents Dela Peña-Reyes and Manalastas directly committed
copyright infringement of ABS-CBN’s news footage to warrant piercing of the corporate veil. They are
responsible in airing the embargoed Angelo dela Cruz footage. They could have prevented the act of
infringement had they been diligent in their functions as Head of News Operations and Program
Manager.

Secretary Agra, however, committed grave abuse of discretion when he ordered the filing of the
Information against all respondents despite the erroneous piercing of the corporate veil. Respondents
Gozon, Duavit, Jr., Flores, and Soho cannot be held liable for the criminal liability of the corporation.

Mere membership in the Board or being President per se does not mean knowledge, approval, and
participation in the act alleged as criminal. There must be a showing of active participation, not simply
a constructive one.

Under principles of criminal law, the principals of a crime are those "who take a direct part in the
execution of the act; [t]hose who directly force or induce others to commit it; [or] [t]hose who
cooperate in the commission of the offense by another act without which it would not have been
accomplished."169 There is conspiracy "when two or more persons come to an agreement concerning
the commission of a felony and decide to commit it":170

Conspiracy is not presumed. Like the physical acts constituting the crime itself, the elements of
conspiracy must be proven beyond reasonable doubt.1âwphi1 While conspiracy need not be
established by direct evidence, for it may be inferred from the conduct of the accused before, during
and after the commission of the crime, all taken together, however, the evidence must be strong
enough to show the community of criminal design. For conspiracy to exist, it is essential that there
must be a conscious design to commit an offense. Conspiracy is the product of intentionality on the
part of the cohorts.

It is necessary that a conspirator should have performed some overt act as a direct or indirect
contribution to the execution of the crime committed. The overt act may consist of active participation
in the actual commission of the crime itself, or it may consist of moral assistance to his co-
conspirators by being present at the commission of the crime or by exerting moral ascendancy over
the other co-conspirators[.]171 (Emphasis supplied, citations omitted)

In sum, the trial court erred in failing to resume the proceedings after the designated period. The
Court of Appeals erred when it held that Secretary Agra committed errors of jurisdiction despite its
own pronouncement that ABS-CBN is the owner of the copyright on the news footage. News should
be differentiated from expression of the news, particularly when the issue involves rebroadcast of
news footage. The Court of Appeals also erroneously held that good faith, as. well as lack of
knowledge of infringement, is a defense against criminal prosecution for copyright and neighboring
rights infringement. In its current form, the Intellectual Property Code is malum prohibitum and
prescribes a strict liability for copyright infringement. Good faith, lack of knowledge of the copyright, or
lack of intent to infringe is not a defense against copyright infringement. Copyright, however, is
subject to the rules of fair. use and will be judged on a case-to-case basis. Finding probable cause
includes a determination of the defendant's active participation, particularly when the corporate veil is
pierced in cases involving a corporation's criminal liability.

WHEREFORE, the Petition is partially GRANTED. The Department of Justice Resolution dated June
29, 2010 ordering the filing of the Information is hereby REINSTATED as to respondents Grace Dela
Pena-Reyes and John Oliver T. Manalastas. Branch 93 of the Regional Trial Court of Quezon City is
directed to continue with the proceedings in Criminal Case No. Q-04-131533.

SO ORDERED.

MARVIC M.V.F. LEONEN

Associate Justice

WE CONCUR:

ANTONIO T. CARPIO
Associate Justice
Chairperson

ARTURO D. BRION MARIANO C. DEL CASTILLO

 Associate Justice Associate Justice

JOSE CATRAL MENDOZA

Associate Justice

ATTESTATION

I attest that the conclusions in the above Decision had been reached in consultation before the case
was assigned to the writer of the opinion of the Court's Division.

ANTONIO T. CARPIO
Associate Justice
Chairperson, Second Division

CERTIFICATION

Pursuant to Section 13, Article VIII of the Constitution and the Division Chairperson's Attestation, I
certify that the conclusions in the above Decision had been reached in consultation before the case
was assigned to the writer of the opinion of the Court's Division.

MARIA LOURDES P.A. SERENO

Chief Justice
G.R. No. 161295 June 29, 2005

JESSIE G. CHING, petitioner,

vs.
WILLIAM M. SALINAS, SR., WILLIAM M. SALINAS, JR., JOSEPHINE L. SALINAS, JENNIFER Y.
SALINAS, ALONTO SOLAIMAN SALLE, JOHN ERIC I. SALINAS, NOEL M. YABUT (Board of
Directors and Officers of WILAWARE PRODUCT CORPORATION), respondents.

DECISION

CALLEJO, SR., J.:

This petition for review on certiorari assails the Decision1 and Resolution2 of the Court of Appeals
(CA) in CA-G.R. SP No. 70411 affirming the January 3, 2002 and February 14, 2002 Orders3 of the
Regional Trial Court (RTC) of Manila, Branch 1, which quashed and set aside Search Warrant Nos.
01-2401 and 01-2402 granted in favor of petitioner Jessie G. Ching.

Jessie G. Ching is the owner and general manager of Jeshicris Manufacturing Co., the maker and
manufacturer of a Utility Model, described as "Leaf Spring Eye Bushing for Automobile" made up of
plastic.

On September 4, 2001, Ching and Joseph Yu were issued by the National Library Certificates of
Copyright Registration and Deposit of the said work described therein as "Leaf Spring Eye Bushing
for Automobile."4

On September 20, 2001, Ching requested the National Bureau of Investigation (NBI) for
police/investigative assistance for the apprehension and prosecution of illegal manufacturers,
producers and/or distributors of the works.5

After due investigation, the NBI filed applications for search warrants in the RTC of Manila against
William Salinas, Sr. and the officers and members of the Board of Directors of Wilaware Product
Corporation. It was alleged that the respondents therein reproduced and distributed the said models
penalized under Sections 177.1 and 177.3 of Republic Act (R.A.) No. 8293. The applications sought
the seizure of the following:

a.) Undetermined quantity of Leaf spring eye bushing for automobile that are made up of
plastic polypropylene;

b.) Undetermined quantity of Leaf spring eye bushing for automobile that are made up of
polyvinyl chloride plastic;

c.) Undetermined quantity of Vehicle bearing cushion that is made up of polyvinyl chloride
plastic;

d.) Undetermined quantity of Dies and jigs, patterns and flasks used in the
manufacture/fabrication of items a to d;

e.) Evidences of sale which include delivery receipts, invoices and official receipts.6

The RTC granted the application and issued Search Warrant Nos. 01-2401 and 01-2402 for the
seizure of the aforecited articles.7 In the inventory submitted by the NBI agent, it appears that the
following articles/items were seized based on the search warrants:

Leaf Spring eye bushing

a) Plastic Polypropylene

- C190 27 }

- C240 rear 40 }
 - C240 front 41 } BAG 1

b) Polyvinyl Chloride Plastic

- C190 13 }

c) Vehicle bearing cushion

- center bearing cushion 11 }

Budder for C190 mold 8 }

Diesel Mold

a) Mold for spring eye bushing rear 1 set

b) Mold for spring eye bushing front 1 set

c) Mold for spring eye bushing for C190 1 set

d) Mold for C240 rear 1 piece of the set

e) Mold for spring eye bushing for L300 2 sets

f) Mold for leaf spring eye bushing C190 with metal 1 set

g) Mold for vehicle bearing cushion 1 set8

The respondents filed a motion to quash the search warrants on the following grounds:

2. The copyright registrations were issued in violation of the Intellectual Property Code on the ground
that:

a) the subject matter of the registrations are not artistic or literary;

b) the subject matter of the registrations are spare parts of automobiles meaning – there (sic)
are original parts that they are designed to replace. Hence, they are not original.9

The respondents averred that the works covered by the certificates issued by the National Library are
not artistic in nature; they are considered automotive spare parts and pertain to technology. They
aver that the models are not original, and as such are the proper subject of a patent, not copyright. 10

In opposing the motion, the petitioner averred that the court which issued the search warrants was
not the proper forum in which to articulate the issue of the validity of the copyrights issued to him.
Citing the ruling of the Court in Malaloan v. Court of Appeals,11 the petitioner stated that a search
warrant is merely a judicial process designed by the Rules of Court in anticipation of a criminal case.
Until his copyright was nullified in a proper proceeding, he enjoys rights of a registered owner/holder
thereof.

On January 3, 2002, the trial court issued an Order12 granting the motion, and quashed the search
warrant on its finding that there was no probable cause for its issuance. The court ruled that the work
covered by the certificates issued to the petitioner pertained to solutions to technical problems, not
literary and artistic as provided in Article 172 of the Intellectual Property Code.

His motion for reconsideration of the order having been denied by the trial court’s Order of February
14, 2002, the petitioner filed a petition for certiorari in the CA, contending that the RTC had no
jurisdiction to delve into and resolve the validity of the copyright certificates issued to him by the
National Library. He insisted that his works are covered by Sections 172.1 and 172.2 of the
Intellectual Property Code. The petitioner averred that the copyright certificates are prima
facie evidence of its validity, citing the ruling of the United States Court of Appeals in Wildlife Express
Corporation v. Carol Wright Sales, Inc.13 The petitioner asserted that the respondents failed to
adduce evidence to support their motion to quash the search warrants. The petitioner noted that
respondent William Salinas, Jr. was not being honest, as he was able to secure a similar copyright
registration of a similar product from the National Library on January 14, 2002.

On September 26, 2003, the CA rendered judgment dismissing the petition on its finding that the RTC
did not commit any grave abuse of its discretion in issuing the assailed order, to wit:

It is settled that preliminarily, there must be a finding that a specific offense must have been
committed to justify the issuance of a search warrant. In a number of cases decided by the Supreme
Court, the same is explicitly provided, thus:

"The probable cause must be in connection with one specific offense, and the judge must, before
issuing the warrant, personally examine in the form of searching questions and answers, in writing
and under oath, the complainant and any witness he may produce, on facts personally known to them
and attach to the record their sworn statements together with any affidavit submitted.

"In the determination of probable cause, the court must necessarily resolve whether or not an offense
exists to justify the issuance or quashal of the search warrant."

In the instant case, the petitioner is praying for the reinstatement of the search warrants issued, but
subsequently quashed, for the offense of Violation of Class Designation of Copyrightable Works
under Section 177.1 in relation to Section 177.3 of Republic Act 8293, when the objects subject of the
same, are patently not copyrightable.

It is worthy to state that the works protected under the Law on Copyright are: literary or artistic works
(Sec. 172) and derivative works (Sec. 173). The Leaf Spring Eye Bushing and Vehicle Bearing
Cushion fall on neither classification. Accordingly, if, in the first place, the item subject of the petition
is not entitled to be protected by the law on copyright, how can there be any violation? 14

The petitioner’s motion for reconsideration of the said decision suffered the same fate. The petitioner
forthwith filed the present petition for review on certiorari, contending that the revocation of his
copyright certificates should be raised in a direct action and not in a search warrant proceeding.

The petitioner posits that even assuming ex argumenti that the trial court may resolve the validity of
his copyright in a proceeding to quash a search warrant for allegedly infringing items, the RTC
committed a grave abuse of its discretion when it declared that his works are not copyrightable in the
first place. He claims that R.A. No. 8293, otherwise known as the Intellectual Property Code of the
Philippines, which took effect on January 1, 1998, provides in no uncertain terms that copyright
protection automatically attaches to a work by the sole fact of its creation, irrespective of its mode or
form of expression, as well as of its content, quality or purpose.15 The law gives a non-inclusive
definition of "work" as referring to original intellectual creations in the literary and artistic domain
protected from the moment of their creation; and includes original ornamental designs or models for
articles of manufacture, whether or not registrable as an industrial design and other works of applied
art under Section 172.1(h) of R.A. No. 8293.lawphil.net

As such, the petitioner insists, notwithstanding the classification of the works as either literary and/or
artistic, the said law, likewise, encompasses works which may have a bearing on the utility aspect to
which the petitioner’s utility designs were classified. Moreover, according to the petitioner, what the
Copyright Law protects is the author’s intellectual creation, regardless of whether it is one with
utilitarian functions or incorporated in a useful article produced on an industrial scale.

The petitioner also maintains that the law does not provide that the intended use or use in industry of
an article eligible for patent bars or invalidates its registration under the Law on Copyright. The test of
protection for the aesthetic is not beauty and utility, but art for the copyright and invention of original
and ornamental design for design patents. 16 In like manner, the fact that his utility designs or models
for articles of manufacture have been expressed in the field of automotive parts, or based on
something already in the public domain does not automatically remove them from the protection of
the Law on Copyright.17

The petitioner faults the CA for ignoring Section 218 of R.A. No. 8293 which gives the same
presumption to an affidavit executed by an author who claims copyright ownership of his work.
The petitioner adds that a finding of probable cause to justify the issuance of a search warrant means
merely a reasonable suspicion of the commission of the offense. It is not equivalent to absolute
certainty or a finding of actual and positive cause. 18 He assists that the determination of probable
cause does not concern the issue of whether or not the alleged work is copyrightable. He maintains
that to justify a finding of probable cause in the issuance of a search warrant, it is enough that there
exists a reasonable suspicion of the commission of the offense.

The petitioner contends that he has in his favor the benefit of the presumption that his copyright is
valid; hence, the burden of overturning this presumption is on the alleged infringers, the respondents
herein. But this burden cannot be carried in a hearing on a proceeding to quash the search warrants,
as the issue therein is whether there was probable cause for the issuance of the search warrant. The
petitioner concludes that the issue of probable cause should be resolved without invalidating his
copyright.

In their comment on the petition, the respondents aver that the work of the petitioner is essentially a
technical solution to the problem of wear and tear in automobiles, the substitution of materials, i.e.,
from rubber to plastic matter of polyvinyl chloride, an oil resistant soft texture plastic material strong
enough to endure pressure brought about by the vibration of the counter bearing and thus brings
bushings. Such work, the respondents assert, is the subject of copyright under Section 172.1 of R.A.
No. 8293. The respondents posit that a technical solution in any field of human activity which is novel
may be the subject of a patent, and not of a copyright. They insist that the certificates issued by the
National Library are only certifications that, at a point in time, a certain work was deposited in the said
office. Furthermore, the registration of copyrights does not provide for automatic protection. Citing
Section 218.2(b) of R.A. No. 8293, the respondents aver that no copyright is said to exist if a party
categorically questions its existence and legality. Moreover, under Section 2, Rule 7 of the
Implementing Rules of R.A. No. 8293, the registration and deposit of work is not conclusive as to
copyright outlay or the time of copyright or the right of the copyright owner. The respondents maintain
that a copyright exists only when the work is covered by the protection of R.A. No. 8293.

The petition has no merit.

The RTC had jurisdiction to delve into and resolve the issue whether the petitioner’s utility models are
copyrightable and, if so, whether he is the owner of a copyright over the said models. It bears
stressing that upon the filing of the application for search warrant, the RTC was duty-bound to
determine whether probable cause existed, in accordance with Section 4, Rule 126 of the Rules of
Criminal Procedure:

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

In Solid Triangle Sales Corporation v. The Sheriff of RTC QC, Br. 93,19 the Court held that in the
determination of probable cause, the court must necessarily resolve whether or not an offense exists
to justify the issuance of a search warrant or the quashal of one already issued by the court. Indeed,
probable cause is deemed to exist only where facts and circumstances exist which could lead a
reasonably cautious and prudent man to believe that an offense has been committed or is being
committed. Besides, in Section 3, Rule 126 of the Rules of Criminal Procedure, a search warrant may
be issued for the search and seizure of personal property (a) subject of the offense; (b) stolen or
embezzled and other proceeds or fruits of the offense; or (c) used or intended to be used as the
means of committing an offense.

The RTC is mandated under the Constitution and Rules of Criminal Procedure to determine probable
cause. The court cannot abdicate its constitutional obligation by refusing to determine whether an
offense has been committed.20 The absence of probable cause will cause the outright nullification of
the search warrant.21

For the RTC to determine whether the crime for infringement under R.A. No. 8293 as alleged in an
application is committed, the petitioner-applicant was burdened to prove that (a) respondents Jessie
Ching and Joseph Yu were the owners of copyrighted material; and (b) the copyrighted material was
being copied and distributed by the respondents. Thus, the ownership of a valid copyright is
essential.22
Ownership of copyrighted material is shown by proof of originality and copyrightability. By originality is
meant that the material was not copied, and evidences at least minimal creativity; that it was
independently created by the author and that it possesses at least same minimal degree of
creativity.23 Copying is shown by proof of access to copyrighted material and substantial similarity
between the two works.24 The applicant must thus demonstrate the existence and the validity of his
copyright because in the absence of copyright protection, even original creation may be freely
copied.25

By requesting the NBI to investigate and, if feasible, file an application for a search warrant for
infringement under R.A. No. 8293 against the respondents, the petitioner thereby authorized the RTC
(in resolving the application), to delve into and determine the validity of the copyright which he
claimed he had over the utility models. The petitioner cannot seek relief from the RTC based on his
claim that he was the copyright owner over the utility models and, at the same time, repudiate the
court’s jurisdiction to ascertain the validity of his claim without running afoul to the doctrine of
estoppel.

To discharge his burden, the applicant may present the certificate of registration covering the work or,
in its absence, other evidence.26 A copyright certificate provides prima facie evidence of originality
which is one element of copyright validity. It constitutes prima facie evidence of both validity and
ownership27 and the validity of the facts stated in the certificate. 28 The presumption of validity to a
certificate of copyright registration merely orders the burden of proof. The applicant should not
ordinarily be forced, in the first instance, to prove all the multiple facts that underline the validity of the
copyright unless the respondent, effectively challenging them, shifts the burden of doing so to the
applicant.29 Indeed, Section 218.2 of R.A. No. 8293 provides:

218.2. In an action under this Chapter:

(a) Copyright shall be presumed to subsist in the work or other subject matter to which the
action relates if the defendant does not put in issue the question whether copyright subsists in
the work or other subject matter; and

(b) Where the subsistence of the copyright is established, the plaintiff shall be presumed to be
the owner of the copyright if he claims to be the owner of the copyright and the defendant does
not put in issue the question of his ownership.

A certificate of registration creates no rebuttable presumption of copyright validity where other

evidence in the record casts doubt on the question. In such a case, validity will not be presumed.30

To discharge his burden of probable cause for the issuance of a search warrant for violation of R.A.
No. 8293, the petitioner-applicant submitted to the RTC Certificate of Copyright Registration Nos.
2001-197 and 2001-204 dated September 3, 2001 and September 4, 2001, respectively, issued by
the National Library covering work identified as Leaf Spring Eye Bushing for Automobile and Vehicle
Bearing Cushion both classified under Section 172.1(h) of R.A. No. 8293, to wit:

SEC. 172. Literary and Artistic Works. – 172.1. Literary and artistic works, hereinafter referred to as
"works," are original intellectual creations in the literary and artistic domain protected from the
moment of their creation and shall include in particular:

...

(h) Original ornamental designs or models for articles of manufacture, whether or not registrable as
an industrial design, and other works of applied art.

Related to the provision is Section 171.10, which provides that a "work of applied art" is an artistic
creation with utilitarian functions or incorporated in a useful article, whether made by hand or
produced on an industrial scale.

But, as gleaned from the specifications appended to the application for a copyright certificate filed by
the petitioner, the said Leaf Spring Eye Bushing for Automobile is merely a utility model described as
comprising a generally cylindrical body having a co-axial bore that is centrally located and provided
with a perpendicular flange on one of its ends and a cylindrical metal jacket surrounding the
peripheral walls of said body, with the bushing made of plastic that is either polyvinyl chloride or
polypropylene.31 Likewise, the Vehicle Bearing Cushion is illustrated as a bearing cushion comprising
a generally semi-circular body having a central hole to secure a conventional bearing and a plurality
of ridges provided therefore, with said cushion bearing being made of the same plastic
materials.32 Plainly, these are not literary or artistic works. They are not intellectual creations in the
literary and artistic domain, or works of applied art. They are certainly not ornamental designs or one
having decorative quality or value.

It bears stressing that the focus of copyright is the usefulness of the artistic design, and not its
marketability. The central inquiry is whether the article is a work of art. 33 Works for applied art include
all original pictorials, graphics, and sculptural works that are intended to be or have been embodied in
useful article regardless of factors such as mass production, commercial exploitation, and the
potential availability of design patent protection.34

As gleaned from the description of the models and their objectives, these articles are useful articles
which are defined as one having an intrinsic utilitarian function that is not merely to portray the
appearance of the article or to convey information. Indeed, while works of applied art, original
intellectual, literary and artistic works are copyrightable, useful articles and works of industrial design
are not.35 A useful article may be copyrightable only if and only to the extent that such design
incorporates pictorial, graphic, or sculptural features that can be identified separately from, and are
capable of existing independently of the utilitarian aspects of the article.

We agree with the contention of the petitioner (citing Section 171.10 of R.A. No. 8293), that the
author’s intellectual creation, regardless of whether it is a creation with utilitarian functions or
incorporated in a useful article produced on an industrial scale, is protected by copyright law.
However, the law refers to a "work of applied art which is an artistic creation." It bears stressing that
there is no copyright protection for works of applied art or industrial design which have aesthetic or
artistic features that cannot be identified separately from the utilitarian aspects of the
article.36Functional components of useful articles, no matter how artistically designed, have generally
been denied copyright protection unless they are separable from the useful article. 37

In this case, the petitioner’s models are not works of applied art, nor artistic works. They are utility
models, useful articles, albeit with no artistic design or value. Thus, the petitioner described the utility
model as follows:

LEAF SPRING EYE BUSHING FOR AUTOMOBILE

Known bushings inserted to leaf-spring eye to hold leaf-springs of automobile are made of hard
rubber. These rubber bushings after a time, upon subjecting them to so much or intermittent pressure
would eventually wore (sic) out that would cause the wobbling of the leaf spring.

The primary object of this utility model, therefore, is to provide a leaf-spring eye bushing for
automobile that is made up of plastic.

Another object of this utility model is to provide a leaf-spring eye bushing for automobiles made of
polyvinyl chloride, an oil resistant soft texture plastic or polypropylene, a hard plastic, yet both causes
cushion to the leaf spring, yet strong enough to endure pressure brought about by the up and down
movement of said leaf spring.

Yet, an object of this utility model is to provide a leaf-spring eye bushing for automobiles that has a
much longer life span than the rubber bushings.

Still an object of this utility model is to provide a leaf-spring eye bushing for automobiles that has a
very simple construction and can be made using simple and ordinary molding equipment.

A further object of this utility model is to provide a leaf-spring eye bushing for automobile that is
supplied with a metal jacket to reinforce the plastic eye bushing when in engaged with the steel
material of the leaf spring.

These and other objects and advantages will come to view and be understood upon a reading of the
detailed description when taken in conjunction with the accompanying drawings.
Figure 1 is an exploded perspective of a leaf-spring eye bushing according to the present utility
model;

Figure 2 is a sectional view taken along line 2-2 of Fig. 1;

Figure 3 is a longitudinal sectional view of another embodiment of this utility model;

Figure 4 is a perspective view of a third embodiment; and

Figure 5 is a sectional view thereof.

Referring now to the several views of the drawings wherein like reference numerals designated same
parts throughout, there is shown a utility model for a leaf-spring eye bushing for automobile generally
designated as reference numeral 10.

Said leaf-spring eye bushing 10 comprises a generally cylindrical body 11 having a co-axial bore 12
centrally provided thereof.

As shown in Figs. 1 and 2, said leaf-spring eye bushing 10 is provided with a perpendicular flange 13
on one of its ends and a cylindrical metal jacket 14 surrounding the peripheral walls 15 of said body
11. When said leaf-spring bushing 10 is installed, the metal jacket 14 acts with the leaf-spring eye
(not shown), which is also made of steel or cast steel. In effect, the bushing 10 will not be directly in
contact with steel, but rather the metal jacket, making the life of the bushing 10 longer than those
without the metal jacket.

In Figure 2, the bushing 10 as shown is made of plastic, preferably polyvinyl chloride, an oil resistant
soft texture plastic or a hard polypropylene plastic, both are capable to endure the pressure applied
thereto, and, in effect, would lengthen the life and replacement therefor.

Figure 3, on the other hand, shows the walls 16 of the co-axial bore 12 of said bushing 10 is
insertably provided with a steel tube 17 to reinforce the inner portion thereof. This steel tube 17
accommodates or engages with the leaf-spring bolt (not shown) connecting the leaf spring and the
automobile’s chassis.

Figures 4 and 5 show another embodiment wherein the leaf eye bushing 10 is elongated and
cylindrical as to its construction. Said another embodiment is also made of polypropylene or polyvinyl
chloride plastic material. The steel tube 17 and metal jacket 14 may also be applied to this
embodiment as an option thereof.38

VEHICLE BEARING CUSHION

Known bearing cushions inserted to bearing housings for vehicle propeller shafts are made of hard
rubber. These rubber bushings after a time, upon subjecting them to so much or intermittent pressure
would eventually be worn out that would cause the wobbling of the center bearing.

The primary object of this utility model therefore is to provide a vehicle-bearing cushion that is made
up of plastic.

Another object of this utility model is to provide a vehicle bearing cushion made of polyvinyl chloride,
an oil resistant soft texture plastic material which causes cushion to the propeller’s center bearing, yet
strong enough to endure pressure brought about by the vibration of the center bearing.

Yet, an object of this utility model is to provide a vehicle-bearing cushion that has a much longer life
span than rubber bushings.

Still an object of this utility model is to provide a vehicle bearing cushion that has a very simple
construction and can be made using simple and ordinary molding equipment.

These and other objects and advantages will come to view and be understood upon a reading of the
detailed description when taken in conjunction with the accompanying drawings.
Figure 1 is a perspective view of the present utility model for a vehicle-bearing cushion; and

Figure 2 is a sectional view thereof.

Referring now to the several views of the drawing, wherein like reference numeral designate same
parts throughout, there is shown a utility model for a vehicle-bearing cushion generally designated as
reference numeral 10.

Said bearing cushion 10 comprises of a generally semi-circular body 11, having central hole 12 to
house a conventional bearing (not shown). As shown in Figure 1, said body 11 is provided with a
plurality of ridges 13 which serves reinforcing means thereof.

The subject bearing cushion 10 is made of polyvinyl chloride, a soft texture oil and chemical resistant
plastic material which is strong, durable and capable of enduring severe pressure from the center
bearing brought about by the rotating movement of the propeller shaft of the vehicle.39

A utility model is a technical solution to a problem in any field of human activity which is new and
industrially applicable. It may be, or may relate to, a product, or process, or an improvement of any of
the aforesaid.40Essentially, a utility model refers to an invention in the mechanical field. This is the
reason why its object is sometimes described as a device or useful object. 41 A utility model varies
from an invention, for which a patent for invention is, likewise, available, on at least three aspects:
first, the requisite of "inventive step"42 in a patent for invention is not required; second, the maximum
term of protection is only seven years43 compared to a patent which is twenty years,44 both reckoned
from the date of the application; and third, the provisions on utility model dispense with its substantive
examination45 and prefer for a less complicated system.

Being plain automotive spare parts that must conform to the original structural design of the
components they seek to replace, the Leaf Spring Eye Bushing and Vehicle Bearing Cushion are not
ornamental. They lack the decorative quality or value that must characterize authentic works of
applied art. They are not even artistic creations with incidental utilitarian functions or works
incorporated in a useful article. In actuality, the personal properties described in the search warrants
are mechanical works, the principal function of which is utility sans any aesthetic embellishment.

Neither are we to regard the Leaf Spring Eye Bushing and Vehicle Bearing Cushion as included in the
catch-all phrase "other literary, scholarly, scientific and artistic works" in Section 172.1(a) of R.A. No.
8293. Applying the principle of ejusdem generis which states that "where a statute describes things of
a particular class or kind accompanied by words of a generic character, the generic word will usually
be limited to things of a similar nature with those particularly enumerated, unless there be something
in the context of the state which would repel such inference," 46 the Leaf Spring Eye Bushing and
Vehicle Bearing Cushion are not copyrightable, being not of the same kind and nature as the works
enumerated in Section 172 of R.A. No. 8293.

No copyright granted by law can be said to arise in favor of the petitioner despite the issuance of the
certificates of copyright registration and the deposit of the Leaf Spring Eye Bushing and Vehicle
Bearing Cushion. Indeed, in Joaquin, Jr. v. Drilon47 and Pearl & Dean (Phil.), Incorporated v.
Shoemart, Incorporated,48 the Court ruled that:

Copyright, in the strict sense of the term, is purely a statutory right. It is a new or independent right
granted by the statute, and not simply a pre-existing right regulated by it. Being a statutory grant, the
rights are only such as the statute confers, and may be obtained and enjoyed only with respect to the
subjects and by the persons, and on terms and conditions specified in the statute. Accordingly, it can
cover only the works falling within the statutory enumeration or description.

That the works of the petitioner may be the proper subject of a patent does not entitle him to the
issuance of a search warrant for violation of copyright laws. In Kho v. Court of Appeals49 and Pearl &
Dean (Phil.), Incorporated v. Shoemart, Incorporated,50 the Court ruled that "these copyright and
patent 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."
The Court expounded further, thus:

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.

The petitioner cannot find solace in the ruling of the United States Supreme Court in Mazer v.
Stein51 to buttress his petition. In that case, the artifacts involved in that case were statuettes of
dancing male and female figures made of semi-vitreous china. The controversy therein centered on
the fact that although copyrighted as "works of art," the statuettes were intended for use and used as
bases for table lamps, with electric wiring, sockets and lampshades attached. The issue raised was
whether the statuettes were copyright protected in the United States, considering that the copyright
applicant intended primarily to use them as lamp bases to be made and sold in quantity, and carried
such intentions into effect. At that time, the Copyright Office interpreted the 1909 Copyright Act to
cover works of artistic craftsmanship insofar as their form, but not the utilitarian aspects, were
concerned. After reviewing the history and intent of the US Congress on its copyright legislation and
the interpretation of the copyright office, the US Supreme Court declared that the statuettes were held
copyrightable works of art or models or designs for works of art. The High Court ruled that:

"Works of art (Class G) – (a) – In General. This class includes works of artistic craftsmanship, in so
far as their form but not their mechanical or utilitarian aspects are concerned, such as artistic jewelry,
enamels, glassware, and tapestries, as well as all works belonging to the fine arts, such as paintings,
drawings and sculpture. …"

So we have a contemporaneous and long-continued construction of the statutes by the agency

charged to administer them that would allow the registration of such a statuette as is in question
here.52

The High Court went on to state that "[t]he dichotomy of protection for the aesthetic is not beauty and
utility but art for the copyright and the invention of original and ornamental design for design patents."
Significantly, the copyright office promulgated a rule to implement Mazer to wit:

… [I]f "the sole intrinsic function of an article is its utility, the fact that the work is unique and
attractively shaped will not qualify it as a work of art."

In this case, the bushing and cushion are not works of art. They are, as the petitioner himself
admitted, utility models which may be the subject of a patent.

IN LIGHT OF ALL THE FOREGOING, the instant petition is hereby DENIED for lack of merit. The
assailed Decision and Resolution of the Court of Appeals in CA-G.R. SP No. 70411 are AFFIRMED.
Search Warrant Nos. 01-2401 and 01-2402 issued on October 15, 2001 are ANNULLED AND SET
ASIDE. Costs against the petitioner.

SO ORDERED.

Puno, (Chairman), Austria-Martinez, Tinga, and Chico-Nazario, JJ., concur.

[G.R. No. 132604. March 6, 2002]

VENANCIO SAMBAR, doing business under the name and style of CVS Garment
Enterprises, petitioner, vs. LEVI STRAUSS & CO., and LEVI STRAUSS (PHIL.),
INC., respondents.

DECISION
QUISUMBING, J.:

This petition for review on certiorari prays for the reversal of the decision dated January 30, 1998,
of the Court of Appeals in CA-G.R. CV No. 51553. That decision affirmed the decision in Civil Case
No. 88-2220 of the Regional Trial Court, Branch 66, Makati City, making permanent the writ of
preliminary injunction, ordering CVS Garment and Industrial Company (CVSGIC) and petitioner
Venancio Sambar to pay private respondents jointly and solidarily the sum of P50,000 as temperate
and nominal damages, P10,000 as exemplary damages, and P25,000 as attorneys fees and litigation
costs, and ordering the Director of the National Library to cancel Copyright Registration No. 1-1998 in
the name of Venancio Sambar.
The facts are as follows:
On September 28, 1987, private respondents, through a letter from their legal officer, demanded
that CVS Garment Enterprises (CVSGE) desist from using their stitched arcuate design on the
Europress jeans which CVSGE advertised in the Manila Bulletin.
Atty. Benjamin Gruba, counsel of CVSGE, replied that the arcuate design on the back pockets of
Europress jeans was different from the design on the back pockets of Levis jeans. He further
asserted that his client had a copyright on the design it was using.
Thereafter, private respondents filed a complaint against Sambar, doing business under the
name and style of CVSGE. Private respondents also impleaded the Director of the National
Library. Summons was sent to Sambar in his business address at 161-B Iriga corner Retiro, La Loma,
Quezon City.
Atty. Gruba claimed that he erroneously received the original summons as he mistook it as
addressed to his client, CVSGIC. He returned the summons and the pleadings and manifested in
court that CVSGE, which was formerly doing business in the premises, already stopped operation
and CVSGIC took over CVSGEs occupation of the premises. He also claimed he did not know the
whereabouts of Sambar, the alleged owner of CVSGE.
Thereafter, private respondents amended their complaint to include CVSGIC. When private
respondents learned the whereabouts of Sambar and CVSGE, the case was revived.
Private respondents alleged in their complaint that Levi Strauss and Co. (LS&Co.), an
internationally known clothing manufacturer, owns the arcuate design trademark which was
registered under U.S. Trademark Registration No. 404, 248 on November 16, 1943, and in the
Principal Register of trademarks with the Philippine Patent Office under Certificate of Registration No.
20240 issued on October 8, 1973; that through a Trademark Technical Data and Technical
Assistance Agreement with Levi Strauss (Phil.) Inc. (LSPI) in 1972, LS&Co. granted LSPI a non-
exclusive license to use the arcuate trademark in its manufacture and sale of Levis pants, jackets and
shirts in the Philippines; that in 1983, LS&Co. also appointed LSPI as its agent and attorney-in-fact to
protect its trademark in the Philippines; and that sometime in 1987, CVSGIC and Venancio Sambar,
without the consent and authority of private respondents and in infringement and unfair competition,
sold and advertised, and despite demands to cease and desist, continued to manufacture, sell and
advertise denim pants under the brand name Europress with back pockets bearing a design similar to
the arcuate trademark of private respondents, thereby causing confusion on the buying public,
prejudicial to private respondents goodwill and property right.
In its answer, CVSGIC admitted it manufactured, sold and advertised and was still manufacturing
and selling denim pants under the brand name of Europress, bearing a back pocket design of two
double arcs meeting in the middle. However, it denied that there was infringement or unfair
competition because the display rooms of department stores where Levis and Europress jeans were
sold, were distinctively segregated by billboards and other modes of advertisement. CVSGIC avers
that the public would not be confused on the ownership of such known trademark as Levis, Jag,
Europress, etc.. Also, CVSGIC claimed that it had its own original arcuate design, as evidenced by
Copyright Registration No. 1-1998, which was very different and distinct from Levis design. CVSGIC
prayed for actual, moral and exemplary damages by way of counterclaim.
Petitioner Venancio Sambar filed a separate answer. He denied he was connected with
CVSGIC. He admitted that Copyright Registration No. 1-1998 was issued to him, but he denied using
it. He also said he did not authorize anyone to use the copyrighted design. He counterclaimed for
moral and exemplary damages and payment of attorneys fees.
After hearing, the trial court issued a writ of preliminary injunction enjoining CVSGIC and
petitioner from manufacturing, advertising and selling pants with the arcuate design on their back
pockets. CVSGIC and petitioner did not appear during the October 13 and 27, 1993 hearings, when
they were to present evidence.Consequently, the trial court ruled that they waived their right to
present evidence.
On May 3, 1995, the trial court rendered its decision. The dispositive portion reads:

IN VIEW OF THE FOREGOING, judgment is hereby rendered:

a) making the writ of preliminary injunction permanent;

b) ordering the defendants CVS Garment and Industrial Company and Venancio Sambar to pay the
plaintiffs jointly and solidarily the sum of P50,000.00 as temperate and nominal damages, the sum of
P10,000.00 as exemplary damages, and the sum of P25,000.00 as attorneys fees and litigation
expenses and to pay the costs.

SO ORDERED.[1]

Private respondents moved for a reconsideration praying for the cancellation of petitioners
copyright registration. The trial court granted reconsideration in its July 14, 1995 order, thus:

IN VIEW OF THE FOREGOING, judgment is hereby rendered:

a) making the writ of preliminary injunction permanent;

b) ordering the defendants CVS Garment and Industrial Company and Venancio Sambar to pay the
plaintiffs jointly and solidarily the sum of P50,000.00 as temperate and nominal damages, the sum of
P10,000.00 as exemplary damages, and the sum of P25,000.00 as attorneys fees and litigation
expenses and to pay the costs;

c) ordering the Director of the National Library to cancel the Copyright Registration No. 1-1998 issued
in the name of Venancio Sambar.[2]

Petitioner appealed to the Court of Appeals which on January 30, 1998 decided in favor of private
respondents as follows:

WHEREFORE, the judgment appealed from is AFFIRMED in toto.

SO ORDERED.[3]

In this instant petition, petitioner avers that the Court of Appeals erred in:
I. ...RULING THAT THERE WAS AN INFRINGEMENT OF RESPONDENTS ARCUATE
MARK.
II. ...RULING THAT PETITIONER IS JOINTLY AND SOLIDARILY LIABLE WITH CVS
GARMENTS INDUSTRIAL CORPORATION FOR INFRINGEMENT OF RESPONDENTS
ARCUATE MARK.
III. ...IN ORDERING, THERE BEING NO INFRINGEMENT OR UNFAIR COMPETITION,
THE AWARD OF DAMAGES AND CANCELLATION OF COPYRIGHT REGISTRATION
NO. 1-1998 ISSUED IN THE NAME OF PETITIONER.[4]
Briefly, we are asked to resolve the following issues:
 1. Did petitioner infringe on private respondents arcuate design?
2. Must we hold petitioner solidarily liable with CVS Garments Industrial Corporation?
3. Are private respondents entitled to nominal, temperate and exemplary damages and
cancellation of petitioners copyright?
On the first issue, petitioner claims that he did not infringe on private respondents arcuate design
because there was no colorable imitation which deceived or confused the public. He cites Emerald
Garment Manufacturing Corporation vs. Court of Appeals, G.R. No. 100098, 251 SCRA 600 (1995),
as authority. He disagreed with the Court of Appeals that there were confusing similarities between
Levis and Europress arcuate designs, despite the trial courts observation of differences in
them. Petitioner maintains that although the backpocket designs had similarities, the public was not
confused because Levis jeans had other marks not found in Europress jeans. Further, he says Levis
long history and popularity made its trademark easily identifiable by the public.
In its comment, private respondents aver that the Court of Appeals did not err in ruling that there
was infringement in this case. The backpocket design of Europress jeans, a double arc intersecting in
the middle was the same as Levis mark, also a double arc intersecting at the center. Although the trial
court found differences in the two designs, these differences were not noticeable. Further, private
respondents said, infringement of trademark did not require exact similarity. Colorable imitation
enough to cause confusion among the public, was sufficient for a trademark to be infringed. Private
respondents explained that in a market research they conducted with 600 respondents, the result
showed that the public was confused by Europress trademark vis the Levis trademark.
We find that the first issue raised by petitioner is factual. The basic rule is that factual questions
are beyond the province of this Court in a petition for review. Although there are exceptions to this
rule, this case is not one of them.[5] Hence, we find no reason to disturb the findings of the Court of
Appeals that Europress use of the arcuate design was an infringement of the Levis design.
On the second issue, petitioner claims that private respondents did not show that he was
connected with CVSGIC, nor did they prove his specific acts of infringement to make him liable for
damages. Again, this is a factual matter and factual findings of the trial court, concurred in by the
Court of Appeals, are final and binding on this Court.[6] Both the courts below found that petitioner had
a copyright over Europress arcuate design and that he consented to the use of said design by
CVSGIC. We are bound by this finding, especially in the absence of a showing that it was tainted with
arbitrariness or palpable error.[7] It must be stressed that it was immaterial whether or not petitioner
was connected with CVSGIC. What is relevant is that petitioner had a copyright over the design and
that he allowed the use of the same by CVSGIC.
Petitioner also contends that the Court of Appeals erred when it said that he had the burden to
prove that he was not connected with CVSGIC and that he did not authorize anyone to use his
copyrighted design. According to petitioner, these are important elements of private respondents
cause of action against him, hence, private respondents had the ultimate burden of proof.
Pertinent is Section 1, Rule 131 of the Rules of Court[8] which provides that the burden of proof is
the duty of a party to prove the truth of his claim or defense, or any fact in issue by the amount of
evidence required by law. In civil cases, the burden of proof may be on either the plaintiff or the
defendant. It is on the latter, if in his answer he alleges an affirmative defense, which is not a denial of
an essential ingredient in the plaintiffs cause of action, but is one which, if established, will be a good
defense i.e., an avoidance of the claim, which prima facie, the plaintiff already has because of the
defendants own admissions in the pleadings.[9]
Petitioners defense in this case was an affirmative defense. He did not deny that private
respondents owned the arcuate trademark nor that CVSGIC used on its products a similar arcuate
design. What he averred was that although he owned the copyright on the Europress arcuate design,
he did not allow CVSGIC to use it. He also said he was not connected with CVSGIC. These were not
alleged by private respondents in their pleadings, and petitioner therefore had the burden to prove
these.
Lastly, are private respondents entitled to nominal, temperate and exemplary damages and
cancellation of petitioners copyright?
Petitioner insists that he had not infringed on the arcuate trademark, hence, there was no basis
for nominal and temperate damages. Also, an award of nominal damages precludes an award of
temperate damages. He cites Ventanilla vs. Centeno, G.R. No. L-14333, 1 SCRA 215 (1961) on
this. Thus, he contends, assuming arguendo that there was infringement, the Court of Appeals still
erred in awarding both nominal and temperate damages.
Petitioner likewise said that the grant of exemplary damages was inconsistent with the trial courts
finding that the design of Europress jeans was not similar to Levis design and that no pecuniary loss
was suffered by respondents to entitle them to such damages.
Lastly, petitioner maintains that as Europress arcuate design is not a copy of that of Levis, citing
the trial courts findings that although there are similarities, there are also differences in the two
designs, cancellation of his copyright was not justified.
On this matter, private respondents assert that the lower courts found that there was infringement
and Levis was entitled to damages based on Sections 22 and 23 of RA No. 166 otherwise known as
the Trade Mark Law,[10] as amended, which was the law then governing. Said sections define
infringement and prescribe the remedies therefor. Further, private respondents aver it was misleading
for petitioner to claim that the trial court ruled that private respondents did not suffer pecuniary loss,
suggesting that the award of damages was improper. According to the private respondents, the trial
court did not make any such ruling. It simply stated that there was no evidence that Levis had
suffered decline in its sales because of the use of the arcuate design by Europress jeans. They offer
that while there may be no direct proof that they suffered a decline in sales, damages may still be
measured based on a reasonable percentage of the gross sales of the respondents, pursuant to
Section 23 of the Trademark law.[11]
Finally, regarding the cancellation of petitioners copyright, private respondents deny that the trial
court ruled that the arcuate design of Europress jeans was not the same as Levis arcuate design
jeans. On the contrary, the trial court expressly ruled that there was similarity. The cancellation of
petitioners copyright was justified because petitioners copyright can not prevail over respondents
registration in the Principal Register of Bureau of Patents, Trademarks, and Technology
Transfer. According to private respondents, the essence of copyright registration is originality and a
copied design is inherently non-copyrightable. They insist that registration does not confer originality
upon a copycat version of a prior design.
From the foregoing discussion, it is clear that the matters raised by petitioner in relation to the last
issue are purely factual, except the matter of nominal and temperate damages. Petitioner claims that
damages are not due private respondents and his copyright should not be cancelled because he had
not infringed on Levis trademark. Both the trial court and the Court of Appeals found there was
infringement. Thus, the award of damages and cancellation of petitioners copyright are
appropriate.[12] Award of damages is clearly provided in Section 23,[13] while cancellation of petitioners
copyright finds basis on the fact that the design was a mere copy of that of private respondents
trademark. To be entitled to copyright, the thing being copyrighted must be original, created by the
author through his own skill, labor and judgment, without directly copying or evasively imitating the
work of another.[14]
However, we agree with petitioner that it was error for the Court of Appeals to affirm the award of
nominal damages combined with temperate damages [15] by the Regional Trial Court of Makati. What
respondents are entitled to is an award for temperate damages, not nominal damages. For although
the exact amount of damage or loss can not be determined with reasonable certainty, the fact that
there was infringement means they suffered losses for which they are entitled to moderate
damages.[16]We find that the award of P50,000.00 as temperate damages fair and reasonable,
considering the circumstances herein as well as the global coverage and reputation of private
respondents Levi Strauss & Company and Levi Strauss (Phil.), Inc.
WHEREFORE, the decision dated January 30, 1998, of the Court of Appeals, in CA-G.R. CV No.
51553 AFFIRMING the judgment of the Regional Trial Court of Makati, Branch 66, dated July 14,
1995, is hereby MODIFIED so that nominal damages are deleted but the amount of P50,000 is
hereby awarded only as TEMPERATE DAMAGES. In all other respects, said judgment is hereby
AFFIRMED, to wit:
a) the writ of preliminary injunction is made permanent;
b) the defendants CVS Garment and Industrial Company and Venancio Sambar are ordered
also to pay the plaintiffs jointly and solidarily the sum of P10,000.00 as exemplary
damages, and the sum of P25,000.00 as attorneys fees and litigation expenses, and to
pay the costs; and
c) the Director of the National Library is ordered to cancel the Copyright Registration No. 1-
1998 issued in the name of Venancio Sambar.
SO ORDERED.
Bellosillo, (Chairman), Mendoza, Buena, and De Leon, Jr., JJ., concur.
G.R. No. 172276 August 8, 2010

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

vs.
MARTIN T. DY, JR., Respondent.

DECISION

CARPIO, J.:

The Case

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

The Facts

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

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

Dy, Jr. owns 5M Enterprises. He imports Sunny Boy powdered milk from Australia and repacks the
powdered milk into three sizes of plastic packs bearing the name "NANNY." The packs weigh 80, 180
and 450 grams and are sold for ₱8.90, ₱17.50 and ₱39.90, respectively. NANNY is is also classified
under Class 6 — "full cream milk for adults in [sic] all ages." Dy, Jr. distributes and sells the powdered
milk in Dumaguete, Negros Oriental, Cagayan de Oro, and parts of Mindanao.

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

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

The RTC’s Ruling

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

If determination of infringement shall only be limited on whether or not the mark used would likely
cause confusion or mistake in the minds of the buying public or deceive customers, such in [sic] the
most considered view of this forum would be highly unlikely to happen in the instant case. This is
because upon comparison of the plaintiff’s NAN and defendant’s NANNY, the following features
would reveal the absence of any deceptive tendency in defendant’s NANNY: (1) all NAN products are
contained tin cans [sic], while NANNY are contained in plastic packs; (2) the predominant colors used
in the labels of NAN products are blue and white, while the predominant colors in the plastic packings
of NANNY are blue and green; (3) the labels of NAN products have at the bottom portion an elliptical
shaped figure containing inside it a drawing of nestling birds, which is overlapped by the trade-name
"Nestle", while the plastic packs of NANNY have a drawing of milking cows lazing on a vast green
field, back-dropped with snow covered mountains; (4) the word NAN are [sic] all in large, formal and
conservative-like block letters, while the word NANNY are [sic] all in small and irregular style of letters
with curved ends; and (5) all NAN products are milk formulas intended for use of [sic] infants, while
NANNY is an instant full cream powdered milk intended for use of [sic] adults.

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

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

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

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

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

The Court of Appeals’ Ruling

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

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

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

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

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

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

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

NAN products, which consist of Pre-NAN, NAN-H-A, NAN-1 and NAN-2, are all infant preparations,
while NANNY is a full cream milk for adults in [sic] all ages. NAN milk products are sold in tin cans
and hence, far expensive than the full cream milk NANNY sold in three (3) plastic packs containing
80, 180 and 450 grams and worth ₱8.90, ₱17.50 and ₱39.90 per milk pack. The labels of NAN
products are of the colors blue and white and have at the bottom portion an elliptical shaped figure
containing inside it a drawing of nestling birds, which is overlapped by the trade-name "Nestle." On
the other hand, the plastic packs NANNY have a drawing of milking cows lazing on a vast green field,
back-dropped with snow-capped mountains and using the predominant colors of blue and green. The
word NAN are [sic] all in large, formal and conservative-like block letters, while the word NANNY are
[sic] all in small and irregular style of letters with curved ends. With these material differences
apparent in the packaging of both milk products, NANNY full cream milk cannot possibly be an
infringement of NAN infant milk.1avvphi1

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

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

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

Issue

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

The Court’s Ruling

The petition is meritorious.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Callman notes two types of confusion. The first is the confusion of goods "in which event the
ordinarily prudent purchaser would be induced to purchase one product in the belief that he was
purchasing the other." In which case, "defendant’s goods are then bought as the plaintiff’s, and the
poorer quality of the former reflects adversely on the plaintiff’s reputation." The other is the confusion
of business: "Here though the goods of the parties are different, the defendant’s product is such as
might reasonably be assumed to originate with the plaintiff, and the public would then be deceived
either into that belief or into the belief that there is some connection between the plaintiff and
defendant which, in fact, does not exist."

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

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

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

In trademark cases, particularly in ascertaining whether one trademark is confusingly similar to

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

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

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

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

We find no cogent reason to depart from such conclusion.

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

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

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

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

xxxx

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

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

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

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

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

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

Thus, in the 1954 case of Co Tiong Sa v. Director of Patents, the Court ruled:

x x x It has been consistently held that the question of infringement of a trademark is to be

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

xxxx

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

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

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

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

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

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

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

x x x. It is the observation of this Office that much of the dominance which the word MASTER has
acquired through Opposer’s advertising schemes is carried over when the same is incorporated into
respondent-applicant’s trademark FLAVOR MASTER. Thus, when one looks at the label bearing the
trademark FLAVOR MASTER (exh. 4) one’s attention is easily attracted to the word MASTER, rather
than to the dissimilarities that exist. Therefore, the possibility of confusion as to the goods which bear
the competing marks or as to the origins thereof is not farfetched.
Applying the dominancy test in the present case, the Court finds that "NANNY" is confusingly similar
to "NAN." "NAN" is the prevalent feature of Nestle’s line of infant powdered milk products. It is written
in bold letters and used in all products. The line consists of PRE-NAN, NAN-H.A., NAN-1, and NAN-
2. Clearly, "NANNY" contains the prevalent feature "NAN." The first three letters of "NANNY" are
exactly the same as the letters of "NAN." When "NAN" and "NANNY" are pronounced, the aural effect
is confusingly similar.

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

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

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

xxxx

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

The scope of protection afforded to registered trademark owners is not limited to protection from
infringers with identical goods. The scope of protection extends to protection from infringers with
related goods, and to market areas that are the normal expansion of business of the registered
trademark owners. Section 138 of R.A. No. 8293 states:

Certificates of Registration. — A certificate of registration of a mark shall be prima facie evidence of

validity of the registration, the registrant’s ownership of the mark, and of the registrant’s exclusive
right to use the same in connection with the goods or services and those that are related
thereto specified in the certificate. (Emphasis supplied)

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

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

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

xxx

Even respondent’s use of the "Big Mak" mark on non-hamburger food products cannot excuse their
infringement of petitioners’ registered mark, otherwise registered marks will lose their protection
under the law.

The registered trademark owner may use his mark on the same or similar products, in
different segments of the market, and at different price levels depending on variations of the
products for specific segments of the market. The Court has recognized that the registered
trademark owner enjoys protection in product and market areas that are the normal potential
expansion of his business. Thus, the Court has declared:

Modern law recognizes that the protection to which the owner of a trademark is entitled is not limited
to guarding his goods or business from actual market competition with identical or similar products of
the parties, but extends to all cases in which the use by a junior appropriator of a trade-mark or trade-
name is likely to lead to a confusion of source, as where prospective purchasers would be misled into
thinking that the complaining party has extended his business into the field (see 148 ALR 56 et sq; 53
Am. Jur. 576) or is in any way connected with the activities of the infringer; or when it forestalls the
normal potential expansion of his business (v. 148 ALR, 77, 84; 52 Am. Jur. 576, 577). (Emphasis
supplied)

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

SO ORDERED.

ANTONIO T. CARPIO
Associate Justice
G.R. No. 164321 November 30, 2006

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

vs.
INTER PACIFIC INDUSTRIAL TRADING CORP. and/or INTER PACIFIC TRADING CORP. and/or
STRONG SPORTS GEAR CO., LTD., and/or STRONGSHOES WAREHOUSE and/or STRONG
FASHION SHOES TRADING and/or TAN TUAN HONG and/or VIOLETA T. MAGAYAGA and/or
JEFFREY R. MORALES and/or any of its other proprietor/s, directors, officers, employees
and/or occupants of its premises located at S-7, Ed & Joe’s Commercial Arcade, No. 153
Quirino Avenue, Parañaque City, Respondents.

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

TRENDWORKS INTERNATIONAL CORPORATION, Petitioner-Intervenor,

vs.
INTER PACIFIC INDUSTRIAL TRADING CORP. and/or INTER PACIFIC TRADING CORP. and/or
STRONG SPORTS GEAR CO., LTD., and/or STRONGSHOES WAREHOUSE and/or STRONG
FASHION SHOES TRADING and/or TAN TUAN HONG and/or VIOLETA T. MAGAYAGA and/or
JEFFREY R. MORALES and/or any of its other proprietor/s, directors, officers, employees
and/or occupants of its premises located at S-7, Ed & Joe’s Commercial Arcade, No. 153
Quirino Avenue, Parañaque City, Respondents.

DECISION

CHICO-NAZARIO, J.:

Before Us is a Petition for Review on Certiorari under Rule 45 of the Rules of Civil Procedure,
assailing the Decision1 of the Court of Appeals in CA-G.R. SP No. 77269, dated 17 November 2003,
which denied petitioner’s Petition for Certiorari seeking to annul the Order2 of the Regional Trial Court
(RTC) of Manila, Branch 24 dated 7 November 2002, quashing Search Warrant No. 02-2827 and
directing National Bureau of Investigation (NBI) Special Investigator Carlos N. Borromeo III to return
the seized items to respondents and the Order dated 6 March 2003 denying petitioner’s Motion for
Reconsideration.

Petitioner is a foreign corporation existing under the laws of the State of California, United States of
America and engaged in the manufacture of footwear. Petitioner is not doing business in the
Philippines and is suing before the trial court only to protect its intellectual property rights. In the
course of business, petitioner registered the trademark "SKECHERS" with the Intellectual Property
Office (IPO) under Registration No. 63364, Class 25 on 30 August 1996, and the trademark "S"
(within an oval design) under Registration No. 4-1996-110182, Class 25 on 12 July 2000, both to be
used in men’s, women’s, and children’s footwear, namely, shoes, boots and slippers of all kinds, and
men’s, women’s and children’s clothing, namely, t-shirts, sweat shirts, sweat pants, socks, shorts,
and hats. Petitioner also has a pending application for the trademark "S" and design to be used for
the same kinds of goods.

Sometime in March 2002, petitioner engaged the services of Zetetic Far East, Inc. (Zetetic), a private
investigative firm, to conduct an investigation on Inter Pacific Industrial Trading Corporation (Inter
Pacific) in coordination with the NBI to confirm if Inter Pacific is indeed engaged in the importation,
distribution and sale of unauthorized products bearing counterfeit or unauthorized trademarks owned
by petitioner.

On 11 April 2002, Mr. Alvin Ambion, a Market Researcher for Zetetic, visited the business address of
Inter Pacific/Strongshoes Warehouse and/or Strong Fashion Shoes Trading at S-7 No. 153 Quirino
Avenue, Parañaque City. Located at said business address was Warehouse No. 7 of Ed & Joe’s
Commercial Arcade. Upon entering said warehouse, Mr. Ambion saw different kinds and models of
rubber shoes including shoes bearing the "S" logo. During the visit, Mr. Ambion allegedly talked with
the caretakers of said warehouse who informed him that Inter Pacific directly imports the goods from
China and that their company distributes them to wholesalers and retailers in the Baclaran area. One
of the caretakers allegedly claimed that the shoes bearing the "Strong" name with the "S" logo have
the same style as Skechers shoes. Another caretaker purportedly informed Mr. Ambion that they
have an outlet located at Stall C-11, Baclaran Terminal, Plaza 2 Shopping Center, Taft Avenue Ext.,
Pasay City, managed by Violeta T. Magayaga, which sells the same footwear products.
Together with his colleague, Ms. Amelita Angeles, Mr. Ambion again visited respondent’s warehouse
on 12 April 2002 and purchased four pairs of rubber shoes bearing the "Strong" mark containing the
"S" logo for ₱730.00, for which he was issued Sales Invoice No. 0715. On the same day, Mr. Ambion
and Ms. Angeles visited respondent’s outlet store in Baclaran.

On 17 May 2002, counsel for petitioner filed a letter complaint with the Office of the NBI Director
requesting their assistance in stopping the illegal importation, manufacture and sale of counterfeit
products bearing the trademarks owned by petitioner, and in prosecuting the owners of the
establishments engaged therein. Thus, on 21 May 2002 Mr. Ambion and Ms. Angeles, together with
NBI Special Investigator Carlos N. Borromeo III of the Intellectual Property Rights Division of the NBI,
visited respondent’s warehouse located at Ed & Joe’s Commercial Arcade and purchased 24 pairs of
rubber shoes bearing the "Strong" name and the "S" logo. Afterwards, they went to respondent’s
outlet store in Baclaran and therein purchased a pair of rubber shoes also bearing the "Strong" name
and the "S" logo.

On 11 June 2002, Special Investigator Borromeo of the NBI, with Mr. Ambion as witness, proceeded
to Branch 24, RTC, Manila, to apply for search warrants against the warehouse and outlet store being
operated and managed by respondent for infringement of trademark under Section 155 3 in relation to
Section 1704 of Republic Act No. 8293, otherwise known as The Intellectual Property Code of the
Philippines.

After personally examining the search warrant applicant and his witness, the court a quo found
probable cause to issue the search warrants applied for and thus issued on the same day Search
Warrant Nos. 02-2827 and 02-2828 to be served on the warehouse and retail outlet of respondent.
That same afternoon, the search warrants were simultaneously served by the operatives of the
Intellectual Property Rights Division of the NBI and seized from the warehouse 71 boxes containing
36 pairs of rubber shoes each or 2,556 pairs of rubber shoes bearing the "S" logo, 147 boxes
containing 24 pairs per box or 3,528 pairs of rubber shoes bearing the "S" logo and six pages of
various documents evidencing the sale and distribution of similar merchandise; and from the outlet
store, 295 pairs of rubber shoes bearing the "S" logo and five pieces of rubber shoes bearing the "S"
logo.

In compliance with the Order dated 9 July 2002 of the RTC directing respondents to file their
Comment on the issuance of the search warrant, respondents filed their Compliance and Comment
with Prayer to Quash the search warrants. On 28 August 2002, respondents filed their Amended
Comment with Motion to Quash Search Warrants on the ground that there is no confusing similarity
between the petitioner’s Skechers’ rubber shoes and respondent’s Strong rubber shoes.

On 7 November 2002, the lower court issued the assailed Order quashing Search Warrant No. 02-
2827 and directing the NBI to return to respondents the items seized by virtue of said search warrant.
According to the court a quo:

The question to be posed in this case is this: Will the purchaser be deceived or likely to be deceived
into purchasing respondent’s Strong Rubber Shoes because of the belief that they are Skechers
shoes in the ordinary course of purchase? We answer in the negative.

A careful perusal of the Strong Rubber Shoes and Skechers shoes presented by both respondents
and private complainants reveals glaring differences that an ordinary prudent purchaser would not
likely be mislead or confused in purchasing the wrong article. Some of these are;

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

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

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

4. Strong Shoes are modestly priced compared to the costs of Sketchers Shoes.

xxxx
Similarly as in this case, although the mark "S" is prominent on both products, the same should be
considered as a whole and not piecemeal. Factoring the variables already cited make the
dissimilarities between the two marks conspicuous, noticeable and substantial.

Further, the products involved in the case at bar are not your ordinary household items. These are
shoes which vary in price. The casual buyer is predisposed to be more cautious and discriminating
and would prefer to mull over his purchase. Confusion and deception is less likely.

Finally, like beer and maong pants and jeans, the average consumer generally buys his rubber shoes
by brand. He does not ask the sales clerk for rubber shoes but for, say Adidas, Reebok, or Nike. He
is, more or less, knowledgeable and familiar with his preference and will not easily be distracted.
(Emerald Garment Manufacturing Corp., v. Court of Appeals, 251 SCRA 600, supra)

ACCORDINGLY, respondent’s Inter Pacific Industrial Trading Corporation, Motion to Quash Search
[Warrant] is hereby granted. Search Warrant No. 02-2827 is quashed. The applicant, Carlos N.
Borromeo of the National Bureau of Investigation is hereby directed to return to respondents the
seized items.5

Petitioner’s Motion for Reconsideration was subsequently denied in an Order dated 6 March 2003.
Aggrieved, petitioner filed a Petition for Certiorari under Rule 65 of the Rules of Court before the
Court of Appeals assailing the Orders of the court a quo on the ground that public respondent court
committed grave abuse of discretion amounting to lack and/or excess of jurisdiction in ruling that the
act of private respondents in selling and distributing rubber shoes which contain the trademarks and
designs owned by petitioner does not constitute trademark infringement.

On 17 November 2003, the appellate court denied the petition in this wise:

In the instant case, after examining and evaluating the foregoing factual milieu and the respective
arguments of the parties, We are inclined to agree with the ruling of the public respondent that the
holistic test is better suited to the present case and consequently, hold that the private respondents’
appropriation and use of the letter "S" on their rubber shoes did not constitute an infringement of the
trademark of the petitioner. Hence, the instant petition must necessarily fail.

A careful appreciation of the products in question readily reveals that these products are not the
ordinary household items like catsup, coffee or candy which are commonly inexpensive. As such, the
ordinary purchaser would be naturally inclined to closely examine specific details and would prefer to
mull over his purchase. The case of Del Monte Corp. vs. Court of Appeals (181 SCRA 410), is clear
on this point:

Among these, what essentially determines the attitudes of the purchaser, specifically his inclination to
be cautious, is the cost of the goods. To be sure, a person who buys a box of candies will not
exercise as much care as one who buys an expensive watch. As a general rule, an ordinary buyer
does not exercise as much prudence in buying an article for which he pays a few centavos as he
does in purchasing a more valuable thing. Expensive and valuable items are normally bought only
after deliberate, comparative and analytical investigation. But mass products, low priced articles in
wide use, and matters of everyday purchase requiring frequent replacement are bought by the casual
consumer without care x x x.

In his context, although one of the essential features of the private respondents’ shoes is the letter
"S", suffice it to state that this alone would not likely cause confusion, deception or mistake on the
part of the ordinary buying public. For it must be stressed that an ordinary purchaser of a product like
a pair of rubber shoes is an intelligent buyer, who "is accustomed to buy, and therefore to some
extent familiar with the goods" (Dy Buncio vs. Tan Tiao Bok, 42 Phil. 190). x x x.

xxxx

Going further, contrary to the contention of the petitioner, the case of Converse Rubber Corp. vs.
Universal Rubber Products, Inc. (147 SCRA 154) is in no way controlling in the instant case
considering that it involved a different factual milieu in contrast with that of the instant case. In said
case, the respondent sought for the registration of the trademark "UNIVERSAL CONVERSE AND
DEVICE" used on rubber shoes. Petitioner opposed on the ground that respondent’s trademark is
confusingly similar to petitioner’s corporate name which is CONVERSE RUBBER CORPORATION
and that it would likely deceive purchasers of products on which it is to be used to an extent that said
products may be mistaken by the unwary public to be manufactured by the petitioner, i.e.
"CONVERSE CHUCK TAYLOR," "CONVERSE ALL STAR," "ALL STAR CONVERSE CHUCK
TAYLOR," OR "ALL STAR DEVICE." The High Court denied the application for registration of
respondent’s trademark ratiocinating as follows:

The similarity in the general appearance of respondent’s trademark and that of petitioner would
evidently create a likelihood of confusion among the purchasing public. But even assuming arguendo,
that the trademark sought to be registered by respondent is distinctively dissimilar from those of the
petitioner, the likelihood of confusion would still subsists, not on the purchaser’s perception of the
goods but on the origins thereof. By appropriating the world "CONVERSE," respondent’s products are
likely to be mistaken as having been produced by petitioner. The risk of damage is not limited to a
possible confusion of goods but also includes confusion of reputation if the public could reasonably
assume that the goods of the parties originated from the same source.

Verily, the foregoing ruling does not apply on all fours in the instant case. The word "CONVERSE" is
highly identified not only to the products of Converse Rubber Corporation but to the corporate entity
most importantly such that the mere appropriation of the word "CONVERSE" on products like rubber
shoes, regardless of whether or not it was compounded with other letters, symbols or words; would
not only likely but actually cause one to be mistaken that such rubber shoes had been produced by
Converse Rubber Corporation.

On the other hand, the letter "S" used on private respondents’ rubber shoes in the instant case could
hardly be considered as highly identifiable to the products of petitioner alone. For it is not amiss to
state that the letter "S" has been used in many existing trademarks, the most popular of which is the
trademark "S" enclosed by an inverted triangle, which is extremely and profoundly identifiable to the
well-known comics action hero, Superman. And perhaps it is due to the existence of these
trademarks containing letter "S" that the petitioner was prompted to accessorize that letter "S" in its
trademark with an outer oval design and accompany it with the word "SKECHERS" in order to make it
distinct from the rest and identifiable only to its products. As such, the dominancy test as applied in
the Converse case could not be applied in the instant case inasmuch as the letter "S," although a
dominant feature in petitioner’s trademark; is neither extremely and profoundly identifiable to the
products of petitioner alone nor has it acquired a certain connotation to mean the rubber shoes
produced by the petitioner. What is extremely and profoundly identifiable to the products of the
petitioner is the whole trademark consisting of the letter "S" enclosed by a uniquely designed oval.
Further, confusion and deception are less likely in the instant case considering that the private
respondents’ rubber shoes were distinctly and conspicuously marked "STRONG" at their front side,
back side and insoles. Furthermore their hang tags and labels attached to the shoes bear the word
"STRONG." In view of these, the dissimilarities between the private respondents’ and petitioner’s
shoes became more striking and noticeable to the ordinary purchaser who could not in any way be
deceived or misled that the shoes he buys is produced by the petitioner. With this, the holistic test is
squarely applicable.

xxxx

As set out in the decision, the foregoing case involves a peculiar factual milieu in stark contrast with
the instant case. As such, it finds no application in the controversy in the instant case.

Taking off from the foregoing premises, the public respondent judge did not commit grave abuse of
discretion amounting to lack or excess of jurisdiction in ruling that the act of the private respondent in
selling and distributing rubber shoes which contain the trademarks and designs owned by the
petitioners does not constitute trademark infringement. After all, the public respondent judge was
merely exercising his judgmental call conformably with the factual and legal issues proferred and
presented before him. Suffice it to state, it is a hornbook doctrine in our jurisdiction that certiorari will
not be issued to cure errors in proceedings or to correct erroneous conclusions of law and fact. The
special civil action for certiorari is not a remedy for errors of judgment, which are correctible by
appeal (Montecillo vs. Civil Service Commission, 360 SCRA 99).

WHEREFORE, in consideration of the foregoing premises, the instant petition is perforce denied.[6]

Petitioner’s Motion for Reconsideration having been denied in an Order dated 18 June 2004,
petitioner filed the instant case contending that the Court of Appeals committed grave abuse of
discretion in considering matters of defense in a criminal trial for trademark infringement in passing
upon the validity of the search warrant and in concluding that respondents are not guilty of trademark
infringement in the case where the sole triable issue is the existence of probable cause to issue a
search warrant.

For its part, respondent maintains that it is logical for the Court of Appeals to touch on the issue of
whether or not there was trademark infringement since it was the very issue raised in the Petition
for Certiorari. According to respondent, petitioner failed to qualify whether or not the determination of
the Court of Appeals should be limited to whether or not there was probable cause to issue the
search warrants. Furthermore, respondent claims that the trial court may not be faulted for quashing
the search warrants it had issued after finding that there was no basis for its issuance in the first
place. According to respondent, after full appreciation of the trademarks and logos depicted in the
rubber shoes presented before the court a quo for close comparison, it was only prudent for the lower
court to correct itself and quash the search warrant following a finding that probable cause does not
exist for the offense of trademark infringement.

At this juncture, it is paramount to stress that the power to issue search warrants is exclusively vested
with the trial judges in the exercise of their judicial function.7 And inherent in the courts’ power to
issue search warrants is the power to quash warrants already issued. 8 After the judge has issued a
warrant, he is not precluded to subsequently quash the same, if he finds upon re-evaluation of the
evidence that no probable cause exists.9 Though there is no fixed rule for the determination of the
existence of probable cause since the existence depends to a large degree upon the finding or
opinion of the judge conducting the examination,10 however, the findings of the judge should not
disregard the facts before him nor run counter to the clear dictates of reason.11

In the determination of probable cause, the court must necessarily resolve whether or not an offense
exists to justify the issuance or quashal of the search warrant.12 In the case at bar, the subject search
warrant was issued allegedly in connection with trademark infringement, particularly the unauthorized
use of the "S" logo by respondent in their Strong rubber shoes. After conducting the hearing on the
application for a search warrant, the court a quo was initially convinced that there was sufficient
reason to justify the issuance of the search warrant. However, upon motion of respondent to quash
the search warrant, the lower court changed its position and declared that there was no probable
cause to issue the search warrant as there was no colorable imitation between respondent’s
trademark and that of petitioner.

Based on its appreciation of the respective parties’ arguments and the pieces of evidence, particularly
the samples of the original Skechers rubber shoes vis-à-vis respondent’s Strong rubber shoes, the
trial court concluded that respondent’s appropriation of the symbol "S" on their rubber shoes does not
constitute an infringement on the trademark of petitioner. This exercise of judgment was further
strengthened by the affirmation of the Court of Appeals that public respondent judge did not commit
grave abuse of discretion amounting to lack or excess of jurisdiction in ruling that the acts of
respondent do not constitute trademark infringement in light of the factual and legal issues presented
before it for consideration.

In ruling that there was no colorable imitation of petitioner’s trademark in light of the factual milieu
prevalent in the instant case, the trial court may not be faulted for reversing its initial finding that there
was probable cause. Based on the courts’ inherent power to issue search warrants and to quash the
same, the courts must be provided with the opportunity to correct itself of an error inadvertently
committed. After reevaluating the evidence presented before it, the trial court may reverse its initial
finding of probable cause in order that its conclusion may be made to conform to the facts prevailing
in the instant case.

Furthermore, the court was acting reasonably when it went into a discussion of whether or not there
was trademark infringement, this is so because in the determination of the existence of probable
cause for the issuance or quashal of a warrant, it is inevitable that the court may touch on issues
properly threshed out in a regular proceeding.13 This finding that there was no colorable imitation of
petitioner’s trademark is merely preliminary and did not finally determine the merits of the possible
criminal proceedings that may be instituted by petitioner. As held in the case of Solid Triangle Sales
Corp. v. Sheriff, RTC, Q.C., Br. 93:141âwphi1

When the court, in determining probable cause for issuing or quashing a search warrant, finds that no
offense has been committed, it does not interfere with or encroach upon the proceedings in the
preliminary investigation. The court does not oblige the investigating officer not to file an information
for the court’s ruling that no crime exists is only for the purposes of issuing or quashing the warrant.

WHEREFORE, premises considered, the instant petition is hereby DENIED. The Decision of the
Court of Appeals in CA-G.R. SP No. 77269, dated 17 November 2003 is hereby AFFIRMED. Costs
against petitioner.

SO ORDERED.
FIRST DIVISION

G.R. No. 198889, January 20, 2016

UFC PHILIPPINES, INC. (NOW MERGED WITH NUTRI-ASIA, INC., WITH NUTRI-ASIA, INC. AS
THE SURVIVING ENTITY), Petitioner, v. FIESTA BARRIO MANUFACTURING
CORPORATION, Respondent.

DECISION

LEONARDO-DE CASTRO, J.:

For our disposition is a petition for review on certiorari under Rule 45 seeking to annul and set aside
the June 23, 2011 Decision1 and the October 4, 2011 Resolution2 of the Court of Appeals in CA-
G.R. SP No. 107570, which reversed and set aside the March 26, 2008 Decision3 of the Bureau of
Legal Affairs of the Intellectual Property Office (IPO-BLA) and the January 29, 2009 Decision4 of the
Director General of the IPO. Petitioner Nutri-Asia, Inc. (petitioner) is a corporation duly organized and
existing under Philippine laws.5 It is the emergent entity in a merger with UFC Philippines, Inc. that
was completed on February 11, 2009.6 Respondent Barrio Fiesta Manufacturing Corporation
(respondent) is likewise a corporation organized and existing under Philippine laws.

On April 4, 2002, respondent filed Application No. 4-2002-002757 for the mark "PAPA BOY &
DEVICE" for goods under Class 30, specifically for "lechon sauce." 7 The Intellectual Property Office
(IPO) published said application for opposition in the IP Phil. e-Gazette released on September 8,
2006. The mark appears as follows:

(Please see image G.R. No. 198889 pg. 2)

On December 11, 2006, petitioner filed with the IPO-BLA a Verified Notice of Opposition to the
above-mentioned application and alleged that:

1. The mark "PAPA" for use on banana catsup and other similar goods was first used [in] 1954 by
Neri Papa, and thus, was taken from his surname;

2. After using the mark "PAPA" for about twenty-seven (27) years, Neri Papa subsequently
assigned the mark "PAPA" to Hernan D. Reyes who, on September 17, 1981, filed an
application to register said mark "PAPA" for use on banana catsup, chili sauce, achara,
banana chips, and instant ube powder;

3. On August 14, 1983, Hernan D. Reyes was issued Certificate of Registration No. 32416;

4. [Certificate of] Registration No. 32416 was subsequently assigned to the following in
successive fashion: Acres & Acres Food, Inc., Southeast Asia Food, Inc., Heinz-UFC
Philippines, Inc., and Opposer UFC Philippines, Inc.;

5. Last October 28, 2005, Heinz-UFC Philippines, Inc. filed Application Serial No. 4-2005-010788
which, in effect, is a re- registration of Registration No. 32416 which expired on August 11,
2003;

6. Hernan D. Reyes also filed on March 04, 1982 an application to register in the Supplemental
Register the "PAPA BANANA CATSUP Label";

7. On August 11, 1983, Hernan D. Reyes was issued Certificate of Registration No. SR-6282
which was subsequently assigned to Acres & Acres Food, Inc., Southeast Asia Food, Inc.,
Heinz-UFC Philippines, Inc.;

8. After its expiration, Opposer filed on November 15, 2006 Trademark Application Serial No. 4-
2006-012346 for the re-registration of the "PAPA Label Design";

9. The mark "PAPA KETSARAP" for use on banana sauce falling under Class 30 was also
registered in favor of Acres & Acres Food, Inc. under Registration No. 34681 issued on August
23, 1985 and renewed last August 23, 2005 by Heinz-UFC Philippines, Inc. for ten (10) years;
 10. On November 07, 2006, Registration No. 34681 was assigned to Opposer;

11. Opposer has not abandoned the use of the mark "PAPA" and the variations thereof as
Opposer has continued their use up to the present;

12. The mark "PAPA BOY & DEVICE" is identical to the mark "PAPA" owned by Opposer and duly
registered in its favor, particularly the dominant feature thereof;

13. [With the] dominant feature of respondent-applicant's mark "PAPA BOY & DEVICE", which is
Opposer's "PAPA" and the variations thereof, confusion and deception is likely to result: The
consuming public, particularly the unwary customers, will be deceived, confused, and mistaken
into believing that respondent-applicant's goods come from Opposer or are authorized by
Opposer to Opposer's prejudice, which is particularly true considering that Opposer's sister
company, Southeast Asia Food, Inc., and its predecessors-in-interest have been major
manufacturers and distributors of lechon sauce and other table sauces since 1965 under its
registered mark "Mang Tomas";

14. Respondent-applicant's mark "PAPA BOY & DEVICE" which nearly resembles Opposer's mark
"PAPA" and the variations thereof will impress upon the gullible or unsuspecting public that it is
the same or related to Opposer as to source because its dominant part is the same as
Opposer's mark and, thus, will likely be mistaken to be the mark, or related to, or a derivative
or variation of, Opposer's mark;

15. The goods covered by respondent-applicant's application fall under Class 30, the same Class
under which Opposer's goods enumerated in its earlier issued registrations;

16. The test of dominancy is now explicitly incorporated into law in Section 155.1 of the IP Code
which defines infringement as the colorable imitation of a registered mark or a dominant
feature thereof, and is provided for by jurisprudence;

17. As a corporation also engaged in the food business, Respondent- applicant knew and/or ought
to know that Opposer and its predecessors-in-interest have been using the mark "PAPA" and
the variations thereof for the last fifty-two (52) years while its sister company is engaged in the
business of manufacturing and distributing "lechon sauce" and other table sauces for the last
forty-one (41) years;

18. The approval of the subject application will violate Opposer's right to the exclusive use of its
registered mark "PAPA" and the variations thereof per Section 13 8 of the IP Code;

19. The approval of the subject application has caused and will continue to cause great and
irreparable damage and injury to Opposer;

20. Respondent-applicant filed the subject application fraudulently and in bad faith; and

21. Respondent-applicant is not entitled to register the subject mark in its favor.8

In its verified opposition before the IPO, petitioner contended that "PAPA BOY & DEVICE" is
confusingly similar with its "PAPA" marks inasmuch as the former incorporates the term "PAPA,"
which is the dominant feature of petitioner's "PAPA" marks. Petitioner averred that respondent's use
of "PAPA BOY & DEVICE" mark for its lechon sauce product, if allowed, would likely lead the
consuming public to believe that said lechon sauce product originates from or is authorized by
petitioner, and that the "PAPA BOY & DEVICE" mark is a variation or derivative of petitioner's "PAPA"
marks. Petitioner argued that this was especially true considering that petitioner's ketchup product
and respondent's lechon sauce product are related articles that fall under the same Class
30.9chanroblesvirtuallawlibrary

Petitioner alleged that the registration of respondent's challenged mark was also likely to damage the
petitioner, considering that its former sister company, Southeast Asia Food, Inc., and the latter's
predecessors-in-interest, had been major manufacturers and distributors of lechon and other table
sauces since 1965, such as products employing the registered "Mang Tomas" mark.

In its Verified Answer, respondent argued that there is no likelihood of confusion between petitioner's
family of "PAPA" trademarks and respondent's "PAPA BOY & DEVICE" trademark. Respondent
raised affirmative defenses and we quote the relevant ones below:

3. Opposer cites several of its following marks in support of its opposition to the application but an
examination of said marks [reveals] that these have already expired and/or that no confusing
similarity exists x xx;

4. Assuming that the mark "PAPA KETSARAP" had been timely renewed on August 23, 2005 for
"banana sauce" under Class 30, the same is not a hindrance to the successful registration of the
mark "PAPA BOY & DEVICE": Jurisprudence provides that a certificate of registration confers upon
the trademark owner the exclusive right to use its own symbol only to those goods specified in the
certificate subject to the conditions and limitations stated therein;

5. As a result, Opposer's right to use the mark "PAPAKETSARAP" is limited to the products covered
by its certificate of registration which is Class 30 for banana sauce;

6. Contrary to Opposer's belief, the dominant features of Respondent-applicant's mark "PAPA BOY &
DEVICE" are the words "PAPA BOY" and the representation of a smiling hog-like character gesturing
the thumbs-up sign and wearing a traditional Filipino hat and scarf while the dominant feature of
Opposer's mark "PAPA KETSARAP" are the words "Papa" and "Ketsarap", not the word "Papa"; and
the word "Ketsarap " is more prominently printed and displayed in the foreground than the word
"Papa" for which reasons opposer's reference to the Dominancy Test fails;

7. Opposer's allegation that the registration of Respondent-applicant's mark "PAPA BOY & DEVICE"
will damage and prejudice the mark "MANG TOMAS" is irrelevant considering that Opposer's basis
for filing this opposition is the alleged confusing similarity between Respondent-applicant's mark and
Opposer's mark "PAPA KETSARAP", not the mark "MANG TOMAS";

8. Respondent-applicant's mark "PAPA BOY & DEVICE" is neither identical nor confusingly similar to
Opposer's mark "PAPA KETSARAP": Respondent-applicant's mark "PAPABOY & DEVICE" is an
arbitrary mark which differs in overall sound, spelling, meaning, style, configuration, presentation, and
appearance from Opposer's mark "PAPA KETSARAP";

9. The dissimilarities between the marks are so distinct, thus, confusion is very unlikely: While
Opposer's mark is a plain word mark, Respondent-applicant's mark "PAPA BOY & DEVICE" is much
more intricate and distinctive such as Opposer's mark not having the words "Lechon Sauce" printed
inside a blue ribbon-like device which is illustrated below the words "PAPA BOY", Opposer's mark not
having a prominent smiling hog-like character gesturing a thumbs-up sign and wearing a Filipino hat
and scarf stands beside the words "PAPA BOY", and Opposer's mark not having the words "Barrio
Fiesta" albeit conspicuously displayed above the mark, all which leave no doubt in the consumer's
mind on the product that he is purchasing;

10. Aside from the fact that Respondent-applicant's mark "PAPA BOY & DEVICE" is distinct and
different in appearance, spelling, sound, meaning, and style from Opposer's mark "PAPA
KETSARAP", the difference in the goods covered by both marks is obvious: Since the goods covered
by Respondent-applicant's mark is unrelated and non- competing to those covered by Opposer's
mark, the doctrine allowing the registrations of marks covering unrelated and non-competing goods
as enunciated by the Supreme Court is therefore applicable in this case;

11. Respondent-applicant's mark cannot be confusingly similar to Opposer's mark considering that
the products covered by these marks are different: While Respondent-applicant's mark "PAPA BOY &
DEVICE" covers lechon sauce under Class 30, Opposer's mark "PAPA KETSARAP" covers banana
sauce;

12. If a consumer is in the market for banana sauce, he will not buy lechon sauce and vice-versa and
as a result, the margin of error in the acquisition of one from the other is simply remote;

13. Respondent-applicant is the exclusive owner of the mark "PAPA BOY & DEVICE" for lechon
sauce under Class 30: The words "PAPA BOY" is a combination of the nickname of Bonifacio
Ongpauco who is one of Respondent-applicant's incorporators and founders- "BOY"- and the word
"PAPA" as Bonifacio Ongpauco's mother, Sixta P. Evangelista, had been fondly known as "Mama
Chit", making Respondent-applicant the prior adopter, user, and applicant of the mark "PAPA BOY &
DEVICE" in the Philippines;

14. To protect its ownership over the mark "PAPA BOY & DEVICE" considering that it is the first to
adopt and use said mark, Respondent-applicant applied for its registration under Application Serial
No. 4-2002-002757 for Class 30, and said application was found registrable by the Examiner as a
consequence of which the same was recommended for allowance after undergoing a thorough
process of examination, which recommendation was then approved by the Director of the Bureau of
Trademarks (BOT);

15. Respondent-applicant's mark "PAPA BOY & DEVICE" has been commercially used in the
Philippines;

16. Respondent-applicant's mark "PAPA BOY & DEVICE" has been promoted and advertised for a
considerable duration of time and over wide geographical areas: Respondent-applicant has invested
tremendous amount of resources in the promotion of its mark "PAPA BOY & DEVICE" through
various media including print publications and promotional materials;

17. The widespread local commercial use of the subject mark by Respondent-applicant to distinguish
and identify its various high-quality consumer products has earned Respondent-applicant a well-
deserved business reputation and goodwill;

18. Respondent-applicant's mark is distinctive and capable of identifying its goods and distinguishing
them from those offered for sale by others in the market including Opposer's goods for which reason
no confusion will result because Respondent-applicant's mark is for lechon sauce while Opposer's
mark is for banana sauce; and

19. The presence of a common prefix "PAPA" in the marks of both parties does not render said marks
identical or confusingly similar: Opposer cannot exclusively appropriate said prefix considering that
other marks such as "Papa Heinz Pizza", "Papa Heinz Sausage", "Papa Beaver", "Papa Pop", "Pizza
Papa John's & Design", "Papadoods", and "Papa in Wine and Device" are valid and
active.10chanrobleslaw

Petitioner's mark and its variations appear as follows:

1. 1. "PAPA" under Registration No. 32416 for Class 29 goods;11

(Please see image G.R. No. 198889 page 7.)

2. The mark "PAPA" as it appeared upon re-registration of Certificate No. 32416, under
Application No. 4-2005-010788 for Classes 29 and 30 goods;12

(Please see image G.R. No. 198889 page 7.)

3. "PAPA LABEL DESIGN" under Registration No. 4-2006-012364;13 and

(Please see image G.R. No. 198889 page 7.)

4. "PAPA KETSARAP" under Certificate of Registration No. 34681, for banana sauce (Class
30).14

(Please see image G.R. No. 198889 page 8.)

PROCEEDINGS BEFORE THE INTELLECTUAL PROPERTY OFFICE

The case was referred to mediation but the parties failed to arrive at an amicable settlement. The
case was thus set for preliminary conference. Subsequently, the IPO-BLA directed the parties to file
their respective position papers and draft decisions.

The IPO-BLA rendered a Decision on March 26, 2008 sustaining petitioner's Opposition and rejecting
respondent's application for "PAPA BOY & DEVICE." The fallo of said decision reads as follows:

WHEREFORE, the VERIFIED NOTICE OF OPPOSITION filed by UFC Philippines, Inc. is, as it is
hereby, SUSTAINED. Consequently, Application Serial No. 4-2002-002757 for the mark "PAPA BOY
& DEVICE" for lechon sauce under Class 30 filed on April 04, 2002 by Barrio Fiesta Manufacturing
Corporation, is, as it is hereby, REJECTED. Let the file wrapper of PAPA BOY & Device subject
matter of this case be forwarded to the Bureau of Trademarks (BOT) for appropriate action in
accordance with this Decision.15chanrobleslaw

Respondent filed an appeal before the IPO Director General, who found it unmeritorious, and
disposed of the case in the following manner:

WHEREFORE, the instant appeal is hereby DISMISSED. Let a copy of this Decision as well as the
trademark application and records be furnished and returned to the Director of the Bureau of Legal
Affairs for appropriate action. Further, let also the Director of the Bureau of Trademarks and the
library of the Documentation, Information and Technology Transfer Bureau be furnished a copy of this
Decision for information, guidance, and records purposes." 16

DECISION OF THE COURT OF APPEALS

Respondent then filed a petition with the Court of Appeals, questioning the above decision of the IPO
Director General that affirmed the decision of the IPO Bureau of Legal Affairs Director, which
disallowed respondent's application for trademark registration. Respondent's arguments before the
Court of Appeals are quoted below:

A.

REGISTRATION NOS. 32416 AND 42005010788 ISSUED FOR THE "PAPA" MARK AND
REGISTRATION NOS. SR-6282 AND 42006012364 ISSUED FOR THE TRADEMARK "PAPA
BANANA CATSUP LABEL/PAPA LABEL DESIGN" SHOULD NOT BE USED AS BASIS IN
DETERMINING THE EXISTENCE OF CONFUSING SIMILARITY.

B.

THERE IS NO CONFUSING SIMILARITY BETWEEN PETITIONER-APPLICANT'S "PAPA BOY &

DEVICE" AND RESPONDENT'S "PAPA KETSARAP" MARK.

C.

PETITIONER-APPLICANT IS ENTITLED TO THE REGISTRATION OF THE MARK "PAPA BOY &

DEVICE."

D.

THE OPPOSITION STATES NO CAUSE OF ACTION, AND HENCE, SHOULD BE DENIED

OUTRIGHT.17chanrobleslaw

As regards the first ground, the Court of Appeals held:

Records show that respondent UFC has Certificates of Registration for the trademarks PAPA, PAPA
BANANA CATSUP label and PAPA KETSARAP. A closer look at the respective Certificate[s] of
Registration of the aforementioned marks, however, reveals that at the time the trademark application
of petitioner was published in the IPO e-Gazette on September 8, 2006, the duration of the trademark
registration of respondent over the marks PAPA and PAPA BANANA CATSUP have already expired.
On the other hand, the mark PAPA KETSARAP was timely renewed by respondent as shown by
the Certificate of Renewal of Registration issued on September 1, 2006 by the Director of the
Bureau of Trademarks.

Under R.A. No. 8293, as amended by R.A. No. 9150, the duration of a trademark registration is 10
years, renewable for periods of 10 years each renewal. The request for renewal must be made within
6 months before or after the expiration of the registration. Respondent's PAPA mark was not renewed
within the period provided for under RA No. 8293. Its registered term ended on August 11, 2003 but
was reapplied for registration only on April 4, 2005. Meanwhile, the mark PAPA BANANA CATSUP
was registered by respondent only in the Supplemental Register, hence, was not provided any
protection, x x x. It is noted that the PAPA BANANA CATSUP label was applied for registration on
November 15, 2006, over three years after the expiration of its registration in the Supplemental
Register of the Philippine Patent Office on August 11, 2003. Thus, while petitioner has a point that
the marks PAPA and PAPA BANANA CATSUP have already expired and the latter having been
afforded no protection at all and should not be juxtaposed with petitioner's trademark,
respondent can still use the marks PAPA KETSARAP and PAPA BANANA CATSUP, it
appearing that the Intellectual Property Office issued a Certificate of Registration No. 4-2006-
012364 for the latter on April 30, 2007, to bar the registration of petitioner's "PAPA BOY &
DEVICE" mark.18 (Emphases supplied, citations omitted.)

Anent the second ground, the Court of Appeals ruled in the following manner:

After taking into account the aforementioned doctrines and the factual circumstances of the
case at bar, this Court, after considering the trademarks involved as a whole, is of the view
that petitioner's trademark "PAPA BOY & DEVICE" is not confusingly similar to respondent's
"PAPA KETSARAP" and "PAPA BANANA CATSUP" trademark. Petitioner's trademark is "PAPA
BOY" as a whole as opposed to respondent's "PAPA". Although on its label the word "PAPA" is
prominent, the trademark should be taken as a whole and not piecemeal. The difference between the
two marks are conspicuous and noticeable. While respondent's products are both labeled as banana
sauces, that of petitioner Barrio Fiesta is labeled as lechon sauce.

Moreover, it appears on the label of petitioner's product that the said lechon sauce is manufactured
by Barrio Fiesta thus, clearly informing the public [of) the identity of the manufacturer of the lechon
sauce. As claimed by respondent, its products have been in commercial use for decades. It is safe to
assume then that the consumers are already aware that "PAPA KETSARAP" and "PAPA BANANA
CATSUP" are products of UFC and not of petitioner or the other way around. In addition, as correctly
pointed out by petitioner, if a consumer is in the market for banana sauce, he will not buy lechon
sauce and vice-versa because aside from the fact that the labels of both parties' products contain the
kind of sauce they are marketing, the color of the products is visibly different. An ordinary consumer is
familiar with the fact that the color of a banana sauce is red while a lechon sauce is dark brown.
There can be no deception as both products are marketed in bottles making the distinction visible to
the eye of the consumer and the likelihood of acquiring a wrong sauce, remote. Even if the products
are placed side by side, the dissimilarities between the two marks are conspicuous, noticeable and
substantial enough to matter especially in the light of the following variables that must be factored in.

Lastly, respondent avers that the word "PAPA" was coined after the surname of the person who first
created and made use of the mark. Admittedly, while "PAPA" is a surname, it is more widely known
as a term of endearment for one's father. Respondent cannot, therefore, claim exclusive ownership
over and singular use of [the] term. Petitioner was able to explain that it adopted the word "PAPA" in
parallel to the nickname of the founder of Barrio fiesta which is "MAMA CHIT". "PAPA BOY" was
derived from the nickname of one of the incorporators of herein petitioner, a certain Bonifacio
Ongpauco, son of Mama Chit.19(Emphasis ours, citation omitted.)

THEORY OF PETITIONER

Thus, petitioner came to this Court, seeking the reversal of the questioned decision and resolution of
the Court of Appeals, and the reinstatement of the decision of the IPO Director General affirming the
decision of the IPO-BLA. Petitioner raises the following grounds:

I.
The court a quo erred in applying the "holistic test" to determine whether there is confusing similarity
between the contending marks, and in reversing the IPO-BLA and the Director General's application
of the "dominancy test."

II.

The court a quo erred in holding that there is no likelihood of confusion between the contending
marks given that the "PAPA BOY & DEVICE" mark is used on lechon sauce, as opposed to ketchup
products.

III.

The court a quo erred in holding that Petitioner cannot claim exclusive ownership and use of the
"PAPA" mark for its sauce products because "PAPA" is supposedly a common term of endearment
for one's father.20chanrobleslaw

Under the first ground, petitioner submitted the following arguments:

1. The findings of administrative agencies, if supported by substantial evidence, are binding upon
the courts.21

Petitioner alleges that the Court of Appeals should have respected the ruling of the IPO Director
General, which was consistent with the ruling of the IPO-BLA and supported by substantial evidence,
instead of substituting its findings of fact for those of the Director General and the IPO-BLA.

2. The dominancy test should have been applied to determine if there is confusing similarity
between the competing marks.22

Petitioner points out that the Director General and the IPO-BLA found that the dominant feature of the
competing marks is the word "PAPA" and the minor additions to respondent's "PAPA BOY &
DEVICE" mark do not negate likelihood of confusion caused by the latter's use of the dominant word
"PAPA." Petitioner claims that even compared solely to petitioner's "PAPA KETSARAP" mark
(Registration No. 34681), which is conceded to have been timely renewed and to have never expired,
respondent's "PAPA BOY & DEVICE" would still create the likelihood of
confusion.23chanroblesvirtuallawlibrary

According to petitioner, the Court of Appeals based its decision on Mead Johnson & Co. v. N.V.J. Van
Dorp, Ltd.,24 a case decided almost five decades ago, long before Republic Act No. 8293 or the 1998
Intellectual Property Code was enforced. Thus, the Court of Appeals erroneously applied the holistic
test since given the nature of the products bearing the competing marks, the dominancy test should
have been applied.

Petitioner claims that "[k]etchup and lechon sauce are common and inexpensive household products
that are sold in groceries and regularly encountered by the ordinary or common purchaser who is not
expected to examine, scrutinize, and compare the details of the competing marks." 25cralawred

Petitioner distinguishes this case from Mead Johnson and claims that the ordinary purchaser of
ketchup or lechon sauce is not likely to closely scrutinize each mark as a whole, for the latter is
"undiscerningly rash" and usually in a hurry, and cannot be expected to take note of the smiling hog-
like character or the blue ribbon-like device with the words "Lechon Sauce." Petitioner argues that
under the Intellectual Property Code, it is not necessary for one to colorably imitate the competing
trademark as a whole. It is sufficient that one imitates a "dominant feature" of the mark to constitute
trademark infringement.

Petitioner asserts that as the IPO-BLA and the Director General observed that the ordinary purchaser
is most likely to notice the words "PAPA BOY," which, in turn, may lead him to believe that there is a
connection between respondent's lechon sauce and petitioner's ketchup products.

Under the second ground, petitioner argues that the Court of Appeals seemed to be unmindful that
two kinds of confusion may arise from the use of similar or colorable imitation marks, i.e., confusion of
goods (product confusion) and confusion of business (source or origin confusion). Petitioner claims
that it is reasonable to assume that it may expand its business to producing lechon sauce, inasmuch
as it already produces food sauce products and its Articles of Incorporation authorizes it to do so.

Petitioner alleges that the IPO-BLA recognized that confusion of business may arise from
respondent's use of its "PAPA BOY & DEVICE" mark for lechon sauce products, and that the
Director-General agreed with the IPO-BLA's findings on this issue.

Petitioner asserts that ketchup and lechon sauce are undeniably related goods; that they belong to
the same class, i.e., Class 30 of the Nice Classifications; that they serve practically the same
purpose, i.e., to spice up dishes; and that they are sold in similar bottles in the same shelves in
grocery stores. Petitioner argues that the Court of Appeals had absolutely no basis for stating that a
person who is out to buy ketchup is not likely to buy lechon sauce by mistake, as this analysis
allegedly only applies to "product confusion" and does not consider confusion of business. Petitioner
alleges that "[t]here equally is actionable confusion when a buyer purchases Respondent's 'PAPA
BOY' lechon sauce believing that the said product is related to or associated with the famous 'PAPA
KETSUP' makers." Petitioner further alleges that "it is reasonable and likely for a consumer to believe
that Respondent's 'PAPA BOY' lechon sauce originated from or is otherwise connected with
Petitioner's line of sauces" and that this is "the precise evil that recognition of confusion of business
seeks to prevent."26chanroblesvirtuallawlibrary

Petitioner avers that "PAPA" is a well-known mark and that it has been in commercial use as early as
1954 on banana ketchup and similar goods. The "PAPA" mark is also registered as a trademark and
in commercial use in other parts of the world such as the United States of America and the Middle
East. Petitioner claims that "[bjeing a trademark that is registered and well-known both locally and
internationally, Petitioner's 'PAPA' marks cannot be appropriated by another person or entity not only
with respect to goods similar to those with respect to which it is registered, but also with respect to
goods which are not similar to those for which the 'PAPA' marks are
registered."27chanroblesvirtuallawlibrary

Under the third ground, petitioner claims that the fact that the word "PAPA" is a known term of
endearment for fathers does not preclude it from being used as a mark to identify goods. Petitioner
claims that their mark falls under a type of mark known as "arbitrary or fanciful marks," which are
"marks that bear no logical relation to the actual characteristics of the products they represent," are
"highly distinctive and valid," and "are entitled to the greatest protection." 28chanroblesvirtuallawlibrary

Petitioner claims that the mark "PAPA" falls under this class of arbitrary marks, even if "PAPA" is also
a common term of endearment for one's father. Petitioner states that there is no logical connection
between one's father and food sauces, such as ketchup; thus, with respect to ketchup, food sauces,
and their related products, and for the purpose of identifying its products, petitioner claims exclusive
ownership of the term "PAPA" as an arbitrary mark.

Petitioner alleges that if respondent "has a good faith and proud desire to unmistakably and distinctly
identify its lechon sauce product out in the market, it should have coined a mark that departs from
and is distinguished from those of its competitors." Petitioner claims that respondent, with full
knowledge of the fame and the decades-long commercial use of petitioner's "PAPA" marks, opted for
"PAPA BOY & DEVICE," which obviously is just a "colorable imitation." 29

THEORY OF RESPONDENT

In its Comment,30 respondent claims that petitioner's marks have either expired and/or "that no
confusing similarity exists between them and respondent's "PAPA BOY & DEVICE' mark."
Respondent alleges that under Section 15 of Republic Act No. 166, a renewal application should be
filed within six months before the expiration of the period or within three months after such expiration.
Respondent avers that the expiration of the 20-year term for the "PAPA" mark under Registration No.
32416 issued on August 11, 1983 was August 11, 2003. The sixth month before August 11, 2003 was
February 11, 2003 and the third month after August 11, 2003 was November 11, 2003. Respondent
claims that the application that petitioner filed on October 28, 2005 was almost two years late. Thus, it
was not a renewal application, but could only be considered a new application under the new
Trademark Law, with the filing date reckoned on October 28, 2005. The registrability of the mark
under the new application was examined again, and any certificate issued for the registration of
"PAPA" could not have been a renewal certificate.

As for petitioner's other mark "PAPA BANANA CATSUP LABEL," respondent claims that its 20-year
term also expired on August 11, 2003 and that petitioner only filed its application for the new "PAPA
LABEL DESIGN" on November 15, 2006. Having been filed three years beyond the renewal
application deadline, petitioner was not able to renew its application on time, and cannot claim a
"continuous existence of its rights over the 'PAPA BANANA CATSUP LABEL.'" Respondent claims
that the two marks are different from each other and that the registration of one is independent of the
other. Respondent concludes that the certificate of registration issued for "PAPA LABEL DESIGN" is
"not and will never be a renewal certificate." 31chanroblesvirtuallawlibrary

Respondent also avers as follows:

1.3. With regard to the two new registrations of petitioner namely: "PAPA" (Reg. No. 4-2005-010788)
and "PAPA LABEL DESIGN" (Reg. No. 4-2006-012364), these were filed on October 28, 2005 and
November 15, 2006, respectively, under the Intellectual Property Code (RA 8293), which follows the
"first to file" rule, and were obviously filed later than respondent's "PAPA BOY & DEVICE" mark filed
on April 4, 2002. These new marks filed much later than the opposed "PAPA BOY & DEVICE" mark
cannot, therefore, be used as basis for the opposition and should in fact, be denied outrightly.

x x x x

A search of the Online Trademark Database of Intellectual Property Office (IPO) will show that only
Registration No. 34681 issued for "PAPA KETSARAP" was properly renewed on August 23, 2005. x x
x Clearly, the registrations of "PAPA" and "PAPA BANANA CATSUP LABEL" marks under
registration nos. 32416 and SR-6282 respectively, have already expired when Petitioner filed its
opposition proceeding against Respondent's trademark on December 11, 2006. Having expired, and
therefore, no longer legally existing, the "PAPA" and "PAPA BANANA CATSUP LABEL" marks
CANNOT BAR the registration of respondent's mark. To allow petitioner's expired marks to prevent
respondent's distinct "PAPA BOY & DEVICE" mark from being registered would be the ultimate
absurdity.32chanrobleslaw

Respondent posits that the Court of Appeals did not err in reversing the decisions of the
administrative agencies, alleging that "[while] it is true that the general rule is that the factual findings
of administrative bodies deserve utmost respect when supported by evidence, the same is subject to
exceptions,"33 and that the Court of Appeals had justifiable reasons to disregard the factual finding of
the IPO. Here, the Court of Appeals wisely identified certain material facts that were overlooked by
the IPO-BLA and the IPO Director General which it opined, when correctly appreciated, would alter
the result of the case.

Respondent alleges that the IPO-BLA erroneously considered petitioner's marks "PAPA" and "PAPA
BANANA CATSUP LABEL" when it applied the dominancy test in determining whether petitioner's
marks are confusingly similar to those of respondent's mark "PAPA BOY & DEVICE."

Respondent avers that the IPO-BLA absurdly took emphasis on the mark "PAPA" to arrive at its
decision and did not take into consideration that petitioner's mark was already expired when
respondent applied for the registration of its "PAPA BOY & DEVICE" mark. Respondent compares its
"PAPA BOY & DEVICE" with the only mark that respondent allegedly has, "PAPA KETSARAP," and
found no confusing similarity between the two.

We quote below respondent's discussion of its application of the dominancy test to the marks in
question:

Applying the Dominancy test, as correctly emphasized by the Court of Appeals, the dominant feature
in respondent's mark is "PAPA BOY" and not "PAPA". It can be gleaned from respondent's mark that
the word "PAPA" was written in the same font, style and color as the word "BOY". There is also the
presence of a "smiling hog-like character" which is positioned very prominently, both in size and
location in said mark, at glance (sic) even more dominant than the word "PAPA BOY".
x x x x

On the other hand, the dominant feature in petitioner's mark is "KETSARAP", not "PAPA". Even an
ordinary examiner could observe that the word "KETSARAP" in petitioner's mark is more prominently
printed than the word "PAPA".

x x x x

In a dominancy test, the prominent feature of the competing trademarks must be similar to cause
confusion or deception, x x x.

Verily, respondent's dominant feature "PAPA BOY" and the smiling hog-like character and petitioner's
dominant feature "KETSARAP", being the word written in a larger font, are neither confusing nor
deceiving to the public. In fact, the differences between their dominant marks are very noticeable and
conspicuous to every purchaser.

Furthermore, the Supreme Court in Societe des Produits Nestle, S.A. v. Dy [641 Phil. 345], applied
the dominancy test by taking into account the aural effects of the words and letters contained in the
marks in determining the issue of confusing similarity. Obviously, petitioners' "PAPA KETSARAP"
mark does not in any way sounds (sic) like respondent's "PAPA BOY" mark. The common prefix
"PAPA" does not render the marks aurally the same. As discussed above, the dominant feature in
petitioner's mark is "KETSARAP" and the dominant feature in respondent's mark is "PAPA BOY".
Thus, the words "KETSARAP" and "PAPA BOY" in petitioner's and respondent's respective marks
are obviously different in sound, making "PAPA BOY & DEVICE" even more distinct from petitioner's
"PAPA KETSARAP" mark.35chanrobleslaw

Using the holistic test, respondent further discusses the differences in the marks in this wise:

Even the use of the holistic test x x x takes into consideration the entirety of the marks in question [to]
be considered in resolving confusing similarity. The differences are again very obvious. Respondent's
mark has (1) the word "lechon sauce" printed inside a blue ribbon-like device which is illustrated
below the word "PAPA BOY"; (2) a prominent smiling hog-like character gesturing a thumbs-up sign
and wearing a Filipino hat and scarf stands beside the word "PAPA BOY"; and the word "BARRIO
FIESTA" conspicuously displayed above the said trademark which leaves no doubt in the consumer's
mind on the product that he or she is purchasing. On the other hand, petitioner's mark is the word
"PAPA" enclosed by a cloud on top of the word "KETSARAP' enclosed by a geometrical figure.

x x x x

In the instant case, the respective marks are obviously different in color scheme, logo, spelling,
sound, meaning and connotation. Thus, yet again, under the holistic test there can be no confusion or
deception between these marks.

It also bears stressing that petitioner's "PAPA KETSARAP" mark covers "banana catsup" while
respondent's "PAPA BOY & DEVICE" covers "lechon sauce", thereby obliterating any confusion of
products of both marks as they travel different channels of trade. If a consumer is in the market for
banana catsup, he or she will not buy lechon sauce and vice-versa. As a result, the margin of error in
the acquisition of one for the other is simply remote. Lechon sauce which is liver sauce is distinct from
catsup extracted/ made from banana fruit. The flavor and taste of a lechon sauce are far from those
of a banana catsup. Lechon sauce is sauce for "lechon" while banana catsup is apparently catsup
made from banana.36chanrobleslaw

Respondent also contends that "PAPA BOY & DEVICE" mark is not confusingly similar to petitioner's
trademark "PAPA KETSARAP" in terms of appearance, sound, spelling and meaning. The difference
in nature, usage, taste and appearance of products decreases the possibility of deception among
buyers.37chanroblesvirtuallawlibrary

Respondent alleges that since petitioner merely included banana catsup as its product in its
certificate, it cannot claim any further right to the mark "PAPA KETSARAP" on products other than
banana catsup. Respondent also alleges that petitioner cannot raise "international notoriety of the
mark" for the first time on appeal and that there is no proof that petitioner's mark is internationally
well-known.38chanroblesvirtuallawlibrary

Furthermore, respondent argues that petitioner cannot claim exclusive ownership over the use of the
word "PAPA," a term of endearment for one's father. Respondent points out that there are several
other valid and active marks owned by third parties which use the word "PAPA," even in classes of
goods similar to those of petitioner's. Respondent avers that petitioner's claim that its "PAPA" mark is
an arbitrary mark is belatedly raised in the instant petition, and cannot be allowed because the "PAPA
KETSARAP" mark would immediately bring the consuming public to thinking that the product involved
is catsup and the description of said catsup is "masarap" (delicious) and due to the logical relation of
the petitioner's mark to the actual product, it being descriptive or generic, it is far from being arbitrary
or fanciful.39chanroblesvirtuallawlibrary

Lastly, respondent claims that the Court of Appeals correctly ruled that respondent's product cannot
be confused as originating from the petitioner. Since it clearly appears in the product label of the
respondent that it is manufactured by Barrio Fiesta, the public is dutifully informed of the identity of
the lechon sauce manufacturer. The Court of Appeals further took into account the fact that
petitioner's products have been in commercial use for decades. 40chanroblesvirtuallawlibrary

Petitioner, in its Reply41 to respondent's Comment, contends that respondent cannot invoke a prior
filing date for the "PAPA BOY" mark as against Petitioner's "PAPA" and "PAPA BANANA CATSUP
LABEL" marks, because the latter marks were still registered when respondent applied for registration
of its "PAPA BOY" mark. Thus, the IPO-BLA and Director General correctly considered them in
deciding whether the "PAPA BOY" mark should be registered, using the "first to file" rule under
Section 123.1(d) of Republic Act No. 8293, or the Intellectual Property Code (IP Code).

Petitioner reiterates its argument that the Court of Appeals erred in applying the holistic test and that
the proper test under the circumstances is the dominancy test, which was correctly applied by the
IPO-BLA and the Director General.42

THIS COURT'S RULING

The petition has merit. We find that the Court of Appeals erred in applying the holistic test and in
reversing and setting aside the decision of the IPO-BLA and that of the IPO Director General, both of
which rejected respondent's application for the mark "PAPA BOY & DEVICE."

In Dermaline, Inc. v. Myra Pharmaceuticals, Inc.,43 we defined a trademark as "any distinctive word,
name, symbol, emblem, sign, or device, or any combination thereof, adopted and used by a
manufacturer or merchant on his goods to identify and distinguish them from those manufactured,
sold, or dealt by others." We held that a trademark is "an intellectual property deserving protection by
law."

The rights of the trademark owner are found in the Intellectual Property Code, which provides:

Section 147. Rights Conferred. - 147.1. The owner of a registered mark shall have the exclusive
right to prevent all third parties not having the owner's consent from using in the course of trade
identical or similar signs or containers for goods or services which are identical or similar to those in
respect of which the trademark is registered where such use would result in a likelihood of confusion.
In case of the use of an identical sign for identical goods or services, a likelihood of confusion shall be
presumed.

Section 168. Unfair Competition, Rights, Regulation and Remedies. - 168.1. A person who has
identified in the mind of the public the goods he manufactures or deals in, his business or services
from those of others, whether or not a registered mark is employed, has a property right in the
goodwill of the said goods, business or services so identified, which will be protected in the same
manner as other property rights.

The guideline for courts in determining likelihood of confusion is found in A.M. No. 10-3-10-SC, or the
Rules of Procedure for Intellectual Property Rights Cases, Rule 18, which provides:

RULE 18
Evidence in Trademark Infringement and Unfair Competition Cases SECTION 1. Certificate of
Registration. � A certificate of registration of a mark shall be prima facie evidence of:

a) the validity of the registration; b) the registrant's ownership of the mark; and

c) the registrant's exclusive right to use the same in connection with the goods or services and those
that are related thereto specified in the certificate.

xxxx

SECTION 3. Presumption of Likelihood of Confusion. � Likelihood of confusion shall be presumed in

case an identical sign or mark is used for identical goods or services.

SECTION 4. Likelihood of Confusion in Other Cases. � In determining whether one trademark is

confusingly similar to or is a colorable imitation of another, the court must consider the general
impression of the ordinary purchaser, buying under the normally prevalent conditions in trade and
giving the attention such purchasers usually give in buying that class of goods. Visual, aural,
connotative comparisons and overall impressions engendered by the marks in controversy as they
are encountered in the realities of the marketplace must be taken into account. Where there are both
similarities and differences in the marks, these must be weighed against one another to see which
predominates.

In determining likelihood of confusion between marks used on non-identical goods or services,

several factors may be taken into account, such as, but not limited to:

a) the strength of plaintiff s mark;

b) the degree of similarity between the plaintiffs and the defendant's marks;

c) the proximity of the products or services;

d) the likelihood that the plaintiff will bridge the gap;

e) evidence of actual confusion;

f) the defendant's good faith in adopting the mark;

g) the quality of defendant's product or service; and/or h) the sophistication of the buyers.

"Colorable imitation" denotes such a close or ingenious imitation as to be calculated to deceive

ordinary persons, or such a resemblance to the original as to deceive an ordinary purchaser giving
such attention as a purchaser usually gives, as to cause him to purchase the one supposing it to be
the other.

SECTION 5. Determination of Similar and Dissimilar Goods or Services. � Goods or services may
not be considered as being similar or dissimilar to each other on the ground that, in any registration or
publication by the Office, they appear in different classes of the Nice Classification.

In this case, the findings of fact of the highly technical agency, the Intellectual Property Office, which
has the expertise in this field, should have been given great weight by the Court of Appeals. As we
held in Berris Agricultural Co., Inc. v. Abyadang44:

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

On the other hand, R.A. No. 166 defines a "trademark" as any distinctive word, name, symbol,
emblem, sign, or device, or any combination thereof, adopted and used by a manufacturer or
merchant on his goods to identify and distinguish them from those manufactured, sold, or dealt by
another. A trademark, being a special property, is afforded protection by law. But for one to enjoy this
legal protection, legal protection ownership of the trademark should rightly be established.

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

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

x x x x

Verily, the protection of trademarks as intellectual property is intended not only to preserve the
goodwill and reputation of the business established on the goods bearing the mark through actual use
over a period of time, but also to safeguard the public as consumers against confusion on these
goods. On this matter of particular concern, administrative agencies, such as the IPO, by
reason of their special knowledge and expertise over matters falling under their jurisdiction,
are in a better position to pass judgment thereon. Thus, their findings of fact in that regard are
generally accorded great respect, if not finality by the courts, as long as they are supported by
substantial evidence, even if such evidence might not be overwhelming or even preponderant.
It is not the task of the appellate court to weigh once more the evidence submitted before the
administrative body and to substitute its own judgment for that of the administrative agency in
respect to sufficiency of evidence. (Emphasis added, citations omitted.)

In trademark controversies, each case must be scrutinized according to its peculiar circumstances,
such that jurisprudential precedents should only be made to apply if they are specifically in
point.45 The cases discussed below are mentioned only for purposes of lifting the applicable
doctrines, laws, and concepts, but not for their factual circumstances, because of the uniqueness of
each case in controversies such as this one.

There are two tests used in jurisprudence to determine likelihood of confusion, namely the dominancy
test used by the IPO, and the holistic test adopted by the Court of Appeals. In Skechers, U.S.A., Inc.
v. Inter Pacific Industrial Trading Corp.,46 we held:

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

x x x x

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

Applying the Dominancy Test to the case at bar, this Court finds that the use of the stylized "S" by
respondent in its Strong rubber shoes infringes on the mark already registered by petitioner with the
IPO. While it is undisputed that petitioner's stylized "S" is within an oval design, to this Court's mind,
the dominant feature of the trademark is the stylized "S," as it is precisely the stylized "S" which
catches the eye of the purchaser. Thus, even if respondent did not use an oval design, the mere fact
that it used the same stylized "S", the same being the dominant feature of petitioner's trademark,
already constitutes infringement under the Dominancy Test.

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

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

X X X X

While there may be dissimilarities between the appearances of the shoes, to this Court's mind such
dissimilarities do not outweigh the stark and blatant similarities in their general features, x x x.

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

x x x x

Neither can the difference in price be a complete defense in trademark infringement. In McDonald's
Corporation v. L.C. Big Mak Burger, Inc., this Court held:

Modern law recognizes that the protection to which the owner of a trademark is entitled is not limited
to guarding his goods or business from actual market competition with identical or similar products of
the parties, but extends to all cases in which the use by a junior appropriator of a trade-mark or trade-
name is likely to lead to a confusion of source, as where prospective purchasers would be misled into
thinking that the complaining party has extended his business into the field (see 148 ALR 56 et
seq; 53 Am. Jur. 576) or is in any way connected with the activities of the infringer; or when it
forestalls the normal potential expansion of his business (v. 148 ALR 77, 84; 52 Am. Jur. 576, 577). x
x x.

Indeed, the registered trademark owner may use its mark on the same or similar products, in different
segments of the market, and at different price levels depending on variations of the products for
specific segments of the market. The purchasing public might be mistaken in thinking that petitioner
had ventured into a lower market segment such that it is not inconceivable for the public to think that
Strong or Strong Sport Trail might be associated or connected with petitioner's brand, which scenario
is plausible especially since both petitioner and respondent manufacture rubber shoes.

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

The Court discussed the concept of confusion of business in the case of Societe Des Produits Nestle,
S.A. v. Dy, Jr.,47 as quoted below:

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

Callman notes two types of confusion. The first is the confusion of goods "in which event the
ordinarily prudent purchaser would be induced to purchase one product in the belief that he was
purchasing the other." In which case, "defendant's goods are then bought as the plaintiffs, and the
poorer quality of the former reflects adversely on the plaintiffs reputation." The other is the confusion
of business: "Here though the goods of the parties are different, the defendant's product is such as
might reasonably be assumed to originate with the plaintiff, and the public would then be deceived
either into that belief or into the belief that there is some connection between the plaintiff and
defendant which, in fact, does not exist."

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

x x x x

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

In trademark cases, particularly in ascertaining whether one trademark is confusingly similar to

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

In the light of the facts of the present case, the Court holds that the dominancy test is applicable. In
recent cases with similar factual milieus, the Court has consistently applied the dominancy test, x x x.

x x x x

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

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

x x x x

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

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

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

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

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

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

Thus, in the 1954 case of Co Tiong Sa v. Director of Patents, the Court ruled:

x x x It has been consistently held that the question of infringement of a trademark is to be

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

x x x x

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

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

In Societe Des Produits Nestle, S.A. v. Court of Appeals, the Court applied the dominancy test in
holding that "FLAVOR MASTER" is confusingly similar to "MASTER ROAST" and "MASTER
BLEND." The Court held:
While this Court agrees with the Court of Appeals' detailed enumeration of differences between the
respective trademarks of the two coffee products, this Court cannot agree that totality test is the one
applicable in this case. Rather, this Court believes that the dominancy test is more suitable to this
case in light of its peculiar factual milieu.

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

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

xxxx

The scope of protection afforded to registered trademark owners is not limited to protection
from infringers with identical goods. The scope of protection extends to protection from
infringers with related goods, and to market areas that are the normal expansion of business
of the registered trademark owners. Section 138 of R.A. No. 8293 states:

Certificates of Registration. � A certificate of registration of a mark shall be prima facie evidence of

validity of the registration, the registrant's ownership of the mark, and of the registrant's exclusive
right to use the same in connection with the goods or services and those that are related thereto
specified in the certificate, x x x.

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

x x x x

xxx. However, as the registered owner of the "NAN" mark, Nestle should be free to use its mark
on similar products, in different segments of the market, and at different price
levels. In McDonald's Corporation v. L.C. Big Mak Burger, Inc., the Court held that the scope of
protection afforded to registered trademark owners extends to market areas that are the normal
expansion of business:

x x x x

Even respondent's use of the "Big Mak" mark on non-hamburger food products cannot excuse their
infringement of petitioners' registered mark, otherwise registered marks will lose their protection under
the law.

The registered trademark owner may use his mark on the same or similar products, in
different segments of the market, and at different price levels depending on variations of the
products for specific segments of the market. The Court has recognized that the registered
trademark owner enjoys protection in product and market areas that are the normal potential
expansion of his business.Thus, the Court has declared:

Modern law recognizes that the protection to which the owner of a trademark is entitled is not limited
to guarding his goods or business from actual market competition with identical or similar products of
the parties, but extends to all cases in which the use by a junior appropriator of a trade-mark or trade-
name is likely to lead to a confusion of source, as where prospective purchasers would be misled into
thinking that the complaining party has extended his business into the field (see 148 ALR 56 et sq; 53
Am. Jur. 576) or is in any way connected with the activities of the infringer; or when it forestalls the
normal potential expansion of his business (v. 148 ALR, 77, 84; 52 Am. Jur. 576, 577). (Emphases
supplied, citations omitted.)

Again, this Court discussed the dominancy test and confusion of business in Dermaline, Inc. v. Myra
Pharmaceuticals, Inc.,48 and we quote:

The Dominancy Test focuses on the similarity of the prevalent features of the competing trademarks
that might cause confusion or deception. It is applied when the trademark sought to be registered
contains the main, essential and dominant features of the earlier registered trademark, and confusion
or deception is likely to result. Duplication or imitation is not even required; neither is it necessary that
the label of the applied mark for registration should suggest an effort to imitate. The important issue is
whether the use of the marks involved would likely cause confusion or mistake in the mind of or
deceive the ordinary purchaser, or one who is accustomed to buy, and therefore to some extent
familiar with, the goods in question. Given greater consideration are the aural and visual impressions
created by the marks in the public mind, giving little weight to factors like prices, quality, sales outlets,
and market segments. The test of dominancy is now explicitly incorporated into law in Section 155.1
of R.A. No. 8293 which provides �

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

xxxx

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

x x x x

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

x x x x

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

Indeed, the registered trademark owner may use its mark on the same or similar products, in different
segments of the market, and at different price levels depending on variations of the products for
specific segments of the market. The Court is cognizant that the registered trademark owner enjoys
protection in product and market areas that are the normal potential expansion of his business. Thus,
we have held �

Modern law recognizes that the protection to which the owner of a trademark is entitled is not limited
to guarding his goods or business from actual market competition with identical or similar products of
the parties, but extends to all cases in which the use by a junior appropriator of a trade-mark or trade-
name is likely to lead to a confusion of source, as where prospective purchasers would be
misled into thinking that the complaining party has extended his business into the field (see
148 ALR 56 et seq; 53 Am Jur. 576) or is in any way connected with the activities of the infringer; or
when it forestalls the normal potential expansion of his business (v. 148 ALR 77, 84; 52 Am.
Jur. 576, 577).

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

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

Section 123. l(d) of the IP Code provides:

A mark cannot be registered if it:

x x x x

(d) Is identical with a registered mark belonging to a different proprietor or a mark with an earlier filing
or priority date, in respect of:

i. The same goods or services, or

ii. Closely related goods or services, or

iii. If it nearly resembles such a mark as to be likely to deceive or cause confusion[.]

A scrutiny of petitioner's and respondent's respective marks would show that the IPO-BLA and the
IPO Director General correctly found the word "PAPA" as the dominant feature of petitioner's mark
"PAPA KETSARAP." Contrary to respondent's contention, "KETSARAP" cannot be the dominant
feature of the mark as it is merely descriptive of the product. Furthermore, it is the "PAPA" mark that
has been in commercial use for decades and has established awareness and goodwill among
consumers.

We likewise agree with the IPO-BLA that the word "PAPA" is also the dominant feature of
respondent's "PAPA BOY & DEVICE" mark subject of the application, such that "the word 'PAPA' is
written on top of and before the other words such that it is the first word/figure that catches the
eyes."49 Furthermore, as the IPO Director General put it, the part of respondent's mark which appears
prominently to the eyes and ears is the phrase "PAPA BOY" and that is what a purchaser of
respondent's product would immediately recall, not the smiling hog.

We quote the relevant portion of the IPO-BLA decision on this point below:

A careful examination of Opposer's and Respondent-applicant's respective marks shows that the
word "PAPA" is the dominant feature: In Opposer's marks, the word "PAPA" is either the mark by
itself or the predominant word considering its stylized font and the conspicuous placement of the word
"PAPA" before the other words. In Respondent-applicant's mark, the word "PAPA" is written on top of
and before the other words such that it is the first word figure that catches the eyes. The visual and
aural impressions created by such dominant word "PAPA" at the least is that the respective goods of
the parties originated from the other, or that one party has permitted or has been given license to the
other to use the word "PAPA" for the other party's product, or that there is a relation/connection
between the two parties when, in fact, there is none. This is especially true considering that the
products of both parties belong to the same class and are closely related: Catsup and lechon sauce
or liver sauce are both gravy-like condiments used to spice up dishes. Thus, confusion of goods and
of business may likely result.

Under the Dominancy Test, the dominant features of the competing marks are considered in
determining whether these competing marks are confusingly similar. Greater weight is given to the
similarity of the appearance of the products arising from the adoption of the dominant features of the
registered mark, disregarding minor differences. The visual, aural, connotative, and overall
comparisons and impressions engendered by the marks in controversy as they are encountered in
the realities of the marketplace are the main considerations (McDonald's Corporation, et al., v. L. C.
Big Mak Burger, Inc., et al., G. R. No. 143993, August 18, 2004; Societe Des Produits Nestle, S. A."
et al. v. Court of Appeals, et al., G. R. No. 112012, April 4, 2001). If the competing trademark contains
the main or essential or dominant features of another, and confusion and deception is likely to result,
infringement takes place. (Lim Hoa v. Director of Patents, 100 Phil. 214 [1956]); Co Tiong Sa v.
Director of Patents, et al., G. R. No. L-5378, May 24, 1954). Duplication or imitation is not necessary;
nor is it necessary that the infringing label should suggest an effort to imitate (Lim Hoa v. Director of
Patents, supra, and Co Liong Sa v. Director of Patents, supra). Actual confusion is not required: Only
likelihood of confusion on the part of the buying public is necessary so as to render two marks
confusingly similar so as to deny the registration of the junior mark (Sterling Products International,
Inc. v. Farbenfabriken Bayer Aktiengesellschaft, 137 Phil. 838 [1969]).

As to the first issue of whether PAPA BOY is confusingly similar to Opposer's PAPA mark, this
Bureau rules in the affirmative.

The records bear the following:

1. Registration No. 32416 issued for the mark "PAPA" under Class 29 goods was deemed expired as
of February 11, 2004 (Exhibit "A" attached to the VERIFIED NOTICE OF OPPOSITION). Application
Serial No. 4- 2005-010788 was filed on October 28, 2005 for the same mark "PAPA" for Class 30
goods and Registration No. 42005010788 was issued on March 19,2007;

2. Opposer was issued for the mark "PAPA BANANA CATSUP LABEL" on August 11, 1983
Registration No. SR-6282 for Class 30 goods in the Supplemental Register, which registration
expired in 2003. Application Serial No. 4-2006-012364 was filed for the mark "PAPA LABEL DESIGN"
for Class 30 goods on November 15, 2006, and Registration No. 42006012364 was issued on April
30, 2007; and

3. Lastly, Registration No. 34681 for the mark "PAPA KETSARAP" for Class 30 goods was issued on
August 23, 1985 and was renewed on August 23, 2005.

Though Respondent-applicant was first to file the subject application on April 04, 2002 vis-a-vis the
mark "PAPA" the filing date of which is reckoned on October 28, 2005, and the mark "PAPA LABEL
DESIGN" the filing date of which is reckoned on November 15, 2006, Opposer was able to secure a
registration for the mark "PAPA KETSARAP" on August 23, 1985 considering that Opposer was the
prior registrant and that its renewal application timely filed on August 23, 2005.

x x x x

Pursuant to [Section 123.l(d) of the IP Code], the application for registration of the subject mark
cannot be allowed considering that Opposer was earlier registrant of the marks PAPA and PAPA
KETSARAP which registrations were timely renewed upon its expiration. Respondent-applicant's
mark "PAPA BOY & DEVICE" is confusingly similar to Opposer's mark "PAPA KETSARAP" and is
applied to goods that are related to Opposer's goods, but Opposer's mark "PAPA KETSARAP" was
registered on August 23, 1985 per Certificate of Registration No. 34681, which registration was
renewed for a period of 10 years counted from August 23, 2005 per Certificate of Renewal of
Registration No. 34681 issued on August 23, 2005. To repeat, Opposer has already registered a
mark which Respondent-applicant's mark nearly resembles as to likely deceive or cause confusion as
to origin and which is applied to goods to which respondent-applicant's goods under Class 30 are
closely related.

Section 138 of the IP Code provides that a certificate of registration of a mark is prima facie evidence
of the validity of the registration, the registrant's ownership of the mark, and of the registrant's
exclusive right to use the same in connection with the goods and those that are related thereto
specified in the certificate.

We agree that respondent's mark cannot be registered. Respondent's mark is related to a product,
lechon sauce, an everyday all-purpose condiment and sauce, that is not subjected to great scrutiny
and care by the casual purchaser, who knows from regular visits to the grocery store under what aisle
to find it, in which bottle it is contained, and approximately how much it costs. Since petitioner's
product, catsup, is also a household product found on the same grocery aisle, in similar packaging,
the public could think that petitioner had expanded its product mix to include lechon sauce, and that
the "PAPA BOY" lechon sauce is now part of the "PAPA" family of sauces, which is not unlikely
considering the nature of business that petitioner is in. Thus, if allowed registration, confusion of
business may set in, and petitioner's hard-earned goodwill may be associated to the newer product
introduced by respondent, all because of the use of the dominant feature of petitioner's mark on
respondent's mark, which is the word "PAPA." The words "Barrio Fiesta" are not included in the mark,
and although printed on the label of respondent's lechon sauce packaging, still do not remove the
impression that "PAPA BOY" is a product owned by the manufacturer of "PAPA" catsup, by virtue of
the use of the dominant feature. It is possible that petitioner could expand its business to include
lechon sauce, and that would be well within petitioner's rights, but the existence of a "PAPA BOY"
lechon sauce would already eliminate this possibility and deprive petitioner of its rights as an owner of
a valid mark included in the Intellectual Property Code.

The Court of Appeals likewise erred in finding that "PAPA," being a common term of endearment for
one's father, is a word over which petitioner could not claim exclusive use and ownership. The
Merriam-Webster dictionary defines "Papa" simply as "a person's father." True, a person's father has
no logical connection with catsup products, and that precisely makes "PAPA" as an arbitrary mark
capable of being registered, as it is distinctive, coming from a family name that started the brand
several decades ago. What was registered was not the word "Papa" as defined in the dictionary, but
the word "Papa" as the last name of the original owner of the brand. In fact, being part of several of
petitioner's marks, there is no question that the IPO has found "PAPA" to be a registrable mark.

Respondent had an infinite field of words and combinations of words to choose from to coin a mark
for its lechon sauce. While its claim as to the origin of the term "PAPA BOY" is plausible, it is not a
strong enough claim to overrule the rights of the owner of an existing and valid mark. Furthermore,
this Court cannot equitably allow respondent to profit by the name and reputation carefully built by
petitioner without running afoul of the basic demands of fair play. 51

WHEREFORE, we hereby GRANT the petition. We SET ASIDE the June 23, 2011 Decision and the
October 4, 2011 Resolution of the Court of Appeals in CA-G.R. SP No. 107570,
and REINSTATE the March 26, 2008 Decision of the Bureau of Legal Affairs of the Intellectual
Property Office (IPO-BLA) and the January 29, 2009 Decision of the Director General of the IPO.

SO ORDERED.

Sereno, C.J., (Chairperson), Bersamin, Perlas-Bernabe, and Jardeleza, JJ., concur.

G.R. No. L-48226 December 14, 1942

ANA L. ANG, petitioner,

vs.
TORIBIO TEODORO, respondent.

Cirilo Lim for petitioner.

Marcial P. Lichauco and Manuel M. Mejia for respondent.

OZAETA, J.:

Petitioner has appealed to this Court by certiorari to reverse the judgment of the Court of Appeals
reversing that of the Court of First Instance of Manila and directing the Director of Commerce to
cancel the registration of the trade-mark "Ang Tibay" in favor of said petitioner, and perpetually
enjoining the latter from using said trade-mark on goods manufactured and sold by her.

Respondent Toribio Teodoro, at first in partnership with Juan Katindig and later as sole proprietor,
has continuously used "Ang Tibay," both as a trade-mark and as a trade-name, in the manufacture
and sale of slippers, shoes, and indoor baseballs since 1910. He formally registered it as trade-mark
on September 29, 1915, and as trade-name on January 3, 1933. The growth of his business is a
thrilling epic of Filipino industry and business capacity. Starting in an obscure shop in 1910 with a
modest capital of P210 but with tireless industry and unlimited perseverance, Toribio Teodoro, then
an unknown young man making slippers with his own hands but now a prominent business magnate
and manufacturer with a large factory operated with modern machinery by a great number of
employees, has steadily grown with his business to which he has dedicated the best years of his life
and which he has expanded to such proportions that his gross sales from 1918 to 1938 aggregated
P8,787,025.65. His sales in 1937 amounted to P1,299,343.10 and in 1938, P1,133,165.77. His
expenses for advertisement from 1919 to 1938 aggregated P210,641.56.

Petitioner (defendant below) registered the same trade-mark "Ang Tibay" for pants and shirts on April
11, 1932, and established a factory for the manufacture of said articles in the year 1937. In the
following year (1938) her gross sales amounted to P422,682.09. Neither the decision of the trial court
nor that of the Court of Appeals shows how much petitioner has spent or advertisement. But
respondent in his brief says that petitioner "was unable to prove that she had spent a single centavo
advertising "Ang Tibay" shirts and pants prior to 1938. In that year she advertised the factory which
she had just built and it was when this was brought to the attention of the appellee that he consulted
his attorneys and eventually brought the present suit."

The trial court (Judge Quirico Abeto) presiding absolved the defendant from the complaint, with costs
against the plaintiff, on the grounds that the two trademarks are dissimilar and are used on different
and non-competing goods; that there had been no exclusive use of the trade-mark by the plaintiff;
and that there had been no fraud in the use of the said trade-mark by the defendant because the
goods on which it is used are essentially different from those of the plaintiff. The second division of
the Court of Appeals, composed of Justices Bengson, Padilla, Lopez Vito, Tuason, and Alex Reyes,
with Justice Padilla as ponente, reversed that judgment, holding that by uninterrupted an exclusive
use since 191 in the manufacture of slippers and shoes, respondent's trade-mark has acquired a
secondary meaning; that the goods or articles on which the two trade-marks are used are similar or
belong to the same class; and that the use by petitioner of said trade-mark constitutes a violation of
sections 3 and 7 of Act No. 666. The defendant Director of Commerce did not appeal from the
decision of the Court of Appeals.

First. Counsel for the petitioner, in a well-written brief, makes a frontal sledge-hammer attack on the
validity of respondent's trade-mark "Ang Tibay." He contends that the phrase "Ang Tibay" as
employed by the respondent on the articles manufactured by him is a descriptive term because,
"freely translate in English," it means "strong, durable, lasting." He invokes section 2 of Act No. 666,
which provides that words or devices which related only to the name, quality, or description of the
merchandise cannot be the subject of a trade-mark. He cites among others the case of Baxter vs.
Zuazua (5 Phil., 16), which involved the trade-mark "Agua de Kananga" used on toilet water, and in
which this Court held that the word "Kananga," which is the name of a well-known Philippine tree or
its flower, could not be appropriated as a trade-mark any more than could the words "sugar,"
"tobacco," or "coffee." On the other hand, counsel for the respondent, in an equally well-prepared and
exhaustive brief, contend that the words "Ang Tibay" are not descriptive but merely suggestive and
may properly be regarded as fanciful or arbitrary in the legal sense. The cite several cases in which
similar words have been sustained as valid trade-marks, such as "Holeproof" for hosiery, 1 "ideal for
tooth brushes, 2 and "Fashionknit" for neckties and sweaters. 3

We find it necessary to go into the etymology and meaning of the Tagalog words "Ang Tibay" to
determine whether they are a descriptive term, i.e., whether they relate to the quality or description of
the merchandise to which respondent has applied them as a trade-mark. The word "ang" is a definite
article meaning "the" in English. It is also used as an adverb, a contraction of the word "anong" (what
or how). For instance, instead of saying, "Anong ganda!" ("How beautiful!"), we ordinarily say, "Ang
ganda!" Tibay is a root word from which are derived the verb magpatibay (to strenghten; the
nouns pagkamatibay (strength, durability), katibayan (proof, support, strength), katibay-
tibayan (superior strength); and the adjectives matibay (strong, durable, lasting), napakatibay (very
strong), kasintibay or magkasintibay (as strong as, or of equal strength). The phrase "Ang Tibay" is
an exclamation denoting administration of strength or durability. For instance, one who tries hard but
fails to break an object exclaims, "Ang tibay!" (How strong!") It may also be used in a sentence thus,
"Ang tibay ng sapatos mo!" (How durable your shoes are!") The phrase "ang tibay" is never used
adjectively to define or describe an object. One does not say, "ang tibay sapatos" or "sapatos ang
tibay" is never used adjectively to define or describe an object. One does not say, "ang tibay sapatos"
or "sapatos ang tibay" to mean "durable shoes," but "matibay na sapatos" or "sapatos na matibay."

From all of this we deduce that "Ang Tibay" is not a descriptive term within the meaning of the Trade-
Mark Law but rather a fanciful or coined phrase which may properly and legally be appropriated as a
trade-mark or trade-name. In this connection we do not fail to note that when the petitioner herself
took the trouble and expense of securing the registration of these same words as a trademark of her
products she or her attorney as well as the Director of Commerce was undoubtedly convinced that
said words (Ang Tibay) were not a descriptive term and hence could be legally used and validly
registered as a trade-mark. It seems stultifying and puerile for her now to contend otherwise,
suggestive of the story of sour grapes. Counsel for the petitioner says that the function of a trade-
mark is to point distinctively, either by its own meaning or by association, to the origin or ownership of
the wares to which it is applied. That is correct, and we find that "Ang Tibay," as used by the
respondent to designate his wares, had exactly performed that function for twenty-two years before
the petitioner adopted it as a trade-mark in her own business. Ang Tibay shoes and slippers are, by
association, known throughout the Philippines as products of the Ang Tibay factory owned and
operated by the respondent Toribio Teodoro.

Second. In her second assignment of error petitioner contends that the Court of Appeals erred in
holding that the words "Ang Tibay" had acquired a secondary meaning. In view of the conclusion we
have reached upon the first assignment of error, it is unnecessary to apply here the doctrine of
"secondary meaning" in trade-mark parlance. This doctrine is to the effect that a word or phrase
originally incapable of exclusive appropriation with reference to an article of the market, because
geographically or otherwise descriptive, might nevertheless have been used so long and so
exclusively by one producer with reference to his article that, in that trade and to that branch of the
purchasing public, the word or phrase has come to mean that the article was his product. (G. & C.
Merriam Co. vs. Salfield, 198 F., 369, 373.) We have said that the phrase "Ang Tibay," being neither
geographic nor descriptive, was originally capable of exclusive appropriation as a trade-mark. But
were it not so, the application of the doctrine of secondary meaning made by the Court of Appeals
could nevertheless be fully sustained because, in any event, by respondent's long and exclusive use
of said phrase with reference to his products and his business, it has acquired a proprietary
connotation. (Landers, Frary, and Clark vs. Universal Cooler Corporation, 85 F. [2d], 46.)

Third. Petitioner's third assignment of error is, that the Court of Appeals erred in holding that pants
and shirts are goods similar to shoes and slippers within the meaning of sections 3 and 7 of Act No.
666. She also contends under her fourth assignment of error (which we deem convenient to pass
upon together with the third) that there can neither be infringement of trade-mark under section 3 nor
unfair competition under section 7 through her use of the words "Ang Tibay" in connection with pants
and shirts, because those articles do not belong to the same class of merchandise as shoes and
slippers.
The question raised by petitioner involve the scope and application of sections 3,7, 11, 13, and 20 of
the Trade-Mark Law (Act No. 666.) Section 3 provides that "any person entitled to the exclusive use
of a trade-mark to designate the origin or ownership of goods he has made or deals in, may recover
damages in a civil actions from any person who has sold goods of a similar kind, bearing such trade-
mark . . . The complaining party . . . may have a preliminary injunction, . . . and such injunction upon
final hearing, if the complainant's property in the trade-mark and the defendant's violation thereof
shall be fully established, shall be made perpetual, and this injunction shall be part of the judgment for
damages to be rendered in the same cause." Section 7 provides that any person who, in selling his
goods, shall give them the general appearance of the goods of another either in the wrapping of the
packages, or in the devices or words thereon, or in any other feature of their appearance, which
would be likely to influence purchasers to believe that the goods offered are those of the complainant,
shall be guilty of unfair competition, and shall be liable to an action for damages and to an injunction,
as in the cases of trade-mark infringement under section 3. Section 11 requires the applicant for
registration of a trade-mark to state, among others, "the general class of merchandise to which the
trade-mark claimed has been appropriated." Section 13 provides that no alleged trade-mark or trade
name shall be registered which is identical with a registered or known trade-mark owned by another
and appropriate to the same class of merchandise, or which to nearly resembles another person's
lawful trade-mark or trade-name as to be likely to cause confusion or mistake in the mind of the
public, or to deceive purchasers. And section 2 authorizes the Director of Commerce to
establish classes of merchandise for the purpose of the registration of trade-marks and to determine
the particular description of articles included in each class; it also provides that "an application for
registration of a trade-mark shall be registered only for one class of articles and only for the particular
description of articles mentioned in said application."

We have underlined the key words used in the statute: "goods of a similar kin," "general class of
merchandise," "same class of merchandise," "classes of merchandise," and "class of articles,"
because it is upon their implications that the result of the case hinges. These phrases, which refer to
the same thing, have the same meaning as the phrase "merchandise of the same descriptive
properties" used in the statutes and jurisprudence of other jurisdictions.

The burden of petitioner's argument is that under sections 11 and 20 the registration by respondent of
the trade-mark "Ang Tibay" for shoes and slippers is no safe-guard against its being used by
petitioner for pants and shirts because the latter do not belong to the same class of merchandise or
articles as the former; that she cannot be held guilty of infringement of trade-mark under section 3
because respondent's mark is not a valid trade-mark, nor has it acquired a secondary meaning; that
pants and shirts do not possess the same descriptive properties as shoes and slippers; that neither
can she be held guilty of unfair competition under section 7 because the use by her of the trade-mark
"Ang Tibay" upon pants and shirts is not likely to mislead the general public as to their origin or
ownership; and that there is now showing that she in unfairly or fraudulently using that mark "Ang
Tibay" against the respondent. If we were interpreting the statute for the first time and in the first
decade of the twentieth century, when it was enacted, and were to construe it strictly and literally, we
might uphold petitioner's contentions. But law and jurisprudence must keep abreast with the progress
of mankind, and the courts must breathe life into the statutes if they are to serve their purpose. Our
Trade-mark Law, enacted nearly forty years ago, has grown in its implications and practical
application, like a constitution, in virtue of the life continually breathed into it. It is not of merely local
application; it has its counterpart in other jurisdictions of the civilized world from whose jurisprudence
it has also received vitalizing nourishment. We have to apply this law as it has grown and not as it
was born. Its growth or development abreast with that of sister statutes and jurisprudence in other
jurisdictions is reflected in the following observation of a well-known author:

This fundamental change in attitude first manifested itself in the year 1915-1917. Until about
then, the courts had proceeded on the theory that the same trade-mark, used on un-like
goods, could not cause confusion in trade and that, therefore, there could be no objection to
the use and registration of a well-known mark by a third party for a different class of goods.
Since 1916 however, a growing sentiment began to arise that in the selection of a famous
mark by a third party, there was generally the hidden intention to "have a free ride" on the
trade-mark owner's reputation and good will. (Derenberg, Trade-Mark Protection & Unfair
Trading, 1936 edition, p. 409.)

In the present state of development of the law on Trade-Marks, Unfair Competition, and Unfair
Trading, the test employed by the courts to determine whether noncompeting goods are or are not of
the same class is confusion as to the origin of the goods of the second user. Although two
noncompeting articles may be classified under two different classes by the Patent Office because
they are deemed not to possess the same descriptive properties, they would, nevertheless, be held
by the courts to belong to the same class if the simultaneous use on them of identical or closely
similar trade-marks would be likely to cause confusion as to the origin, or personal source, of the
second user's goods. They would be considered as not falling under the same class only if they are
so dissimilar or so foreign to each other as to make it unlikely that the purchaser would think the first
user made the second user's goods.

Such construction of the law is induced by cogent reasons of equity and fair dealing. The courts have
come to realize that there can be unfair competition or unfair trading even if the goods are non-
competing, and that such unfair trading can cause injury or damage to the first user of a given trade-
mark, first, by prevention of the natural expansion of his business and, second, by having his
business reputation confused with and put at the mercy of the second user. Then noncompetitive
products are sold under the same mark, the gradual whittling away or dispersion of the identity and
hold upon the public mind of the mark created by its first user, inevitably results. The original owner is
entitled to the preservation of the valuable link between him and the public that has been created by
his ingenuity and the merit of his wares or services. Experience has demonstrated that when a well-
known trade-mark is adopted by another even for a totally different class of goods, it is done to get
the benefit of the reputation and advertisements of the originator of said mark, to convey to the public
a false impression of some supposed connection between the manufacturer of the article sold under
the original mark and the new articles being tendered to the public under the same or similar mark. As
trade has developed and commercial changes have come about, the law of unfair competition has
expanded to keep pace with the times and the element of strict competition in itself has ceased to be
the determining factor. The owner of a trade-mark or trade-name has a property right in which he is
entitled to protection, since there is damage to him from confusion of reputation or goodwill in the
mind of the public as well as from confusion of goods. The modern trend is to give emphasis to the
unfairness of the acts and to classify and treat the issue as a fraud.

A few of the numerous cases in which the foregoing doctrines have been laid down in one form or
another will now be cited: (1) In Teodoro Kalaw Ng Khe vs. Level Brothers Company (G.R. No.
46817), decided by this Court on April 18, 1941, the respondent company (plaintiff below) was
granted injunctive relief against the use by the petitioner of the trade-mark "Lux" and "Lifebuoy" for
hair pomade, they having been originally used by the respondent for soap; The Court held in effect
that although said articles are noncompetitive, they are similar or belong to the same class. (2)
In Lincoln Motor Co. vs. Lincoln Automobile Co. (44 F. [2d], 812), the manufacturer of the well-known
Lincoln automobile was granted injunctive relief against the use of the word "Lincoln" by another
company as part of its firm name. (3) The case of Aunt Jemima Mills Co. vs. Rigney & Co. (247 F.,
407), involved the trade-mark "Aunt Jemima," originally used on flour, which the defendant attempted
to use on syrup, and there the court held that the goods, though different, are so related as to fall
within the mischief which equity should prevent. (4) In Tiffany & Co., vs. Tiffany Productions, Inc. (264
N.Y.S., 459; 23 Trade-mark Reporter, 183), the plaintiff, a jewelry concern, was granted injunctive
relief against the defendant, a manufacturer of motion pictures, from using the name "Tiffany." Other
famous cases cited on the margin, wherein the courts granted injunctive relief, involved the following
trade-marks or trade-names: "Kodak," for cameras and photographic supplies, against its use for
bicycles. 4 "Penslar," for medicines and toilet articles, against its use for cigars; 5 "Rolls-Royce," for
automobiles. against its use for radio tubes; 6 "Vogue," as the name of a magazine, against its use for
hats; 7 "Kotex," for sanitary napkins, against the use of "Rotex" for vaginal syringes; 8 "Sun-Maid," for
raisins, against its use for flour; 9 "Yale," for locks and keys, against its use for electric
flashlights; 10 and "Waterman," for fountain pens, against its use for razor blades. 11lawphil.net

Against this array of famous cases, the industry of counsel for the petitioner has enabled him to cite
on this point only the following cases: (1) Mohawk Milk Products vs. General Distilleries
Corporation (95 F. [2d], 334), wherein the court held that gin and canned milk and cream do not
belong to the same class; (2) Fawcett Publications, Inc. vs. Popular Mechanics Co. (80 F. [2d], 194),
wherein the court held that the words "Popular Mechanics" used as the title of a magazine and duly
registered as a trade-mark were not infringed by defendant's use of the words "Modern Mechanics
and Inventions" on a competitive magazine, because the word "mechanics" is merely a descriptive
name; and (3) Oxford Book Co. vs. College Entrance Book Co. (98 F. [2d], 688), wherein the plaintiff
unsuccessfully attempted to enjoin the defendant from using the word "Visualized" in connection with
history books, the court holding that said word is merely descriptive. These cases cites and relied
upon by petitioner are obviously of no decisive application to the case at bar.
We think reasonable men may not disagree that shoes and shirts are not as unrelated as fountain
pens and razor blades, for instance. The mere relation or association of the articles is not controlling.
As may readily be noted from what we have heretofore said, the proprietary connotation that a trade-
mark or trade-name has acquired is of more paramount consideration. The Court of Appeals found in
this case that by uninterrupted and exclusive use since 1910 of respondent's registered trade-mark
on slippers and shoes manufactured by him, it has come to indicate the origin and ownership of said
goods. It is certainly not farfetched to surmise that the selection by petitioner of the same trade-mark
for pants and shirts was motivated by a desire to get a free ride on the reputation and selling power it
has acquired at the hands of the respondent. As observed in another case, 12 the field from which a
person may select a trade-mark is practically unlimited, and hence there is no excuse for impinging
upon or even closely approaching the mark of a business rival. In the unlimited field of choice, what
could have been petitioner's purpose in selecting "Ang Tibay" if not for its fame?

Lastly, in her fifth assignment of error petitioner seems to make a frantic effort to retain the use of the
mark "Ang Tibay." Her counsel suggests that instead of enjoining her from using it, she may be
required to state in her labels affixed to her products the inscription: "Not manufactured by Toribio
Teodoro." We think such practice would be unethical and unworthy of a reputable businessman. To
the suggestion of petitioner, respondent may say, not without justice though with a tinge of bitterness:
"Why offer a perpetual apology or explanation as to the origin of your products in order to use my
trade-mark instead of creating one of your own?" On our part may we add, without meaning to be
harsh, that a self-respecting person does not remain in the shelter of another but builds one of his
own.

The judgment of the Court of Appeals is affirmed, with costs against the petitioner in the three
instances. So ordered.

Yulo, C.J., Moran, Paras and Bocobo, JJ., concur.

G.R. No. 209843

TAIWAN KOLIN CORPORATION, LTD., Petitioner,

vs.
KOLIN ELECTRONICS CO., INC., Respondent.

DECISION

VELASCO, JR., J.:

Nature of the Case

Before the Court is a petition for review under Rule 45 of the Rules of Court interposed by petitioner
Taiwan Kolin Corporation, Ltd. (Taiwan Kolin), assailing the April 30, 2013 Decision 1 of the Court of
Appeals (CA) in CA-G.R. SP No. 122565 and its subsequent November 6, 2013 Resolution. 2 The
assailed issuances effectively denied petitioner's trademark application for the use of "KOLIN" on its
television and DVD players.

The Facts

On February 29, 1996, Taiwan Kolin filed with the Intellectual Property Office (IPO), then Bureau of
Patents, Trademarks, and Technology Transfer, a trademark application, docketed as Application No.
4-1996-106310, for the use of "KOLIN" on a combination of goods, including colored televisions,
refrigerators, window-type and split-type air conditioners, electric fans and water dispensers. Said
goods allegedly fall under Classes 9, 11, and 21 of the Nice Classification (NCL).

Application No. 4-1996-106310 would eventually be considered abandoned for Taiwan Kolin’s failure
to respond to IPO’s Paper No. 5 requiring it to elect one class of good for its coverage. However, the
same application was subsequently revived through Application Serial No. 4-2002-011002,3 with
petitioner electing Class 9 as the subject of its application, particularly: television sets, cassette
recorder, VCD Amplifiers, camcorders and other audio/video electronic equipment, flat iron, vacuum
cleaners, cordless handsets, videophones, facsimile machines, teleprinters, cellular phones and
automatic goods vending machine. The application would in time be duly published. 4

On July 13, 2006, respondent Kolin Electronics Co., Inc. (Kolin Electronics) opposed petitioner’s
revived application, docketed as Inter Partes Case No. 14-2006-00096. As argued, the mark Taiwan
Kolin seeks to register is identical, if not confusingly similar, with its "KOLIN" mark registered on
November 23, 2003, covering the following products under Class 9 of the NCL: automatic voltage
regulator, converter, recharger, stereo booster, AC-DC regulated power supply, step-down
transformer, and PA amplified AC-DC.5

To digress a bit, Kolin Electronics’ "KOLIN" registration was, as it turns out, the subject of a prior legal
dispute between the parties in Inter Partes Case No. 14-1998-00050 beforethe IPO. In the said case,
Kolin Electronics’ own application was opposed by Taiwan Kolin, being, as Taiwan Kolin claimed, the
prior registrant and user of the "KOLIN" trademark, having registered the same in Taipei, Taiwan on
December 1, 1988. The Bureau of Legal Affairs of the IPO (BLA-IPO), however, did not accord
priority right to Taiwan Kolin’s Taipei registration absent evidence to prove that it has already used
the said mark in the Philippines as early as 1988. On appeal, the IPO Director General affirmed the
BLA-IPO’s Decision. Taiwan Kolin elevated the case to the CA, but without injunctive relief, Kolin
Electronics was able to register the "KOLIN" trademark on November 23, 2003for its
products.6 Subsequently, the CA, on July 31, 2006, affirmed7 the Decision of the Director General.

In answer to respondent’s opposition in Inter Partes Case No. 14-2006-00096, petitioner argued that
it should be accorded the benefits of a foreign-registered mark under Secs. 3 and 131.1 of Republic
Act No. 8293, otherwise known as the Intellectual Property Code of the Philippines (IP Code); 8 that it
has already registered the "KOLIN" mark in the People’s Republic of China, Malaysia and Vietnam,
all of which are parties to the Paris Convention for the Protection of Industrial Property (Paris
Convention) and the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS);
and that benefits accorded to a well-known mark should be accorded to petitioner.9

Ruling of the BLA-IPO

By Decision10 dated August 16, 2007, the BLA-IPO denied petitioner’s application disposing as
follows:

In view of all the foregoing, the instant Opposition is as, it is hereby SUSTAINED. Accordingly,
application bearing Serial No. 4-1996-106310 for the mark "KOLIN" filed in the name of TAIWAN
KOLIN., LTD. on February 29, 1996 for goods falling under Class 09 of the International Classification
of Goods such as cassette recorder, VCD, woofer, amplifiers, camcorders and other audio/video
electronic equipment, flat iron, vacuum cleaners, cordless handsets, videophones, facsimile
machines, teleprinters, cellular phones, automatic goods vending machines and other electronic
equipment is hereby REJECTED.

Let the file wrapper of "KOLIN", subject of this case be forwarded to the Bureau of Trademarks (BOT)
for appropriate action in accordance with this Decision.

SO ORDERED.

Citing Sec. 123(d) of the IP Code,11 the BLA-IPO held that a mark cannot be registered if it is identical
with a registered mark belonging to a different proprietor in respect of the same or closely-related
goods. Accordingly, respondent, as the registered owner of the mark "KOLIN" for goods falling under
Class 9 of the NCL, should then be protected against anyone who impinges on its right, including
petitioner who seeks to register an identical mark to be used on goods also belonging to Class 9 of
the NCL.12 The BLA-IPO also noted that there was proof of actual confusion in the form of consumers
writing numerous e-mails to respondent asking for information, service, and complaints about
petitioner’s products.13

Petitioner moved for reconsideration but the same was denied on January 26, 2009 for lack of
merit.14 Thus, petitioner appealed the above Decision to the Office of the Director General of the IPO.

Ruling of the IPO Director General

On November 23, 2011, the IPO Director General rendered a Decision 15 reversing that of the BLA-
IPO in the following wise:

Wherefore, premises considered, the appeal is hereby GRANTED. The Appellant’s Trademark
Application No. 4-1996-106310 is hereby GIVEN DUE COURSE subject to the use limitation or
restriction for the goods "television and DVD player". Let a copy of this Decision as well as the
trademark application and records be furnished and returned to the Director of the Bureau of Legal
Affairs for appropriate action. Further, let the Director of the Bureau of Trademarks and the library of
the Documentation, Information and Technology Transfer Bureau be furnished a copy of this Decision
for information, guidance, and records purposes.

SO ORDERED.

In so ruling, the IPO Director General ratiocinated that product classification alone cannot serve as
the decisive factor in the resolution of whether or not the goods are related and that emphasis should
be on the similarity of the products involved and not on the arbitrary classification or general
description of their properties or characteristics. As held, 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.16

Aggrieved, respondent elevated the case to the CA.

Ruling of the Court of Appeals

In its assailed Decision, the CA found for Kolin Electronics, on the strength of the following premises:
(a) the mark sought to be registered by Taiwan Kolin is confusingly similar to the one already
registered in favor of Kolin Electronics; (b) there are no other designs, special shape or easily
identifiable earmarks that would differentiate the products of both competing companies; 17 and (c) the
intertwined use of television sets with amplifier, booster and voltage regulator bolstered the fact that
televisions can be considered as within the normal expansion of Kolin Electronics,18 and is thereby
deemed covered by its trademark as explicitly protected under Sec. 138 19 of the IP
Code.20 Resultantly, the CA granted respondent’s appeal thusly:
WHEREFORE, the appeal is GRANTED. The November 23, 2011 Decision of the Director General of
the Intellectual Property Office in Inter Partes Case No. 14-2006-0096 is REVERSED and SET
ASIDE. The September 17, 2007 Decision of the Bureau of Legal Affairs of the same office is
REINSTATED.

SO ORDERED.

Petitioner moved for reconsideration only to be denied by the CA through its equally assailed
November 6, 2013 Resolution. Hence, the instant recourse.

The Issue

The primordial issue to be resolved boils down to whether or not petitioner is entitled to its trademark
registration of "KOLIN" over its specific goods of television sets and DVD players. Petitioner
postulates, in the main, that its goods are not closely related to those of Kolin Electronics. On the
other hand, respondent hinges its case on the CA’s findings that its and petitioner’s products are
closely-related. Thus, granting petitioner’s application for trademark registration, according to
respondent, would cause confusion as to the public.

The Court's Ruling

The petition is impressed with merit.

Identical marks may be registered for

products from the same classification

To bolster its opposition against petitioner’s application to register trademark "KOLIN," respondent
maintains that the element of mark identity argues against approval of such application, quoting the
BLA IPO’s ruling in this regard:21

Indubitably, Respondent-Applicant’s [herein petitioner] mark is identical to the registered mark of

herein Opposer [herein respondent] and the identical mark is used on goods belonging to Class 9 to
which Opposer’s goods are also classified. On this point alone, Respondent-Applicant’s application
should already be denied.

The argument is specious.

The parties admit that their respective sets of goods belong to Class 9 of the NCL, which includes the
following:22

Class 9

Scientific, nautical, surveying, photographic, cinematographic, optical, weighing, measuring,

signalling, checking (supervision), life-saving and teaching apparatus and instruments; apparatus and
instruments for conducting, switching, transforming, accumulating, regulating or controlling electricity;
apparatus for recording, transmission or reproduction of sound or images; magneticdata carriers,
recording discs; compact discs, DVDs and other digital recording media; mechanisms for coin-
operated apparatus; cash registers, calculating machines, data processing equipment, computers;
computer software; fire-extinguishing apparatus.

But mere uniformity in categorization, by itself, does not automatically preclude the registration of
what appears to be an identical mark, if that be the case. In fact, this Court, in a long line of cases,
has held that such circumstance does not necessarily result in any trademark infringement. The
survey of jurisprudence cited in Mighty Corporation v. E. & J Gallo Winery23 is enlightening on this
point:

(a) in Acoje Mining Co., Inc. vs. Director of Patents,24 we ordered the approval of Acoje
Mining’s 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, 25 we upheld the Patent
Director’s registration of the same trademark CAMIA for Ng Sam’s ham under Class 47,
despite Philippine Refining Company’s 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, 26 we
dismissed Hickok’s petition to cancel private respondent’s HICKOK trademark registration for
its Marikina shoes as against petitioner’s earlier registration of the same trademark for
handkerchiefs, briefs, belts and wallets.

Verily, whether or not the products covered by the trademark sought to be registered by Taiwan Kolin,
on the one hand, and those covered by the prior issued certificate of registration in favor of Kolin
Electronics, on the other, fall under the same categories in the NCL is not the sole and decisive factor
in determining a possible violation of Kolin Electronics’ intellectual property right should petitioner’s
application be granted. It is hornbook doctrine, as held in the above-cited cases, that emphasis
should be on the similarity of the products involved and not on the arbitrary classification or general
description of their properties or characteristics. The mere fact that one person has adopted and used
a trademark on his goods would not, without more, prevent the adoption and use of the same
trademark by others on unrelated articles of a different kind.27 The CA erred in denying petitioner’s
registration application

Respondent next parlays the idea of relation between products as a factor militating against
petitioner’s application. Citing Esso Standard Eastern, Inc. v. Court of Appeals, 28 respondent argues
that the goods covered by petitioner’s application and those covered by its registration are actually
related belonging as they do to the same class or have the same physical characteristics with
reference to their form, composition, texture, or quality, or if they serve the same purpose.
Respondent likewise draws parallelisms between the present controversy and the following cases: 29

(a) In Arce & Sons, Inc. vs. Selecta Biscuit Company,30 biscuits were held related to milk
because they were both food products;

(b) In Chua Che vs. Phil. Patents Office,31 soap and perfume, lipstick and nail polish are held
to be similarly related because they are common household items;

(c) In Ang vs. Teodoro,32 the trademark "Ang Tibay" for shoes and slippers was disallowed to
be used for shirts and pants because they belong to the same general class of goods; and

(d) In Khe vs. Lever Bros. Co.,33 soap and pomade, although noncompetitive, were held to be
similar or belong to the same class, since both are toilet articles.

Respondent avers that Kolin Electronics’ and Taiwan Kolin’s products are closely-related not only
because both fall under Class 9 of the NCL, but mainly because they both relate to electronic
products, instruments, apparatus, or appliances.34 Pushing the point, respondent would argue that
Taiwan Kolin and Kolin Electronics’ goods are inherently similar in that they are all plugged into
electric sockets and perform a useful function.35 Furthermore, respondent echoes the appellate
court’s ratiocination in denying petitioner’s application, viz:36

Significantly, Kolin Electronics’ goods (automatic voltage regulator; converter; recharger; stereo
booster; AC-DC regulated power supply; step-down transformer; and PA amplified AC-DC) and
Taiwan Kolin’s television sets and DVD players are both classified under class 9 of the NICE
agreement. At first glance, it is also evident that all these goods are generally described as electrical
devices. x x x [T]he goods of both Kolin Electronics and Taiwan Kolin will inevitably be introduced to
the public as "KOLIN" products and will be offered for sale in the same channels of trade. Contrary to
Taiwan Kolin’s claim, power supply as well as audio and stereo equipment like booster and amplifier
are not only sold in hardware and electrical shops. These products are commonly found in appliance
stores alongside television sets and DVD players. With the present trend in today’s entertainment of
having a home theater system, it is not unlikely to see a stereo booster, amplifier and automatic
voltage regulator displayed together with the television sets and DVD players. With the intertwined
use of these products bearing the identical "KOLIN" mark, the ordinary intelligent consumer would
likely assume that they are produced by the same manufacturer.
In sum, the intertwined use, the same classification of the products as class 9 under the NICE
Agreement, and the fact that they generally flow through the same channel of trade clearly establish
that Taiwan Kolin’s television sets and DVD players are closely related to Kolin Electronics’ goods. As
correctly pointed out by the BLA-IPO, allowing Taiwan Kolin’s registration would only confuse
consumers as to the origin of the products they intend to purchase. Accordingly, protection should be
afforded to Kolin Electronics, as the registered owner of the "KOLIN" trademark.37(emphasis added)

The CA’s approach and reasoning to arrive at the assailed holding that the approval of petitioner’s
application is likely to cause confusion or deceive fail to persuade.

a. The products covered by

petitioner’s application and
respondent’s registration are
unrelated

A certificate of trademark registration confers upon the trademark owner the exclusive right to sue
those who have adopted a similar mark not only in connection with the goods or services specified in
the certificate, but also with those that are related thereto. 38

In resolving one of the pivotal issues in this case––whether or not the products of the parties involved
are related––the doctrine in Mighty Corporation is authoritative. There, the Court held that the goods
should be tested against several factors before arriving at a sound conclusion on the question of
relatedness. Among these are:

(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;

(d) the nature and cost of the articles;

(e) the descriptive properties, physical attributes or essential characteristics with reference to
their form, composition, texture or quality;

(f) the purpose of the goods;

(g) whether the article is bought for immediate consumption, that is, day-to-day household
items;

(h) the fields of manufacture;

(i) the conditions under which the article is usually purchased; and

(j) the channels of trade through which the goods flow, how they are distributed, marketed,
displayed and sold.39

As mentioned, the classification of the products under the NCL is merely part and parcel of the factors
to be considered in ascertaining whether the goods are related. It is not sufficient to state that the
goods involved herein are electronic products under Class 9 in order to establish relatedness
between the goods, for this only accounts for one of many considerations enumerated in Mighty
Corporation. In this case, credence is accorded to petitioner’s assertions that: 40

a. Taiwan Kolin’s goods are classified as home appliances as opposed to Kolin Electronics’
goods which are power supply and audio equipment accessories;

b. Taiwan Kolin’s television sets and DVD players perform distinct function and purpose from
Kolin Electronics’ power supply and audio equipment; and
 c. Taiwan Kolin sells and distributes its various home appliance products on wholesale and to
accredited dealers, whereas Kolin Electronics’ goods are sold and flow through electrical and
hardware stores.

Clearly then, it was erroneous for respondent to assume over the CA to conclude that all electronic
products are related and that the coverage of one electronic product necessarily precludes the
registration of a similar mark over another. In this digital age wherein electronic products have not
only diversified by leaps and bounds, and are geared towards interoperability, it is difficult to assert
readily, as respondent simplistically did, that all devices that require plugging into sockets are
necessarily related goods.

It bears to stress at this point that the list of products included in Class 941 can be sub-categorized
into five (5) classifications, namely: (1) apparatus and instruments for scientific or research purposes,
(2) information technology and audiovisual equipment, (3) apparatus and devices for controlling the
distribution and use of electricity, (4) optical apparatus and instruments, and (5) safety
equipment.42 From this sub-classification, it becomes apparent that petitioner’s products, i.e.,
televisions and DVD players, belong to audio visiual equipment, while that of respondent, consisting
of automatic voltage regulator, converter, recharger, stereo booster, AC-DC regulated power supply,
step-down transformer, and PA amplified AC-DC, generally fall under devices for controlling the
distribution and use of electricity.

b. The ordinarily intelligent

buyer is not likely to be
confused

In trademark cases, particularly in ascertaining whether one trademark is confusingly similar to

another, no rigid set rules can plausible be formulated. Each case must be decided on its merits, with
due regard to the goods or services involved, the usual purchaser’s character and attitude, among
others. In such cases, even more than in any other litigation, precedent must be studied in the light of
the facts of a particular case. That is the reason why in trademark cases, jurisprudential precedents
should be applied only to a case if they are specifically in point. 43 For a clearer perspective and as
matter of record, the following image on the left44 is the trademark applied for by petitioner, while the
image juxtaposed to its right45 is the trademark registered by respondent:

While both competing marks refer to the word "KOLIN" written in upper case letters and in bold font,
the Court at once notes the distinct visual and aural differences between them: Kolin Electronics’
mark is italicized and colored black while that of Taiwan Kolin is white in pantone red color
background. The differing features between the two, though they may appear minimal, are sufficient
to distinguish one brand from the other.

It cannot be stressed enough that the products involved in the case at bar are, generally speaking,
various kinds of electronic products. These are not ordinary consumable household items, like
catsup, soy sauce or soap which are of minimal cost.46 The products of the contending parties are
relatively luxury items not easily considered affordable. Accordingly, the casual buyer is predisposed
to be more cautious and discriminating in and would prefer to mull over his purchase. Confusion and
deception, then, is less likely.47 As further elucidated in Del Monte Corporation v. Court of Appeals:48

x x x Among these, what essentially determines the attitudes of the purchaser, specifically his
inclination to be cautious, is the cost of the goods. To be sure, a person who buys a box of candies
will not exercise as much care as one who buys an expensive watch. As a general rule, an ordinary
buyer does not exercise as much prudence in buying an article for which he pays a few centavos as
he does in purchasing a more valuable thing. Expensive and valuable items are normally bought only
after deliberate, comparative and analytical investigation. But mass products, low priced articles in
wide use, and matters of everyday purchase requiring frequent replacement are bought by the casual
consumer without great care x x x. (emphasis added) Respondent has made much reliance on Arce
& Sons, Chua Che, Ang, and Khe, oblivious that they involved common household items––i.e.,
biscuits and milk, cosmetics, clothes, and toilet articles, respectively–– whereas the extant case
involves luxury items not regularly and inexpensively purchased by the consuming public. In accord
with common empirical experience, the useful lives of televisions and DVD players last for about five
(5) years, minimum, making replacement purchases very infrequent. The same goes true with
converters and regulators that are seldom replaced despite the acquisition of new equipment to be
plugged onto it. In addition, the amount the buyer would be parting with cannot be deemed minimal
considering that the price of televisions or DVD players can exceed today’s monthly minimum wage.
In light of these circumstances, it is then expected that the ordinary intelligent buyer would be more
discerning when it comes to deciding which electronic product they are going to purchase, and it is
this standard which this Court applies herein in determining the likelihood of confusion should
petitioner’s application be granted.

To be sure, the extant case is reminiscent of Emerald Garment Manufacturing Corporation v. Court of
Appeals,49wherein the opposing trademarks are that of Emerald Garment Manufacturing
Corporation’s "Stylistic Mr. Lee" and H.D. Lee’s "LEE." In the said case, the appellate court affirmed
the decision of the Director of Patents denying Emerald Garment’s application for registration due to
confusing similarity with H.D. Lee’s trademark. This Court, however, was of a different beat and ruled
that there is no confusing similarity between the marks, given that the products covered by the
trademark, i.e., jeans, were, at that time, considered pricey, typically purchased by intelligent buyers
familiar with the products and are more circumspect, and, therefore, would not easily be deceived. As
held:

Finally, in line with the foregoing discussions, more credit should be given to the "ordinary purchaser."
Cast in this particular controversy, the ordinary purchaser is not the "completely unwary consumer"
but is the "ordinarily intelligent buyer" considering the type of product involved.

The definition laid down in Dy Buncio v. Tan Tiao Bok 50 is better suited to the present case. There,
the "ordinary purchaser" was defined as one "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." 51 (emphasis
added)

Consistent with the above ruling, this Court finds that the differences between the two marks, subtle
as they may be, are sufficient to prevent any confusion that may ensue should petitioner’s trademark
application be granted. As held in Esso Standard Eastern, Inc.: 52

Respondent court correctly ruled that considering the general appearances of each mark as a whole,
the possibility of any confusion is unlikely. A comparison of the labels of the samples of the goods
submitted by the parties shows a great many differences on the trademarks used. As pointed out by
respondent court in its appealed decision, "(A) witness for the plaintiff, Mr. Buhay, admitted that the
color of the ‘ESSO’ used by the plaintiff for the oval design where the blue word ESSO is contained is
the distinct and unique kind of blue. In his answer to the trial court’s question, Mr. Buhay informed the
court that the plaintiff never used its trademark on any product where the combination of colors is
similar to the label of the Esso cigarettes," and "Another witness for the plaintiff, Mr. Tengco, testified
that generally, the plaintiff’s trademark comes all in either red, white, blue or any combination of the
three colors. It is to be pointed out that not even a shade of these colors appears on the trademark of
the appellant’s cigarette. The only color that the appellant uses in its trademark is green."

Even the lower court, which ruled initially for petitioner, found that a "noticeable difference between
the brand ESSO being used by the defendants and the trademark ESSO of the plaintiff is that the
former has a rectangular background, while in that of the plaintiff the word ESSO is enclosed in an
oval background."
All told, We are convinced that petitioner's trademark registration not only covers unrelated good, but
is also incapable of deceiving the ordinary intelligent buyer. The ordinary purchaser must be thought
of as having, and credited with, at least a modicum of intelligence to be able to see the differences
between the two trademarks in question.53

Questions of fact may still be entertained

On a final note, the policy according factual findings of courts a quo great respect, if not finality, is not
binding where they have overlooked, misapprehended, or misapplied any fact or circumstance of
weight and substances.54 So it must be here; the nature of the products involved materially affects the
outcome of the instant case. A reversal of the appellate Court's Decision is then in order.

WHEREFORE, in view of the foregoing, the petition is hereby GRANTED. The Decision and the
Resolution of the Court of Appeals in CA-G.R. SP No. 122565, dated April 30, 2013 and November 6,
2013, respectively, are hereby REVERSED and SET ASIDE. Accordingly, the Decision of the
Intellectual Property Office Director General in Inter Partes Case No. 14-2006-00096, dated
November 23, 2011, is hereby REINSTATED.

SO ORDERED.

[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 6 bis 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 wassubsequent to its registration in 1971 and to
Tobacco Industries commercial use of the GALLO cigarette trademark in 1973, we rule that, on this
account, respondents never enjoyed the exclusive right to use the GALLO wine trademark to the
prejudice of Tobacco Industries and its successors-in-interest, herein petitioners, either under the
Trademark Law or the Paris Convention.
Respondents GALLO trademark
registration is limited to
wines only

We also note that the GALLO trademark registration certificates in the Philippines and in other
countries expressly state that they cover wines only, without any evidence or indication that registrant
Gallo Winery expanded or intended to expand its business to cigarettes. [63]
Thus, by strict application of Section 20 of the Trademark Law, Gallo Winerys exclusive right to
use the GALLO trademark should be limited to wines, the only product indicated in its registration
certificates. This strict statutory limitation on the exclusive right to use trademarks was amply clarified
in our ruling in Faberge, Inc. vs. Intermediate Appellate Court:[64]

Having thus reviewed the laws applicable to the case before Us, it is not difficult to discern from the
foregoing statutory enactments that private respondent may be permitted to register the trademark
BRUTE for briefs produced by it notwithstanding petitioner's vehement protestations of unfair dealings
in marketing its own set of items which are limited to: after-shave lotion, shaving cream, deodorant,
talcum powder and toilet soap. Inasmuch as petitioner has not ventured in the production of
briefs, an item which is not listed in its certificate of registration, petitioner cannot and should
not be allowed to feign that private respondent had invaded petitioner's exclusive domain. To
be sure, it is significant that petitioner failed to annex in its Brief the so-called eloquent proof that
petitioner indeed intended to expand its mark BRUT to other goods (Page 27, Brief for the Petitioner;
page 202, Rollo). Even then, a mere application by petitioner in this aspect does not suffice and may
not vest an exclusive right in its favor that can ordinarily be protected by the Trademark Law. In
short, paraphrasing Section 20 of the Trademark Law as applied to the documentary evidence
adduced by petitioner, the certificate of registration issued by the Director of Patents can
confer upon petitioner the exclusive right to use its own symbol only to those goods specified
in the certificate, subject to any conditions and limitations stated therein. This basic point is perhaps
the unwritten rationale of Justice Escolin in Philippine Refining Co., Inc. vs. Ng Sam (115 SCRA
472 [1982]), when he stressed the principle enunciated by the United States Supreme Court
in American Foundries vs. Robertson (269 U.S. 372, 381, 70 L ed 317, 46 Sct. 160) that one who
has adopted and used a trademark on his goods does not prevent the adoption and use of the
same trademark by others for products which are of a different description. Verily, this Court
had the occasion to observe in the 1966 case of George W. Luft Co., Inc. vs. Ngo Guan (18 SCRA
944 [1966]) that no serious objection was posed by the petitioner therein since the applicant utilized
the emblem Tango for no other product than hair pomade in which petitioner does not deal.
This brings Us back to the incidental issue raised by petitioner which private respondent sought to
belie as regards petitioner's alleged expansion of its business. It may be recalled that petitioner
claimed that it has a pending application for registration of the emblem BRUT 33 for briefs (page 25,
Brief for the Petitioner; page 202, Rollo) to impress upon Us the Solomonic wisdom imparted by
Justice JBL Reyes in Sta. Ana vs. Maliwat (24 SCRA 1018 [1968]), to the effect that dissimilarity
of goods will not preclude relief if the junior user's goods are not remote from any other
product which the first user would be likely to make or sell (vide, at page 1025). Commenting on
the former provision of the Trademark Law now embodied substantially under Section 4(d) of
Republic Act No. 166, as amended, the erudite jurist opined that the law in point does not require that
the articles of manufacture of the previous user and late user of the mark should possess the same
descriptive properties or should fall into the same categories as to bar the latter from registering his
mark in the principal register. (supra at page 1026).

Yet, it is equally true that as aforesaid, the protective mantle of the Trademark Law extends
only to the goods used by the first user as specified in the certificate of registration following
the clear message conveyed by Section 20.

How do We now reconcile the apparent conflict between Section 4(d) which was relied upon
by Justice JBL Reyes in the Sta. Ana case and Section 20? It would seem that Section 4(d)
does not require that the goods manufactured by the second user be related to the goods
produced by the senior user while Section 20 limits the exclusive right of the senior user only
to those goods specified in the certificate of registration. But the rule has been laid down that the
clause which comes later shall be given paramount significance over an anterior proviso upon the
presumption that it expresses the latest and dominant purpose. (Graham Paper Co. vs. National
Newspapers Asso. (Mo. App.) 193 S.W. 1003; Barnett vs. Merchant's L. Ins. Co., 87 Okl. 42; State ex
nel Atty. Gen. vs. Toledo, 26 N.E., p. 1061; cited by Martin, Statutory Construction Sixth ed., 1980
Reprinted, p. 144). It ineluctably follows that Section 20 is controlling and, therefore, private
respondent can appropriate its symbol for the briefs it manufactures because as aptly
remarked by Justice Sanchez in Sterling Products International Inc. vs. Farbenfabriken
Bayer (27 SCRA 1214 [1969]):

Really, if the certificate of registration were to be deemed as including goods not specified
therein, then a situation may arise whereby an applicant may be tempted to register a
trademark on any and all goods which his mind may conceive even if he had never intended to
use the trademark for the said goods. We believe that such omnibus registration is not
contemplated by our Trademark Law. (1226).

NO LIKELIHOOD OF CONFUSION, MISTAKE

OR DECEIT AS TO THE IDENTITY OR SOURCE
OF PETITIONERS AND RESPONDENTS
GOODS OR BUSINESS

A crucial issue in any trademark infringement case is the likelihood of confusion, mistake or
deceit as to the identity, source or origin of the goods or identity of the business as a consequence of
using a certain mark. Likelihood of confusion is admittedly a relative term, to be determined rigidly
according to the particular (and sometimes peculiar) circumstances of each case. Thus, in trademark
cases, more than in other kinds of litigation, precedents must be studied in the light of each particular
case. [65]
There are two types of confusion in trademark infringement. The first is confusion of goods when
an otherwise prudent purchaser is induced to purchase one product in the belief that he is purchasing
another, in which case defendants goods are then bought as the plaintiffs and its poor quality reflects
badly on the plaintiffs reputation. The other is confusion of business wherein the goods of the parties
are different but the defendants product can reasonably (though mistakenly) be assumed to originate
from the plaintiff, thus deceiving the public into believing that there is some connection between the
plaintiff and defendant which, in fact, does not exist.[66]
In determining the likelihood of confusion, the Court must consider: [a] the resemblance between
the trademarks; [b] the similarity of the goods to which the trademarks are attached; [c] the likely
effect on the purchaser and [d] the registrants express or implied consent and other fair and equitable
considerations.
 Petitioners and respondents both use GALLO in the labels of their respective cigarette and wine
products. But, as held in the following cases, the use of an identical mark does not, by itself, lead to a
legal conclusion that there is trademark infringement:

(a) in Acoje Mining Co., Inc. vs. Director of Patent,[67] we ordered the approval of Acoje Minings
application for registration of the trademark LOTUS for its soy sauce even though
Philippine Refining Company had prior registration and use of such identical mark for its
edible oil which, like soy sauce, also belonged to Class 47;

(b) in Philippine Refining Co., Inc. vs. Ng Sam and Director of Patents,[68] we upheld the Patent
Directors registration of the same trademark CAMIA for Ng Sams ham under Class 47,
despite Philippine Refining Companys prior trademark registration and actual use of such
mark on its lard, butter, cooking oil (all of which belonged to Class 47), abrasive detergents,
polishing materials and soaps;

(c) in Hickok Manufacturing Co., Inc. vs. Court of Appeals and Santos Lim Bun Liong, [69] we
dismissed Hickoks petition to cancel private respondents HICKOK trademark registration
for its Marikina shoes as against petitioners earlier registration of the same trademark for
handkerchiefs, briefs, belts and wallets;

(d) in Shell Company of the Philippines vs. Court of Appeals,[70] in a minute resolution, we
dismissed the petition for review for lack of merit and affirmed the Patent Offices
registration of the trademark SHELL used in the cigarettes manufactured by respondent
Fortune Tobacco Corporation, notwithstanding Shell Companys opposition as the prior
registrant of the same trademark for its gasoline and other petroleum products;

(e) in Esso Standard Eastern, Inc. vs. Court of Appeals,[71] we dismissed ESSOs complaint for
trademark infringement against United Cigarette Corporation and allowed the latter to use
the trademark ESSO for its cigarettes, the same trademark used by ESSO for its petroleum
products, and

(f) in Canon Kabushiki Kaisha vs. Court of Appeals and NSR Rubber Corporation,[72] we affirmed
the rulings of the Patent Office and the CA that NSR Rubber Corporation could use the
trademark CANON for its sandals (Class 25) despite Canon Kabushiki Kaishas prior
registration and use of the same trademark for its paints, chemical products, toner and
dyestuff (Class 2).

Whether a trademark causes confusion and is likely to deceive the public hinges on colorable
imitation[73] which has been defined as such similarity in form, content, words, sound, meaning,
special arrangement or general appearance of the trademark or tradename in their overall
presentation or in their essential and substantive and distinctive parts as would likely mislead or
confuse persons in the ordinary course of purchasing the genuine article. [74]
Jurisprudence has developed two tests in determining similarity and likelihood of confusion in
trademark resemblance:[75]

(a) the Dominancy Test applied in Asia Brewery, Inc. vs. Court of Appeals[76] and other
cases,[77] and

(b) the Holistic or Totality Test used in Del Monte Corporation vs. Court of Appeals [78] and its
preceding cases.[79]

The Dominancy Test focuses on the similarity of the prevalent features of the competing
trademarks which might cause confusion or deception, and thus infringement. If the competing
trademark contains the main, essential or dominant features of another, and confusion or deception is
likely to result, infringement takes place. Duplication or imitation is not necessary; nor is it necessary
that the infringing label should suggest an effort to imitate. The question is whether the use of the
marks involved is likely to cause confusion or mistake in the mind of the public or deceive
purchasers.[80]
On the other hand, the Holistic Test requires that the entirety of the marks in question be
considered in resolving confusing similarity. Comparison of words is not the only determining
factor. The trademarks in their entirety as they appear in their respective labels or hang tags must
also be considered in relation to the goods to which they are attached. The discerning eye of the
observer must focus not only on the predominant words but also on the other features appearing in
both labels in order that he may draw his conclusion whether one is confusingly similar to the other. [81]
In comparing the resemblance or colorable imitation of marks, various factors have been
considered, such as the dominant color, style, size, form, meaning of letters, words, designs and
emblems used, the likelihood of deception of the mark or name's tendency to confuse [82] and the
commercial impression likely to be conveyed by the trademarks if used in conjunction with the
respective goods of the parties.[83]
Applying the Dominancy and Holistic Tests, we find that the dominant feature of the GALLO
cigarette trademark is the device of a large rooster facing left, outlined in black against a gold
background. The roosters color is either green or red green for GALLO menthols and red for GALLO
filters. Directly below the large rooster device is the word GALLO. The rooster device is given
prominence in the GALLO cigarette packs in terms of size and location on the labels.[84]
The GALLO mark appears to be a fanciful and arbitrary mark for the cigarettes as it has no
relation at all to the product but was chosen merely as a trademark due to the fondness for fighting
cocks of the son of petitioners president. Furthermore, petitioners adopted GALLO, the Spanish word
for rooster, as a cigarette trademark to appeal to one of their target markets,
the sabungeros (cockfight aficionados).[85]
Also, as admitted by respondents themselves,[86] on the side of the GALLO cigarette packs are
the words MADE BY MIGHTY CORPORATION, thus clearly informing the public as to the identity of
the manufacturer of the cigarettes.
On the other hand, GALLO Winerys wine and brandy labels are diverse. In many of them, the
labels are embellished with sketches of buildings and trees, vineyards or a bunch of grapes while in a
few, one or two small roosters facing right or facing each other (atop the EJG crest, surrounded by
leaves or ribbons), with additional designs in green, red and yellow colors, appear as minor features
thereof.[87] Directly below or above these sketches is the entire printed name of the founder-owners,
ERNEST & JULIO GALLO or just their surname GALLO, [88] which appears in different fonts, sizes,
styles and labels, unlike petitioners uniform casque-font bold-lettered GALLO mark.
Moreover, on the labels of Gallo Winerys wines are printed the words VINTED AND BOTTLED
BY ERNEST & JULIO GALLO, MODESTO, CALIFORNIA.[89]
The many different features like color schemes, art works and other markings of both products
drown out the similarity between them the use of the word GALLO ― a family surname for the Gallo
Winerys wines and a Spanish word for rooster for petitioners cigarettes.
WINES AND CIGARETTES ARE NOT
IDENTICAL, SIMILAR, COMPETING OR
RELATED GOODS

Confusion of goods is evident where the litigants are actually in competition; but confusion of
business may arise between non-competing interests as well.[90]
Thus, apart from the strict application of Section 20 of the Trademark Law and Article 6 bis of the
Paris Convention which proscribe trademark infringement not only of goods specified in the certificate
of registration but also of identical or similar goods, we have also uniformly recognized and applied
the modern concept of related goods.[91] Simply stated, when goods are so related that the public may
be, or is actually, deceived and misled that they come from the same maker or manufacturer,
trademark infringement occurs.[92]
Non-competing goods may be those which, though they are not in actual competition, are so
related to each other that it can reasonably be assumed that they originate from one manufacturer, in
which case, confusion of business can arise out of the use of similar marks. [93] They may also be
those which, being entirely unrelated, cannot be assumed to have a common source; hence, there is
no confusion of business, even though similar marks are used. [94]Thus, there is no trademark
infringement if the public does not expect the plaintiff to make or sell the same class of goods as
those made or sold by the defendant.[95]
In resolving whether goods are related,[96] several factors come into play:

(a) 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--visthe 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.
G.R. No. 97343 September 13, 1993

PASCUAL GODINES, petitioner,

vs.
THE HONORABLE COURT OF APPEALS, SPECIAL FOURTH DIVISION and SV-AGRO
ENTERPRISES, INC., respondents.

Jesus S. Anonat for petitioner.

Arturo M. Alinio for private respondent.

ROMERO, J.:

Through this petition for review in certiorari of a decision of the Court of Appeals affirming the
decision of the trial court, petitioner Pascual Godines seeks to reverse the adverse decision of the
Court a quo that he was liable for infringement of patent and unfair competition. The dispositive
portion of the assailed decision is hereby quoted to wit:

WHEREFORE, with the elimination of the award for attorney's fees, the judgment
appealed from is hereby AFFIRMED, with costs against appellant. 1

The patent involved in this case is Letters Patent No. UM-2236 issued by the Philippine Patent Office
to one Magdalena S. Villaruz on July 15, 1976. It covers a utility model for a hand tractor or power
tiller, the main components of which are the following: "(1) a vacuumatic house float; (2) a harrow with
adjustable operating handle; (3) a pair of paddy wheels; (4) a protective water covering for the engine
main drive; (5) a transmission case; (6) an operating handle; (7) an engine foundation on the top
midportion of the vacuumatic housing float to which the main engine drive is detachedly installed; (8)
a frontal frame extension above the quarter — circularly shaped water covering hold (sic) in place the
transmission case; (9) a V-belt connection to the engine main drive with transmission gear through
the pulley, and (10) an idler pulley installed on the engine foundation." 2 The patented hand tractor
works in the following manner: "the engine drives the transmission gear thru the V-belt, a driven
pulley and a transmission shaft. The engine drives the transmission gear by tensioning of the V-belt
which is controlled by the idler pulley. The V-belt drives the pulley attached to the transmission gear
which in turn drives the shaft where the paddy wheels are attached. The operator handles the hand
tractor through a handle which is inclined upwardly and supported by a pair of substanding pipes and
reinforced by a U-shaped G.I. pipe at the V-shaped end."3

The above mentioned patent was acquired by SV-Agro Industries Enterprises, Inc., herein private
respondent, from Magdalena Villaruz, its chairman and president, by virtue of a Deed of Assignment
executed by the latter in its favor. On October 31, 1979, SV-Agro Industries caused the publication of
the patent in Bulletin Today, a newspaper of general circulation.

In accordance with the patent, private respondent manufactured and sold the patented power tillers
with the patent imprinted on them. In 1979, SV-Agro Industries suffered a decline of more than 50%
in sales in its Molave, Zamboanga del Sur branch. Upon investigation, it discovered that power tillers
similar to those patented by private respondent were being manufactured and sold by petitioner
herein. Consequently, private respondent notified Pascual Godines about the existing patent and
demanded that the latter stop selling and manufacturing similar power tillers. Upon petitioner's failure
to comply with the demand, SV-Agro Industries filed before the Regional Trial Court a complaint for
infringement of patent and unfair competition.

After trial, the court held Pascual Godines liable for infringement of patent and unfair competition. The
dispositive portion of the decision reads as follows:

WHEREFORE, premises considered, JUDGMENT is hereby rendered in favor of the

plaintiff SV-Agro Industries Enterprises, Inc., and against defendant Pascual Godines:

1. Declaring the writ of preliminary injunction issued by this Court against defendant as
permanent;

2. Ordering defendant Pascual Godines to pay plaintiff the sum of Fifty Thousand Pesos
(P50,000.00) as damages to its business reputation and goodwill, plus the further sum
 of Eighty Thousand Pesos (P80,000.00) for unrealized profits during the period
defendant was manufacturing and selling copied or imitation floating power tiller;

3. Ordering the defendant to pay the plaintiff, the further sum of Eight Thousand Pesos
(P8,000.00) as reimbursement of attorney's fees and other expenses of litigation; and to
pay the costs of the suit.

SO ORDERED.4

The decision was affirmed by the appellate court.

Thereafter, this petition was filed. Petitioner maintains the defenses which he raised before the trial
and appellate courts, to wit: that he was not engaged in the manufacture and sale of the power tillers
as he made them only upon the special order of his customers who gave their own specifications;
hence, he could not be liable for infringement of patent and unfair competition; and that those made
by him were different from those being manufactured and sold by private respondent.

We find no merit in his arguments. The question of whether petitioner was manufacturing and selling
power tillers is a question of fact better addressed to the lower courts. In dismissing the first argument
of petitioner herein, the Court of Appeals quoted the findings of the court, to wit:

It is the contention of defendant that he did not manufacture or make imitations or

copies of plaintiff's turtle power tiller as what he merely did was to fabricate his floating
power tiller upon specifications and designs of those who ordered them. However, this
contention appears untenable in the light of the following circumstances: 1) he admits in
his Answer that he has been manufacturing power tillers or hand tractors, selling and
distributing them long before plaintiff started selling its turtle power tiller in Zamboanga
del Sur and Misamis Occidental, meaning that defendant is principally a manufacturer of
power tillers, not upon specification and design of buyers, but upon his own
specification and design; 2) it would be unbelievable that defendant would fabricate
power tillers similar to the turtle power tillers of plaintiff upon specifications of buyers
without requiring a job order where the specification and designs of those ordered are
specified. No document was (sic) ever been presented showing such job orders, and it
is rather unusual for defendant to manufacture something without the specification and
designs, considering that he is an engineer by profession and proprietor of the Ozamis
Engineering shop. On the other hand, it is also highly unusual for buyers to order the
fabrication of a power tiller or hand tractor and allow defendant to manufacture them
merely based on their verbal instructions. This is contrary to the usual business and
manufacturing practice. This is not only time consuming, but costly because it involves a
trial and error method, repeat jobs and material wastage. Defendant judicially admitted
two (2) units of the turtle power tiller sold by him to Policarpio Berondo. 5

Of general acceptance is the rule imbedded in our jurisprudence that ". . . the jurisdiction of the
Supreme Court in cases brought to it from the Court of Appeals in a petition for certiorari under Rule
45 of the Rules of Court is limited to the review of errors of law, and that said appellate court's
findings of fact are conclusive upon this Court."6

The fact that petitioner herein manufactured and sold power tillers without patentee's authority has
been established by the courts despite petitioner's claims to the contrary.

The question now arises: Did petitioner's product infringe upon the patent of private respondent?

Tests have been established to determine infringement. These are (a) literal infringement; and (b) the
doctrine of equivalents.7 In using literal infringement as a test, ". . . resort must be had, in the first
instance, to the words of the claim. If accused matter clearly falls within the claim, infringement is
made out and that is the end of it." 8 To determine whether the particular item falls within the literal
meaning of the patent claims, the court must juxtapose the claims of the patent and the accused
product within the overall context of the claims and specifications, to determine whether there is exact
identity of all material elements.9

The trial court made the following observation:

 Samples of the defendant's floating power tiller have been produced and inspected by
the court and compared with that of the turtle power tiller of the plaintiff (see Exhibits H
to H-28). In appearance and form, both the floating power tillers of the defendant and
the turtle power tiller of the plaintiff are virtually the same. Defendant admitted to the
Court that two (2) of the power inspected on March 12, 1984, were manufactured and
sold by him (see TSN, March 12, 1984, p. 7). The three power tillers were placed
alongside with each other. At the center was the turtle power tiller of plaintiff, and on
both sides thereof were the floating power tillers of defendant (Exhibits H to H-2).
Witness Rodrigo took photographs of the same power tillers (front, side, top and back
views for purposes of comparison (see Exhibits H-4 to H-28). Viewed from any
perspective or angle, the power tiller of the defendant is identical and similar to that of
the turtle power tiller of plaintiff in form, configuration, design and appearance. The parts
or components thereof are virtually the same. Both have the circularly-shaped
vacuumatic housing float, a paddy in front, a protective water covering, a transmission
box housing the transmission gears, a handle which is V-shaped and inclined upwardly,
attached to the side of the vacuumatic housing float and supported by the upstanding
G.I. pipes and an engine base at the top midportion of the vacuumatic housing float to
which the engine drive may be attached. In operation, the floating power tiller of the
defendant operates also in similar manner as the turtle power tiller of plaintiff. This was
admitted by the defendant himself in court that they are operating on the same
principles. (TSN, August 19, 1987, p. 13) 10

Moreover, it is also observed that petitioner also called his power tiller as a floating power tiller. The
patent issued by the Patent Office referred to a "farm implement but more particularly to a turtle hand
tractor having a vacuumatic housing float on which the engine drive is held in place, the operating
handle, the harrow housing with its operating handle and the paddy wheel protective covering." 11 It
appears from the foregoing observation of the trial court that these claims of the patent and the
features of the patented utility model were copied by petitioner. We are compelled to arrive at no
other conclusion but that there was infringement.

Petitioner's argument that his power tillers were different from private respondent's is that of a
drowning man clutching at straws.

Recognizing that the logical fallback position of one in the place of defendant is to aver that his
product is different from the patented one, courts have adopted the doctrine of equivalents which
recognizes that minor modifications in a patented invention are sufficient to put the item beyond the
scope of literal infringement. 12 Thus, according to this doctrine, "(a)n infringement also occurs when
a device appropriates a prior invention by incorporating its innovative concept and, albeit with some
modification and change, performs substantially the same function in substantially the same way to
achieve substantially the same result." 13 The reason for the doctrine of equivalents is that to permit
the imitation of a patented invention which does not copy any literal detail would be to convert the
protection of the patent grant into a hollow and useless thing. Such imitation would leave room for —
indeed encourage — the unscrupulous copyist to make unimportant and insubstantial changes and
substitutions in the patent which, though adding nothing, would be enough to take the copied matter
outside the claim, and hence outside the reach of the law. 14

In this case, the trial court observed:

Defendant's witness Eduardo Cañete, employed for 11 years as welder of the Ozamis
Engineering, and therefore actually involved in the making of the floating power tillers of
defendant tried to explain the difference between the floating power tillers made by the
defendant. But a careful examination between the two power tillers will show that they
will operate on the same fundamental principles. And, according to establish
jurisprudence, in infringement of patent, similarities or differences are to be determined,
not by the names of things, but in the light of what elements do, and substantial, rather
than technical, identity in the test. More specifically, it is necessary and sufficient to
constitute equivalency that the same function can be performed in substantially the
same way or manner, or by the same or substantially the same, principle or mode of
operation; but where these tests are satisfied, mere differences of form or name are
immaterial. . . . 15

It also stated:
 To establish an infringement, it is not essential to show that the defendant adopted the
device or process in every particular; Proof of an adoption of the substance of the thing
will be sufficient. "In one sense," said Justice Brown, "it may be said that no device can
be adjudged an infringement that does not substantially correspond with the patent. But
another construction, which would limit these words to exact mechanism described in
the patent, would be so obviously unjust that no court could be expected to adopt it. . . .

The law will protect a patentee against imitation of his patent by other forms and
proportions. If two devices do the same work in substantially the same way, and
accomplish substantially the same result, they are the same, even though they differ in
name, form, or shape. 16

We pronounce petitioner liable for infringement in accordance with Section 37 of Republic Act No.
165, as amended, providing, inter alia:

Sec. 37. Right of Patentees. — A patentee shall have the exclusive right to make, use
and sell the patented machine, article or product, and to use the patented process for
the purpose of industry or commerce, throughout the territory of the Philippines for the
terms of the patent; and such making, using, or selling by any person without the
authorization of the Patentee constitutes infringement of the patent. (Emphasis ours)

As far as the issue regarding unfair competition is concerned, suffice it to say that Republic Act No.
166, as amended, provides, inter alia:

Sec. 29. Unfair competition, rights and remedies. — . . .

xxx xxx xxx

In particular, and without in any way limiting the scope of unfair competition, the
following shall be deemed guilty of unfair competition:

(a) Any person, who in selling his goods shall give them the general appearance of
goods of another manufacturer or dealer, either as to the goods themselves or in the
wrapping of the packages in which they are contained, or the devices or words thereon,
or in any other feature of their appearance, which would be likely to influence
purchasers 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. . . .

xxx xxx xxx

Considering the foregoing, we find no reversible error in the decision of the Court of Appeals affirming
with modification the decision of the trial court.

WHEREFORE, premises considered, the decision of the Court of Appeals is hereby AFFIRMED and
this petition DENIED for lack of merit.

Bidin, Melo and Vitug, JJ., concur.

Feliciano, J., is on leave.