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Leviton Industries vs. Salvador, 114 SCRA 420Puma vs. IAC, 158 SCRA 233La Chemis Lacoste vs. Fernandez, 129 SCRA 373Romero vs. Maidenform, 10 SCRA 556Bata Industries vs. CA, 114 SCRA 318Phil. Nut Industry vs. Standard Brands, 65 SCRA 575Anchor Trading Co. vs. Director of Patents, 99 Phil. 1040Clorox vs. Director of Patents, 20 SCRA 965Pag-asa Industrial Corp. vs. CA, 131 SCRA 565Wolverine Worldwide vs. CA, 169 SCRA 627

Esso Standard Eastern vs. CA, 116 SCRA 338Fruit of Loom vs. CA, 113 SCRA 405Cagayan Valley vs. CA, 178 SCRA 218Del Monte vs. CA, 181 SCRA 410Asia Brewery vs. CA, 224 SCRA 437Heirs of Almoradie vs. CA, 229 SCRA 16Conrad vs. CA, 246 SCRA 691Emerald Garment vs. CA, 252 SCRA 600Etepha vs. Director of PatentsDistileria Washington vs. CA, 263 SCRA 303Distileria Washington vs. La Tondena, 280 SCRA 116Twin Ace HOldings s. CA, 280 SCRA 884Amigo vs. Cluett, 354 SCRA 434Societe des produits Nestle vs. CA, 356 SCRA 207

Converse vs. Jacinto Rubber, 97 SCRA 158Universal Rubber vs. CA, 130 SCRA 104Del Monte Corp. vs. CA, 181 SCRA 410Pro Line Sports Center vs. CA, 281 SCRA 162Solid Triangle vs. Sheriff, 370 SCRA 491246 Corp. vs. Daway, GR 157216, Nov. 30, 2003

Sy vs. CA, 113 SCRA 334

G.R. No. L-40163 June 19, 1982

LEVITON INDUSTRIES, NENA DE LA CRUZ LIM, DOMINGO GO, and LIM KIAT, petitioners, vs.HON. SERAFIN SALVADOR, Judge, Court of First Instance of Rizal, Caloocan City, Branch XIV and LEVITON MANUFACTURING CO., INC., respondents.

ESCOLIN, J:

Challenged in this petition for certiorari and prohibition is the order of the respondent Judge Serafin Salvador in Civil Case No. C-2891 of the Court of First Instance of Rizal, sustaining the legal capacity of a foreign corporation to maintain a suit for unfair competition under Section 21-A of Republic Act No. 166, as amended, otherwise known as the Trademark Law.

On April 17, 1973, private respondent Leviton Manufacturing Co., Inc. filed a complaint for unfair competition against petitioners Leviton Industries, Nena de la Cruz Lim, Domingo Go and Lim Kiat before the Court of First Instance of Rizal, Branch XXXIII, presided by respondent Judge Serafin Salvador. The complaint substantially alleges that plaintiff is a foreign corporation organized and existing under the laws of the State of New York, United States of America, with office

located at 236 Greenpoint Avenue, Brooklyn City, State of New York, U.S.A.; that defendant Leviton Industries is a partnership organized and existing under the laws of the Philippines with principal office at 382 10th Avenue, Grace Park, Caloocan City; while defendants Nena de la Cruz Lim, Domingo Go and Lim Kiat are the partners, with defendant Domingo Go acting as General Manager of defendant Leviton Industries; that plaintiff, founded in 1906 by Isidor Leviton, is the largest manufacturer of electrical wiring devices in the United States under the trademark Leviton, which various electrical wiring devices bearing the trademark Leviton and trade name Leviton Manufacturing Co., Inc. had been exported to the Philippines since 1954; that due to the superior quality and widespread use of its products by the public, the same are well known to Filipino consumers under the trade name Leviton Manufacturing Co., Inc. and trademark Leviton; that long subsequent to the use of plaintiff's trademark and trade name in the Philippines, defendants began manufacturing and selling electrical ballast, fuse and oval buzzer under the trademark Leviton and trade name Leviton Industries Co.; that Domingo Go, partner and general manager of defendant partnership, had registered with the Philippine Patent Office the trademarks Leviton Label and Leviton with respect to ballast and fuse under Certificate of Registration Nos. SR-1132 and 15517, respectively, which registration was contrary to paragraphs (d) and (e) of Section 4 of RA 166, as amended, and violative of plaintiff's right over the trademark Leviton; that defendants not only used the trademark Leviton but likewise copied the design used by plaintiff in distinguishing its trademark; and that the use thereof by defendants of its products would cause confusion in the minds of the consumers and likely to deceive them as to the source of origin, thereby enabling defendants to pass off their products as those of plaintiff's. Invoking the provisions of Section 21-A of Republic Act No. 166, plaintiff prayed for damages. It also sought the issuance of a writ of injunction to prohibit defendants from using the trade name Leviton Industries, Co. and the trademark Leviton.

Defendants moved to dismiss the complaint for failure to state a cause of action, drawing attention to the plaintiff's failure to allege therein its capacity to sue under Section 21-A of Republic Act No. 166, as amended. After the filing of the plaintiff's opposition and the defendant's reply, the respondent judge denied the motion on the ground that the same did not appear to be indubitable. On September 21, 1973, defendants filed their answer, reiterating the ground supporting their motion to dismiss. Thereafter, defendants served upon plaintiff a request for admission under Rule 26 of the Rules of Court, of the following matters of fact, to wit:

(1) That the plaintiff is not actually manufacturing, selling and/or distributing ballasts generally used in flourescent lighting;

(2) That plaintiff has no registered trademark or trade name in the Philippine Patent Office of any of its products; and

(3) That plaintiff has no license to do business in the Philippines under and by virtue of the provision of Act No. 1459, better known as the Philippine Corporation Law, at the time it filed the complaint. 1

Complying with the said request, plaintiff admitted:

That it does not manufacture ballasts; that it has not registered its trademark in the Philippine Patent Office, but has filed with the same office an application of its trade mark on April 16, 1971; and that it has no license to do business in the Philippines. 2

On the basis of these admissions, defendants filed an Urgent Supplemental Motion to Dismiss. This was followed by the plaintiff's opposition, and the defendant's rejoinder, after which respondent judge issued the questioned order 3 denying the motion, thus:

Acting on the Urgent Supplemental Motion to Dismiss, dated July 2, 1974, filed by counsels for the defendants, as well as the oppositions thereto, the Court after a careful consideration of the reasons adduced for and against said motion, is of the opinion that the same should be, as it is hereby DENIED.

SO ORDERED.

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The motion for reconsideration having likewise been denied, defendants instituted the instant petition for certiorari and prohibition, charging respondent judge with grave abuse of discretion in denying their motion to dismiss.

We agree with petitioners that respondent Leviton Marketing Co., Inc. had failed to allege the essential facts bearing upon its capacity to sue before Philippine courts. Private respondent's action is squarely founded on Section 21-A of Republic Act No. 166, as amended, which we quote:

Sec. 21-A. Any foreign corporation or juristic person to which a mark or tradename has been registered or assigned under this Act may bring an action hereunder for infringement, for unfair competition, or false designation of origin and false description, whether or not it has been licensed to do business in the Philippines under Act numbered Fourteen Hundred and Fifty-Nine, as amended, otherwise known as the Corporation Law, at the time it brings the complaint; Provided, That the country of which the said foreign corporation or juristic person is a citizen, or in which it is domiciled, by treaty, convention or law, grants a similar privilege to corporate or juristic persons of the Philippines. (As amended by R.A. No. 638)

Undoubtedly, the foregoing section grants to a foreign corporation, whether or not licensed to do business in the Philippines, the right to seek redress for unfair competition before Philippine courts. But the said law is not without qualifications. Its literal tenor indicates as a condition sine qua non the registration of the trade mark of the suing foreign corporation with the Philippine Patent Office or, in the least, that it be an asignee of such registered trademark. The said section further requires that the country, of which the plaintiff foreign corporation or juristic person is a citizen or domicilliary, grants to Filipino corporations or juristic entities the same reciprocal treatment, either thru treaty, convention or law,

All that is alleged in private respondent's complaint is that it is a foreign corporation. Such bare averment not only fails to comply with the requirements imposed by the aforesaid Section 21-A but violates as well the directive of Section 4, Rule 8 of the Rules of Court that "facts showing the capacity of a party to sue or be sued or the authority of a party to sue or be sued in a representative capacity or the legal existence of an organized association of persons that is made a party, must be averred "

In the case at bar, private respondent has chosen to anchor its action under the Trademark Law of the Philippines, a law which, as pointed out, explicitly sets down the conditions precedent for the successful prosecution thereof. It is therefore incumbent upon private respondent to comply with these requirements or aver its exemption therefrom, if such be the case. It may be that private respondent has the right to sue before Philippine courts, but our rules on pleadings require that the necessary qualifying circumstances which clothe it with such right be affirmatively pleaded. And the reason therefor, as enunciated in "Atlantic Mutual Insurance Co., et al. versus Cebu Stevedoring Co., Inc." 4 is that —

these are matters peculiarly within the knowledge of appellants alone, and it would be unfair to impose upon appellees the burden of asserting and proving the contrary. It is enough that foreign corporations are allowed by law to seek redress in our courts under certain conditions: the interpretation of the law should not go so far as to include, in effect, an inference that those conditions had been met from the mere fact that the party sued is a foreign corporation.

It was indeed in the light of this and other considerations that this Court has seen fit to amend the former rule by requiring in the revised rules (Section 4, Rule 8) that "facts showing the capacity of a party to sue or be sued or the authority of a party to sue or be sued in a representative capacity or the legal existence of an organized association of persons that is made a party, must be averred,

IN VIEW OF THE FOREGOING, the instant petition is hereby granted and, accordingly, the order of the respondent judge dated September 27, 1974 denying petitioner's motion to dismiss is hereby set aside. The Court of First Instance of Rizal (Caloocan City), the court of origin, is hereby restrained from conducting further proceedings in Civil Case No. C-2891, except to dismiss the same. No costs.

SO ORDERED.

Guerrero, Abad Santos and De Castro, JJ., concur.

Concepcion Jr., J., is on leave.

G.R. No. 75067 February 26, 1988

PUMA SPORTSCHUHFABRIKEN RUDOLF DASSLER, K.G., petitioner vs.THE INTERMEDIATE APPELLATE COURT and MIL-ORO MANUFACTURING CORPORATION, respondents.

GUTIERREZ, JR., J.:

This is a petition for review by way of certiorari of the Court of Appeals' decision which reversed the order of the Regional Trial Court and dismissed the civil case filed by the petitioner on the grounds of litis pendentia and lack of legal capacity to sue.

On July 25, 1985, the petitioner, a foreign corporation duly organized and existing under the laws of the Federal Republic of Germany and the manufacturer and producer of "PUMA PRODUCTS," filed a complaint for infringement of patent or trademark with a prayer for the issuance of a writ of preliminary injunction against the private respondent before the Regional Trial Court of Makati.

Prior to the filing of the said civil suit, three cases were pending before the Philippine Patent Office, namely:

Inter Partes Case No. 1259 entitled 'PUMA SPORTSCHUHFABRIKEN v. MIL-ORO MANUFACTURING CORPORATION, respondent-applicant which is an opposition to the registration of petitioner's trademark 'PUMA and DEVICE' in the PRINCIPAL REGISTER;

Inter Partes Case No. 1675 similarly entitled, 'PUMA SPORTSCHUHFABRIKEN RUDOLF DASSLER, K.G., petitioner, versus MIL-ORO MANUFACTURING CORPORATION, respondent-registrant,' which is a case for the cancellation of the trademark registration of the petitioner; and

Inter Partes Case No. 1945 also between the same parties this time the petitioner praying for the cancellation of private respondent's Certificate of Registration No. 26875 (pp. 40-41, 255, Rollo) (pp. 51 -52, Rollo)

On July 31, 1985, the trial court issued a temporary restraining order, restraining the private respondent and the Director of Patents from using the trademark "PUMA' or any reproduction, counterfeit copy or colorable imitation thereof, and to withdraw from the market all products bearing the same trademark.

On August 9, 1985, the private respondent filed a motion to dismiss on the grounds that the petitioners' complaint states no cause of action, petitioner has no legal personality to sue, and litis pendentia.

On August 19, 1985, the trial court denied the motion to dismiss and at the same time granted the petitioner's application for a writ of injunction. The private respondents appealed to the Court of Appeals.

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On June 23, 1986, the Court of Appeals reversed the order of the trial court and ordered the respondent judge to dismiss the civil case filed by the petitioner.

In reversing the order of the trial court, the Court of Appeals ruled that the requisites of lis pendens as ground for the motion to dismiss have been met. It said:

Obviously, the parties are Identical. They are the same protagonists. As to the second requisite, which is Identity of rights and reliefs prayed for, both sides maintain that they are the rightful owners of the trademark "PUMA" for socks and belts such that both parties seek the cancellation of the trademark of the other (see prayer in private respondent's complaint, pp, 54-55, Rollo, Annex "A" to the Petition). Inevitably, in either the lower court or in the Patent Office, there is a need to resolve the issue as to who is the rightful owner of the TRADEMARK 'PUMA' for socks and belts.After all,the right to register a trademark must be based on ownership thereof (Operators Inc. v. Director of Patents, L-17910, Oct. 29,1965,15 SCRA 147). Ownership of the trademark is an essential requisite to be proved by the applicant either in a cancellation case or in a suit for infringement of trademark. The relief prayed for by the parties in Inter Partes Cases Nos. 1259, 1675 and 1945 and Civil Case No. 11189 before respondent court seek for the cancellation of usurper's trademark, and the right of the legal owner to have exclusive use of said trademark. From the totality of the obtaining circumstances, the rights of the respective parties are dependent upon the resolution of a single issue, that is, the rightful ownership of the trademark in question. The second requisite needed to justify a motion to dismiss based on lis pendens is present.

As to the third requisite, the decisions and orders of administrative agencies rendered pursuant to their quasi-judicial authority have upon their finality the character of res judicata (Brilliantes v. Castro, 99 Phil. 497). The rule which forbids the re-opening of a matter once judicially determined by competent authority applies as well to judicial acts of public executive and administrative officers and boards acting within their jurisdiction as to the judgments of Courts having general judicial powers (Brilliantes vs. Castro, supra). It may be recalled that the resolution and determination of the issue on ownership are both within the jurisdiction of the Director of Patents and the Regional Trial Court (Sec 25, RA 166). It would thus be confusing for two (2) different forums to hear the same case and resolve a main and determinative issue with both forums risking the possibility of arriving at different conclusions. In the construction of laws and statutes regarding jurisdiction, one must interpret them in a complementary manner for it is presumed that the legislature does not intend any absurdity in the laws it makes (Statutory Construction, Martin, p. 133). Ms is precisely the reason why both decisions of the Director of Patents and Regional Trial Court are appealable to the Intermediate Appellate Court (Sec. 9, BP 129), as both are co-equal in rank regarding the cases that may fall within their jurisdiction.

The record reveals that on March 31, 1986, the Philippine Patent Office rendered a decision in Inter Partes Cases Nos. 1259 and 1675 whereby it concluded that petitioner is the prior and actual adaptor of the trademark 'PUMA and DEVICE used on sports socks and belts, and that MIL-ORO CORPORATION is the rightful owner thereof. ... (pp. 6-7, CA — decision, pp. 51-52, Rollo)

With regard to the petitioner's legal capacity to sue, the Court of Appeals likewise held that it had no such capacity because it failed to allege reciprocity in its complaint:

As to private respondent's having no legal personality to sue, the record discloses that private respondent was suing under Sec. 21-A of Republic Act No. 166, as amended (p. 50, Annex "A", Petition). This is the exception to the general rule that a foreign corporation doing business in the Philippines must secure a license to do business before said foreign corporation could maintain a court or administrative suit (Sec. 133, Corporation Code, in relation to Sec. 21-A, RA 638, as amended). However, there are some conditions which must be met before that exception could be made to apply, namely: (a) the trademark of the suing corporation must be registered in the

Philippines, or that it be the assignee thereof: and (b) that there exists a reciprocal treatment to Philippine Corporations either by law or convention by the country of origin of the foreign corporation (Sec. 21-A Trademark Law). Petitioner recognizes that private respondent is the holder of several certificates of registration, otherwise, the former would not have instituted cancellation proceedings in the Patent's Office. Petitioner actually zeroes on the second requisite provided by Section 21-A of the Trademark Law which is the private respondent's failure to allege reciprocity in the complaint. ...

Citing the case of Leviton Industries v. Salvador (114 SCRA 420), it further ruled:

Failure to allege reciprocity, it being an essential fact under the trademark law regarding its capacity to sue before the Philippine courts, is fatal to the foreign corporations' cause. The Concurring Opinion of Chief Justice Aquino on the same case is more emphatic when he said:

Respondent Leviton Manufacturing Co. Inc., alleged in par. 2 of its complaint for unfair competition that its action 'is being filed under the provisions of Section 21-A of Republic Act No. 166, as amended.' Respondent is bound by the allegation in its complaint. It cannot sue under Section 21-A because it has not complied with the requirements hereof that (1) its trademark Leviton has been registered with the Patent Office and (2) that it should show that the State of New York grants to Philippine Corporations the privilege to bring an action for unfair competition in that state. Respondent 'Leviton has to comply with those requirements before it can be allowed to maintain an action for unfair competition. (p. 9, CA — decision). (p. 55, Rollo).

The Court of Appeals further ruled that in issuing the writ of preliminary injunction, the trial court committed grave abuse of discretion because it deprived the private respondent of its day in court as the latter was not given the chance to present its counter-evidence.

In this petition for review, the petitioner contends that the Court of appeals erred in holding that: (1) it had no legal capacity to sue; (2) the doctrine of lis pendens is applicable as a ground for dismissing the case and (3) the writ of injunction was improperly issued.

Petitioner maintains that it has substantially complied with the requirements of Section 21-A of Republic Act R.A. No. 166, as amended. According to the petitioner, its complaint specifically alleged that it is not doing business in the Philippines and is suing under the said Repulbic Act; that Section 21-A thereof provides that "the country of which the said corporation or juristic person is a citizen, or in which it is domiciled, by treaty, convention or law, grants a similar privilege to corporate or juristic persons of the Philippines" but does not mandatorily require that such reciprocity between the Federal Republic of Germany and the Philippines be pleaded; that such reciprocity arrangement is embodied in and supplied by the Union Convention for the Protection of Industrial Property Paris Convention) to which both the Philippines and Federal Republic of Germany are signatories and that since the Paris 'Convention is a treaty which, pursuant to our Constitution, forms part of the law of the land, our courts are bound to take judicial notice of such treaty, and, consequently, this fact need not be averred in the complaint.

We agree.

In the leading case of La Chemise Lacoste, S.A .v. Fernandez, (129 SCRA 373), we ruled:

But even assuming the truth of the private respondents allegation that the petitioner failed to allege material facto in its petition relative to capacity to sue, the petitioner may still maintain the present suit against respondent Hernandes. As early as 1927, this Court was, and it still is, of the view that a foreign corporation not doing business in the Philippines needs no license to sue

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before Philippine courts for infringement of trademark and unfair competition. Thus, in Western Equipment and Supply Co. v. Reyes (51 Phil. 11 5), this Court held that a foreign corporation which has never done any business in the Philippines and which is unlicensed and unregistered to do business here, but is widely and favorably known in the Philippines through the use therein of its products bearing its corporate and tradename, has a legal right to maintain an action in the Philippines to restrain the residents and inhabitants thereof from organizing a corporation therein bearing the same name as the foreign corporation, when it appears that they have personal knowledge of the existence of such a foreign corporation, and it is apparent that the purpose of the proposed domestic corporation is to deal and trade in the same goods as those of the foreign corporation.

Quoting the Paris Convention and the case of Vanity Fair Mills, Inc. v. T. Eaton, Co. (234 F. 2d 633), this Court further said:

By the same token, the petitioner should be given the same treatment in the Philippines as we make available to our own citizens. We are obligated to assure to nationals of 'countries of the Union' an effective protection against unfair competition in the same way that they are obligated to similarly protect Filipino citizens and firms.

Pursuant to this obligation, the Ministry of Trade on November 20,1980 issued a memorandum addressed to the Director of the Patents Office directing the latter --

xxx xxx xxx

... [T]o reject all pending applications for Philippine registration of signature and other world famous trademarks by applicants other than its original owners or users.

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

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

The memorandum is a clear manifestation of our avowed adherence to a policy of cooperation and amity with an nations. It is not, as wrongly alleged by the private respondent, a personal policy of Minister Luis Villafuerte which expires once he leaves the Ministry of trade. For a treaty or convention is not a mere moral obligation to be enforced or not at the whims of an incumbent head of a Ministry. It creates a legally binding obligation on the parties founded on the generally accepted principle of international law of pacta sunt servanda which has been adopted as part of the law of our land. (Constitution, Art. II, Sec. 3). The memorandum reminds the Director of Patents of his legal duty to obey both law and treaty. It must also be obeyed. (at pp. 389-390, La Chemise Lacoste, S.A. v. Fernandez, supra).

In the case of of Cerverse Rubber Corporation V. Universal Rubber Products, Inc. (174 SCRA 165), we likewise re-aafirmed our adherence to the Paris Convention:

The ruling in the aforecited case is in consonance with the Convention of Converse Rubber Corporation v. Universal Rubber Products, Inc. (I 47 SCRA 165), we likewise re-affirmed our adherence to the Paris Convention: the Union of Paris for the Protection of Industrial Property to which the Philippines became a party on September 27, 1965. Article 8 thereof provides that 'a

trade name [corporation name] shall be protected in all the countries of the Union without the obligation of filing or registration, whether or not it forms part of the trademark.'

The object of the Convention is to accord a national of a member nation extensive protection 'against infringement and other types of unfair competition [Vanity Fair Mills, Inc. v. T. Eaton Co., 234 F. 2d 633]." (at p. 165)

The mandate of the aforementioned Convention finds implementation in Section 37 of RA No. 166, otherwise known as the trademark Law:

Rights of Foreign Registrants. — Persons who are nationals of, domiciled in, or have a bona fide or effective business or commercial establishment in any foreign country, which is a party to an international convention or treaty relating to marks or tradenames on the represssion of unfair competition to which the Philippines may be party, shall be entitled to the benefits and subject to the provisions of this Act ...

Tradenames of persons described in the first paragraph of this section shall be protected without the obligation of filing or registration whether or not they form part of marks.

We, therefore, hold that the petitioner had the legal capacity to file the action below.

Anent the issue of lis pendens as a ground for a motion to dismiss, the petitioner submits that the relief prayed for in its civil action is different from the relief sought in the Inter Partes cases. More important, however, is the fact that for lis pendens to be a valid ground for the dismissal of a case, the other case pending between the same parties and having the same cause must be a court action. As we have held in Solancho v. Ramos (19 SCRA 848):

As noted above, the defendants contend that the pendency of an administrative between themselves and the plaintiff before the Bureau of Lands is a sufficient ground to dismiss the action. On the other hand, the plaintiff, believing that this ground as interposed by the defendants is a sufficient ground for the dismissal of his complaint, filed a motion to withdraw his free patent application No. 16649.

This is not what is contemplated under the law because under section 1(d), Rule 16 (formerly Rule 8) of the Rules of Court, one of the grounds for the dismissal of an action is that "there is another action pending between the same parties for the same cause." Note that the Rule uses the phrase another action. This phrase should be construed in line with Section 1 of Rule 2, which defines the word action, thus--

Action means an ordinary suit in a court of justice by which one party prosecutes another for the enforcement or protection of alright, or the prevention or redress of a wrong. Every other remedy is a special proceeding.

It is,therefore,very clear that the Bureau of Land is not covered under the aforementioned provisions of the Rules of Court. (at p. 851)

Thus, the Court of Appeals likewise erred in holding that the requisites of lis pendens were present so as to justify the dismissal of the case below.

As regards the propriety of the issuance of the writ of preliminary injunuction, the records show that herein private respondent was given the opportunity to present its counter-evidence against the issuance thereof but it intentionally refused to do so to be consistent with its theory that the civil case should be dismissed in the first place.

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Considering the fact that "PUMA" is an internationally known brand name, it is pertinent to reiterate the directive to lower courts, which equally applies to administrative agencies, found in La Chemise Lacoste, S.A. v. Fernandez, supra):

One final point. It is essential that we stress our concern at the seeming inability of law enforcement officials to stem the tide of fake and counterfeit consumer items flooding the Philippine market or exported abroad from our country. The greater victim is not so much the manufacturer whose product is being faked but the Filipino consuming public and in the case of exportations, our image abroad. No less than the President, in issuing Executive Order No. 913 dated October 7, 1983 to strengthen the powers of the Minister of Trade and Industry for the protection of consumers, stated that, among other acts, the dumping of substandard, imitated, hazardous, and cheap goods, the infringement of internationally known tradenames and trademarks, and the unfair trade Practices of business firms have reached such proportions as to constitute economic sabotage. We buy a kitchen appliance, a household tool, perfume, face powder, other toilet articles, watches, brandy or whisky, and items of clothing like jeans, T-shirts, neckties, etc. — the list is quite lengthy — pay good money relying on the brand name as guarantee of its quality and genuine nature only to explode in bitter frustration and helpless anger because the purchased item turns out to be a shoddy imitation, albeit a clever looking counterfeit, of the quality product. Judges all over the country are well advised to remember that court processes should not be used as instruments to, unwittingly or otherwise, aid counterfeiters and intellectual pirates, tie the hands of the law as it seeks to protect the Filipino consuming public and frustrate executive and administrative implementation of solemn commitments pursuant to international conventions and treaties. (at p. 403)

WHEREFORE, the appealed decision of the Court of Appeals dated June 23, 1986 is REVERSED and SET ASIDE and the order of the Regional Trial Court of Makati is hereby Reinstated.

SO ORDERED.

Fernan (Chairman), Feliciano, Bidin and Cortes, JJ., concur.

G.R. No. L-63796-97 May 2, 1984

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

G.R. No. L-65659 May 2l, 1984

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

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

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

GUTIERREZ, JR., J.:

It is among this Court's concerns that the Philippines should not acquire an unbecoming reputation among the manufacturing and trading centers of the world as a haven for intellectual pirates imitating and illegally profiting from trademarks and tradenames which have established themselves in international or foreign trade.

Before this Court is a petition for certiorari with preliminary injunction filed by La Chemise Lacoste, S.A., a well known European manufacturer of clothings and sporting apparels sold in the international market and bearing the trademarks "LACOSTE" "CHEMISE LACOSTE", "CROCODILE DEVICE" and a composite mark consisting of the word "LACOSTE" and a representation of a crocodile/alligator. The petitioner asks us to set aside as null and void, the order of judge Oscar C. Fernandez, of Branch XLIX, Regional Trial Court, National Capital Judicial Region, granting the motion to quash the search warrants previously issued by him and ordering the return of the seized items.

The facts are not seriously disputed. The petitioner is a foreign corporation, organized and existing under the laws of France and not doing business in the Philippines, It is undeniable from the records that it is the actual owner of the abovementioned trademarks used on clothings and other goods specifically sporting apparels sold in many parts of the world and which have been marketed in the Philippines since 1964, The main basis of the private respondent's case is its claim of alleged prior registration.

In 1975, Hemandas & Co., a duly licensed domestic firm applied for and was issued Reg. No. SR-2225 (SR stands for Supplemental Register) for the trademark "CHEMISE LACOSTE & CROCODILE DEVICE" by the Philippine Patent Office for use on T-shirts, sportswear and other garment products of the company. Two years later, it applied for the registration of the same trademark under the Principal Register. The Patent Office eventually issued an order dated March 3, 1977 which states that:

xxx xxx xxx

... Considering that the mark was already registered in the Supplemental Register in favor of herein applicant, the Office has no other recourse but to allow the application, however, Reg. No. SR-2225 is now being contested in a Petition for Cancellation docketed as IPC No. 1046, still registrant is presumed to be the owner of the mark until after the registration is declared cancelled.

Thereafter, Hemandas & Co. assigned to respondent Gobindram Hemandas all rights, title, and interest in the trademark "CHEMISE LACOSTE & DEVICE".

On November 21, 1980, the petitioner filed its application for registration of the trademark "Crocodile Device" (Application Serial No. 43242) and "Lacoste" (Application Serial No. 43241).The former was approved for publication while the latter was opposed by Games and Garments in Inter Partes Case No. 1658. In 1982, the petitioner filed a Petition for the Cancellation of Reg. No. SR-2225 docketed as Inter Partes Case No. 1689. Both cases have now been considered by this Court in Hemandas v. Hon. Roberto Ongpin (G.R. No. 65659).

On March 21, 1983, the petitioner filed with the National Bureau of Investigation (NBI) a letter-complaint alleging therein the acts of unfair competition being committed by Hemandas and requesting their assistance in his apprehension and prosecution. The NBI conducted an investigation and subsequently filed with the respondent court two applications for the issuance of search warrants which would authorize the search of the premises used and occupied by the Lacoste Sports Center and Games and Garments both owned and operated by Hemandas.

The respondent court issued Search Warrant Nos. 83-128 and 83-129 for violation of Article 189 of the Revised Penal Code, "it appearing to the satisfaction of the judge after examining under oath applicant and his witnesses that there are good and sufficient reasons to believe that Gobindram Hemandas ... has in his control and possession in his premises the ... properties subject of the offense," (Rollo, pp. 67 and 69) The NBI agents executed the two search warrants and as a result of the search found and seized various goods and articles described in the warrants.

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Hemandas filed a motion to quash the search warrants alleging that the trademark used by him was different from petitioner's trademark and that pending the resolution of IPC No. 1658 before the Patent Office, any criminal or civil action on the same subject matter and between the same parties would be premature.

The petitioner filed its opposition to the motion arguing that the motion to quash was fatally defective as it cited no valid ground for the quashal of the search warrants and that the grounds alleged in the motion were absolutely without merit. The State Prosecutor likewise filed his opposition on the grounds that the goods seized were instrument of a crime and necessary for the resolution of the case on preliminary investigation and that the release of the said goods would be fatal to the case of the People should prosecution follow in court.

The respondent court was, however, convinced that there was no probable cause to justify the issuance of the search warrants. Thus, in its order dated March 22, 1983, the search warrants were recalled and set aside and the NBI agents or officers in custody of the seized items were ordered to return the same to Hemandas. (Rollo, p. 25)

The petitioner anchors the present petition on the following issues:

Did respondent judge act with grave abuse of discretion amounting to lack of jurisdiction,

(i) in reversing the finding of probable cause which he himself had made in issuing the search warrants, upon allegations which are matters of defense and as such can be raised and resolved only upon trial on the merits; and

(ii) in finding that the issuance of the search warrants is premature in the face of the fact that (a) Lacoste's registration of the subject trademarks is still pending with the Patent Office with opposition from Hemandas; and (b) the subject trademarks had been earlier registered by Hemandas in his name in the Supplemental Register of the Philippine Patent Office?

Respondent, on the other hand, centers his arguments on the following issues:

I

THE PETITIONER HAS NO CAPACITY TO SUE BEFORE PHILIPPINE COURTS.

II

THE RESPONDENT JUDGE DID NOT COMMIT A GRAVE ABUSE OF DISCRETION TANTAMOUNT TO LACK OF JURISDICTION IN ISSUING THE ORDER DATED APRIL 22, 1983.

Hemandas argues in his comment on the petition for certiorari that the petitioner being a foreign corporation failed to allege essential facts bearing upon its capacity to sue before Philippine courts. He states that not only is the petitioner not doing business in the Philippines but it also is not licensed to do business in the Philippines. He also cites the case of Leviton Industries v. Salvador (114 SCRA 420) to support his contention The Levitoncase, however, involved a complaint for unfair competition under Section 21-A of Republic Act No. 166 which provides:

Sec. 21 — A. Any foreign corporation or juristic person to which a mark or tradename has been registered or assigned under this Act may bring an action hereunder for infringement, for unfair competition, or false designation of origin and false description, whether or not it has been licensed to do business in the Philippines under Act numbered Fourteen Hundred and Fifty-Nine, as amended, otherwise known as the Corporation Law, at the time it brings the complaint; Provided, That the country of which the said foreign corporation or juristic person is a

citizen, or in which it is domiciled, by treaty, convention or law, grants a similar privilege to corporate or juristic persons of the Philippines.

We held that it was not enough for Leviton, a foreign corporation organized and existing under the laws of the State of New York, United States of America, to merely allege that it is a foreign corporation. It averred in Paragraph 2 of its complaint that its action was being filed under the provisions of Section 21-A of Republic Act No. 166, as amended. Compliance with the requirements imposed by the abovecited provision was necessary because Section 21-A of Republic Act No. 166 having explicitly laid down certain conditions in a specific proviso, the same must be expressly averred before a successful prosecution may ensue. It is therefore, necessary for the foreign corporation to comply with these requirements or aver why it should be exempted from them, if such was the case. The foreign corporation may have the right to sue before Philippine courts, but our rules on pleadings require that the qualifying circumstances necessary for the assertion of such right should first be affirmatively pleaded.

In contradistinction, the present case involves a complaint for violation of Article 189 of the Revised Penal Code. The Leviton case is not applicable.

Asserting a distinctly different position from the Leviton argument, Hemandas argued in his brief that the petitioner was doing business in the Philippines but was not licensed to do so. To support this argument, he states that the applicable ruling is the case of Mentholatum Co., Inc. v. Mangaliman: (72 Phil. 524) where Mentholatum Co. Inc., a foreign corporation and Philippine-American Drug Co., the former's exclusive distributing agent in the Philippines filed a complaint for infringement of trademark and unfair competition against the Mangalimans.

The argument has no merit. The Mentholatum case is distinct from and inapplicable to the case at bar. Philippine American Drug Co., Inc., was admittedly selling products of its principal Mentholatum Co., Inc., in the latter's name or for the latter's account. Thus, this Court held that "whatever transactions the Philippine-American Drug Co., Inc. had executed in view of the law, the Mentholatum Co., Inc., did it itself. And, the Mentholatum Co., Inc., being a foreign doing business in the Philippines without the license required by Section 68 of the Corporation Law, it may not prosecute this action for violation of trademark and unfair competition."

In the present case, however, the petitioner is a foreign corporation not doing business in the Philippines. The marketing of its products in the Philippines is done through an exclusive distributor, Rustan Commercial Corporation The latter is an independent entity which buys and then markets not only products of the petitioner but also many other products bearing equally well-known and established trademarks and tradenames. in other words, Rustan is not a mere agent or conduit of the petitioner.

The rules and regulations promulgated by the Board of Investments pursuant to its rule-making power under Presidential Decree No. 1789, otherwise known as the Omnibus Investment Code, support a finding that the petitioner is not doing business in the Philippines. Rule I, Sec. 1 (g) of said rules and regulations defines "doing business" as one" which includes, inter alia:

(1) ... A foreign firm which does business through middlemen acting on their own names, such as indentors, commercial brokers or commission merchants, shall not be deemed doing business in the Philippines. But such indentors, commercial brokers or commission merchants shall be the ones deemed to be doing business in the Philippines.

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

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Applying the above provisions to the facts of this case, we find and conclude that the petitioner is not doing business in the Philippines. Rustan is actually a middleman acting and transacting business in its own name and or its own account and not in the name or for the account of the petitioner.

But even assuming the truth of the private respondent's allegation that the petitioner failed to allege material facts in its petition relative to capacity to sue, the petitioner may still maintain the present suit against respondent Hemandas. As early as 1927, this Court was, and it still is, of the view that a foreign corporation not doing business in the Philippines needs no license to sue before Philippine courts for infringement of trademark and unfair competition. Thus, in Western Equipment and Supply Co. v. Reyes (51 Phil. 115), this Court held that a foreign corporation which has never done any business in the Philippines and which is unlicensed and unregistered to do business here, but is widely and favorably known in the Philippines through the use therein of its products bearing its corporate and tradename, has a legal right to maintain an action in the Philippines to restrain the residents and inhabitants thereof from organizing a corporation therein bearing the same name as the foreign corporation, when it appears that they have personal knowledge of the existence of such a foreign corporation, and it is apparent that the purpose of the proposed domestic corporation is to deal and trade in the same goods as those of the foreign corporation.

We further held:

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... That company is not here seeking to enforce any legal or control rights arising from, or growing out of, any business which it has transacted in the Philippine Islands. The sole purpose of the action:

Is to protect its reputation, its corporate name, its goodwill, whenever that reputation, corporate name or goodwill have, through the natural development of its trade, established themselves.' And it contends that its rights to the use of its corporate and trade name:

Is a property right, a right in rem, which it may assert and protect against all the world, in any of the courts of the world-even in jurisdictions where it does not transact business-just the same as it may protect its tangible property, real or personal, against trespass, or conversion. Citing sec. 10, Nims on Unfair Competition and TradeMarks and cases cited; secs. 21-22, Hopkins on TradeMarks, Trade Names and Unfair Competition and cases cited.' That point is sustained by the authorities, and is well stated in Hanover Star Mining Co. v. Allen and Wheeler Co. (208 Fed., 513). in which the syllabus says:

Since it is the trade and not the mark that is to be protected, a trade-mark acknowledges no territorial boundaries of municipalities or states or nations, but extends to every market where the trader's goods have become known and Identified by the use of the mark.

Our recognizing the capacity of the petitioner to sue is not by any means novel or precedent setting. Our jurisprudence is replete with cases illustrating instances when foreign corporations not doing business in the Philippines may nonetheless sue in our courts. In East Board Navigation Ltd, v. Ysmael and Co., Inc. (102 Phil. 1), we recognized a right of foreign corporation to sue on isolated transactions. In General Garments Corp. v. Director of Patents (41 SCRA 50), we sustained the right of Puritan Sportswear Corp., a foreign corporation not licensed to do and not doing business in the Philippines, to file a petition for cancellation of a trademark before the Patent Office.

More important is the nature of the case which led to this petition. What preceded this petition for certiorari was a letter complaint filed before the NBI charging Hemandas with a criminal offense, i.e., violation of Article 189 of the Revised Penal Code. If prosecution follows after the completion of the preliminary investigation being conducted by the Special Prosecutor the information shall be in the name of the People of the Philippines and no longer the petitioner which is only an aggrieved party since a criminal offense is essentially an act against the State. It is the latter which is principally the injured party although there is a private right violated. Petitioner's capacity to sue would become, therefore, of not much

significance in the main case. We cannot snow a possible violator of our criminal statutes to escape prosecution upon a far-fetched contention that the aggrieved party or victim of a crime has no standing to sue.

In upholding the right of the petitioner to maintain the present suit before our courts for unfair competition or infringement of trademarks of a foreign corporation, we are moreover recognizing our duties and the rights of foreign states under the Paris Convention for the Protection of Industrial Property to which the Philippines and France are parties. We are simply interpreting and enforcing a solemn international commitment of the Philippines embodied in a multilateral treaty to which we are a party and which we entered into because it is in our national interest to do so.

The Paris Convention provides in part that:

ARTICLE 1

(1) The countries to which the present Convention applies constitute themselves into a Union for the protection of industrial property.

(2) The protection of industrial property is concerned with patents, utility models, industrial designs, trademarks service marks, trade names, and indications of source or appellations of origin, and the repression of unfair competition.

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ARTICLE 2

(2) Nationals of each of the countries of the Union shall as regards the protection of industrial property, enjoy in all the other countries of the Union the advantages that their respective laws now grant, or may hereafter grant, to nationals, without prejudice to the rights specially provided by the present Convention. Consequently, they shall have the same protection as the latter, and the same legal remedy against any infringement of their rights, provided they observe the conditions and formalities imposed upon nationals.

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ARTICLE 6

(1) The countries of the Union undertake, either administratively if their legislation so permits, or at the request of an interested party, to refuse or to cancel the registration and to prohibit the use of a trademark which constitutes a reproduction, imitation or translation, liable to create confusion, of a mark considered by the competent authority of the country of registration or use to be well-known in that country as being already the mark of a person entitled to the benefits of the present Convention and used for Identical or similar goods. These provisions shall also apply when the essential part of the mark constitutes a reproduction of any such well-known mark or an imitation liable to create confusion therewith.

xxx xxx xxx

ARTICLE 8

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

8

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ARTICLE 10bis

(1) The countries of the Union are bound to assure to persons entitled to the benefits of the Union effective protection against unfair competition.

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ARTICLE 10ter

(1) The countries of the Union undertake to assure to nationals of the other countries of the Union appropriate legal remedies to repress effectively all the acts referred to in Articles 9, 10 and l0bis.

(2) They undertake, further, to provide measures to permit syndicates and associations which represent the industrialists, producers or traders concerned and the existence of which is not contrary to the laws of their countries, to take action in the Courts or before the administrative authorities, with a view to the repression of the acts referred to in Articles 9, 10 and 10bis, in so far as the law of the country in which protection is claimed allows such action by the syndicates and associations of that country.

xxx xxx xxx

ARTICLE 17

Every country party to this Convention undertakes to adopt, in accordance with its constitution, the measures necessary to ensure the application of this Convention.

It is understood that at the time an instrument of ratification or accession is deposited on behalf of a country; such country will be in a position under its domestic law to give effect to the provisions of this Convention. (61 O.G. 8010)

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In Vanity Fair Mills, Inc. v. T Eaton Co. (234 F. 2d 633) the United States Circuit Court of Appeals had occasion to comment on the extraterritorial application of the Paris Convention It said that:

[11] The International Convention is essentially a compact between the various member countries to accord in their own countries to citizens of the other contracting parties trademark and other rights comparable to those accorded their own citizens by their domestic law. The underlying principle is that foreign nationals should be given the same treatment in each of the member countries as that country makes available to its own citizens. In addition, the Convention sought to create uniformity in certain respects by obligating each member nation 'to assure to nationals of countries of the Union an effective protection against unfair competition.'

[12] The Convention is not premised upon the Idea that the trade-mark and related laws of each member nation shall be given extra-territorial application, but on exactly the converse principle that each nation's law shall have only territorial application. Thus a foreign national of a member nation using his trademark in commerce in the United States is accorded extensive protection here against infringement and other types of unfair competition by virtue of United States

membership in the Convention. But that protection has its source in, and is subject to the limitations of, American law, not the law of the foreign national's own country. ...

By the same token, the petitioner should be given the same treatment in the Philippines as we make available to our own citizens. We are obligated to assure to nationals of "countries of the Union" an effective protection against unfair competition in the same way that they are obligated to similarly protect Filipino citizens and firms.

Pursuant to this obligation, the Ministry of Trade on November 20, 1980 issued a memorandum addressed to the Director of the Patents Office directing the latter:

xxx xxx xxx

... to reject all pending applications for Philippine registration of signature and other world famous trademarks by applicants other than its original owners or users.

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

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

The memorandum is a clear manifestation of our avowed adherence to a policy of cooperation and amity with all nations. It is not, as wrongly alleged by the private respondent, a personal policy of Minister Luis Villafuerte which expires once he leaves the Ministry of Trade. For a treaty or convention is not a mere moral obligation to be enforced or not at the whims of an incumbent head of a Ministry. It creates a legally binding obligation on the parties founded on the generally accepted principle of international law of pacta sunt servanda which has been adopted as part of the law of our land. (Constitution, Art. II, Sec. 3). The memorandum reminds the Director of Patents of his legal duty to obey both law and treaty. It must also be obeyed.

Hemandas further contends that the respondent court did not commit grave abuse of discretion in issuing the questioned order of April 22, 1983.

A review of the grounds invoked by Hemandas in his motion to quash the search warrants reveals the fact that they are not appropriate for quashing a warrant. They are matters of defense which should be ventilated during the trial on the merits of the case. For instance, on the basis of the facts before the Judge, we fail to understand how he could treat a bare allegation that the respondent's trademark is different from the petitioner's trademark as a sufficient basis to grant the motion to quash. We will treat the issue of prejudicial question later. Granting that respondent Hemandas was only trying to show the absence of probable cause, we, nonetheless, hold the arguments to be untenable.

As a mandatory requirement for the issuance of a valid search warrant, the Constitution requires in no uncertain terms the determination of probable cause by the judge after examination under oath or affirmation of the complainant and the witnesses he may produce (Constitution, Art. IV, Sec. 3). Probable cause has traditionally meant such facts and circumstances antecedent to the issuance of the warrant that are in themselves sufficient to induce a cautious man to rely upon them and act in pursuance thereof (People v. Sy Juco, 64 Phil. 667).

This concept of probable cause was amplified and modified by our ruling in Stonehill v. Diokno, (20 SCRA 383) that probable cause "presupposes the introduction of competent proof that the party against whom it is sought has performed particular acts, or committed specific omissions, violating a given provision of our criminal laws."

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

The records show that the NBI agents at the hearing of the application for the warrants before respondent court presented three witnesses under oath, sworn statements, and various exhibits in the form of clothing apparels manufactured by Hemandas but carrying the trademark Lacoste. The respondent court personally interrogated Ramon Esguerra, Samuel Fiji, and Mamerto Espatero by means of searching questions. After hearing the testimonies and examining the documentary evidence, the respondent court was convinced that there were good and sufficient reasons for the issuance of the warrant. And it then issued the warrant.

The respondent court, therefore, complied with the constitutional and statutory requirements for the issuance of a valid search warrant. At that point in time, it was fully convinced that there existed probable cause. But after hearing the motion to quash and the oppositions thereto, the respondent court executed a complete turnabout and declared that there was no probable cause to justify its earlier issuance of the warrants.

True, the lower court should be given the opportunity to correct its errors, if there be any, but the rectification must, as earlier stated be based on sound and valid grounds. In this case, there was no compelling justification for the about face. The allegation that vital facts were deliberately suppressed or concealed by the petitioner should have been assessed more carefully because the object of the quashal was the return of items already seized and easily examined by the court. The items were alleged to be fake and quite obviously would be needed as evidence in the criminal prosecution. Moreover, an application for a search warrant is heard ex parte. It is neither a trial nor a part of the trial. Action on these applications must be expedited for time is of the essence. Great reliance has to be accorded by the judge to the testimonies under oath of the complainant and the witnesses. The allegation of Hemandas that the applicant withheld information from the respondent court was clearly no basis to order the return of the seized items.

Hemandas relied heavily below and before us on the argument that it is the holder of a certificate of registration of the trademark "CHEMISE LACOSTE & CROCODILE DEVICE". Significantly, such registration is only in the Supplemental Register.

A certificate of registration in the Supplemental Register is not prima facie evidence of the validity of registration, of the registrant's exclusive right to use the same in connection with the goods, business, or services specified in the certificate. Such a certificate of registration cannot be filed, with effect, with the Bureau of Customs in order to exclude from the Philippines, foreign goods bearing infringement marks or trade names (Rule 124, Revised Rules of Practice Before the Phil. Pat. Off. in Trademark Cases; Martin, Philippine Commercial Laws, 1981, Vol. 2, pp. 513-515).

Section 19-A of Republic Act 166 as amended not only provides for the keeping of the supplemental register in addition to the principal register but specifically directs that:

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The certificates of registration for marks and trade names registered on the supplemental register shall be conspicuously different from certificates issued for marks and trade names on the principal register.

xxx xxx xxx

The reason is explained by a leading commentator on Philippine Commercial Laws:

The registration of a mark upon the supplemental register is not, as in the case of the principal register, prima facie evidence of (1) the validity of registration; (2) registrant's ownership of the mark; and (3) registrant's exclusive right to use the mark. It is not subject to opposition, although it may be cancelled after its issuance. Neither may it be the subject of interference proceedings. Registration on the supplemental register is not constructive notice of registrant's claim of ownership. A supplemental register is provided for the registration of marks which are not registrable on the principal register because of some defects (conversely, defects which make a mark unregistrable on the principal register, yet do not bar them from the supplemental register.) (Agbayani, II Commercial Laws of the Philippines, 1978, p. 514, citing Uy Hong Mo v. Titay & Co., et al., Dec. No. 254 of Director of Patents, Apr. 30, 1963);

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

The reliance of the private respondent on the last sentence of the Patent office action on application Serial No. 30954 that "registrant is presumed to be the owner of the mark until after the registration is declared cancelled" is, therefore, misplaced and grounded on shaky foundation, The supposed presumption not only runs counter to the precept embodied in Rule 124 of the Revised Rules of Practice before the Philippine Patent Office in Trademark Cases but considering all the facts ventilated before us in the four interrelated petitions involving the petitioner and the respondent, it is devoid of factual basis. And even in cases where presumption and precept may factually be reconciled, we have held that the presumption is rebuttable, not conclusive, (People v. Lim Hoa, G.R. No. L10612, May 30, 1958, Unreported). One may be declared an unfair competitor even if his competing trademark is registered (Parke, Davis & Co. v. Kiu Foo & Co., et al., 60 Phil. 928; La Yebana Co. v. Chua Seco & Co., 14 Phil. 534).

By the same token, the argument that the application was premature in view of the pending case before the Patent Office is likewise without legal basis.

The proceedings pending before the Patent Office involving IPC Co. 1658 do not partake of the nature of a prejudicial question which must first be definitely resolved.

Section 5 of Rule 111 of the Rules of Court provides that:

A petition for the suspension of the criminal action based upon the pendency of a pre-judicial question in a civil case, may only be presented by any party before or during the trial of the criminal action.

The case which suspends the criminal prosecution must be a civil case which is determinative of the innocence or, subject to the availability of other defenses, the guilt of the accused. The pending case before the Patent Office is an administrative proceeding and not a civil case. The decision of the Patent Office cannot be finally determinative of the private respondent's innocence of the charges against him.

In Flordelis v. Castillo (58 SCRA 301), we held that:

As clearly delineated in the aforecited provisions of the new Civil Code and the Rules of Court, and as uniformly applied in numerous decisions of this Court, (Berbari v. Concepcion, 40 Phil. 837 (1920); Aleria v. Mendoza, 83 Phil. 427 (1949); People v. Aragon, 94 Phil. 357 (1954); Brito-Sy v. Malate Taxicab & Garage, Inc., 102 Phil 482 (1957); Mendiola v. Macadael, 1 SCRA 593; Benitez v. Concepcion, 2 SCRA 178; Zapante v. Montesa, 4 SCRA 510; Jimenez v. Averia, 22 SCRA 1380.) In Buenaventura v. Ocampo (55 SCRA 271) the doctrine of prejudicial question

10

was held inapplicable because no criminal case but merely an administrative case and a civil suit were involved. The Court, however, held that, in view of the peculiar circumstances of that case, the respondents' suit for damages in the lower court was premature as it was filed during the pendency of an administrative case against the respondents before the POLCOM. 'The possibility cannot be overlooked,' said the Court, 'that the POLCOM may hand down a decision adverse to the respondents, in which case the damage suit will become unfounded and baseless for wanting in cause of action.') the doctrine of pre-judicial question comes into play generally in a situation where a civil action and a criminal action both penned and there exists in the former an issue which must be preemptively resolved before the criminal action may proceed, because howsoever the issue raised in the civil action is resolved would be determinative juris et de jure of the guilt or innocence of the accused in the criminal case.

In the present case, no civil action pends nor has any been instituted. What was pending was an administrative case before the Patent Office.

Even assuming that there could be an administrative proceeding with exceptional or special circumstances which render a criminal prosecution premature pending the promulgation of the administrative decision, no such peculiar circumstances are present in this case.

Moreover, we take note of the action taken by the Patents Office and the Minister of Trade and affirmed by the Intermediate Appellate Court in the case of La Chemise Lacoste S. A. v. Ram Sadhwani (AC-G.R. No. SP-13356, June 17, 1983).

The same November 20, 1980 memorandum of the Minister of Trade discussed in this decision was involved in the appellate court's decision. The Minister as the "implementing authority" under Article 6bis of the Paris Convention for the protection of Industrial Property instructed the Director of Patents to reject applications for Philippine registration of signature and other world famous trademarks by applicants other than its original owners or users. The brand "Lacoste" was specifically cited together with Jordache, Gloria Vanderbilt, Sasson, Fila, Pierre Cardin, Gucci, Christian Dior, Oscar dela Renta, Calvin Klein, Givenchy, Ralph Laurence, Geoffrey Beene, Lanvin, and Ted Lapidus. The Director of Patents was likewise ordered to require Philippine registrants of such trademarks to surrender their certificates of registration. Compliance by the Director of Patents was challenged.

The Intermediate Appellate Court, in the La Chemise Lacoste S.A. v. Sadhwani decision which we cite with approval sustained the power of the Minister of Trade to issue the implementing memorandum and, after going over the evidence in the records, affirmed the decision of the Director of Patents declaring La Chemise Lacoste &A. the owner of the disputed trademark and crocodile or alligator device. The Intermediate Appellate Court speaking through Mr. Justice Vicente V. Mendoza stated:

In the case at bar, the Minister of Trade, as 'the competent authority of the country of registration,' has found that among other well-known trademarks 'Lacoste' is the subject of conflicting claims. For this reason, applications for its registration must be rejected or refused, pursuant to the treaty obligation of the Philippines.

Apart from this finding, the annexes to the opposition, which La Chemise Lacoste S.A. filed in the Patent Office, show that it is the owner of the trademark 'Lacoste' and the device consisting of a representation of a crocodile or alligator by the prior adoption and use of such mark and device on clothing, sports apparel and the like. La Chemise Lacoste S.A, obtained registration of these mark and device and was in fact issued renewal certificates by the French National Industry Property Office.

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Indeed, due process is a rule of reason. In the case at bar the order of the Patent Office is based not only on the undisputed fact of ownership of the trademark by the appellee but on a prior determination by the Minister of Trade, as the competent authority under the Paris Convention, that the trademark and device sought to be registered by the appellant are well-known marks which the Philippines, as party to the Convention, is bound to protect in favor of its owners. it would be to exalt form over substance to say that under the circumstances, due process requires that a hearing should be held before the application is acted upon.

The appellant cites section 9 of Republic Act No. 166, which requires notice and hearing whenever an opposition to the registration of a trademark is made. This provision does not apply, however, to situations covered by the Paris Convention, where the appropriate authorities have determined that a well-known trademark is already that of another person. In such cases, the countries signatories to the Convention are obliged to refuse or to cancel the registration of the mark by any other person or authority. In this case, it is not disputed that the trademark Lacoste is such a well-known mark that a hearing, such as that provided in Republic Act No. 166, would be superfluous.

The issue of due process was raised and fully discussed in the appellate court's decision. The court ruled that due process was not violated.

In the light of the foregoing it is quite plain that the prejudicial question argument is without merit.

We have carefully gone over the records of all the cases filed in this Court and find more than enough evidence to sustain a finding that the petitioner is the owner of the trademarks "LACOSTE", "CHEMISE LACOSTE", the crocodile or alligator device, and the composite mark of LACOSTE and the representation of the crocodile or alligator. Any pretensions of the private respondent that he is the owner are absolutely without basis. Any further ventilation of the issue of ownership before the Patent Office will be a superfluity and a dilatory tactic.

The issue of whether or not the trademark used by the private respondent is different from the petitioner's trade mark is a matter of defense and will be better resolved in the criminal proceedings before a court of justice instead of raising it as a preliminary matter in an administrative proceeding.

The purpose of the law protecting a trademark cannot be overemphasized. They are to point out distinctly the origin or ownership of the article to which it is affixed, to secure to him, who has been instrumental in bringing into market a superior article of merchandise, the fruit of his industry and skill, and to prevent fraud and imposition (Etepha v. Director of Patents, 16 SCRA 495).

The legislature has enacted laws to regulate the use of trademarks and provide for the protection thereof. Modern trade and commerce demands that depredations on legitimate trade marks of non-nationals including those who have not shown prior registration thereof should not be countenanced. The law against such depredations is not only for the protection of the owner of the trademark but also, and more importantly, for the protection of purchasers from confusion, mistake, or deception as to the goods they are buying. (Asari Yoko Co., Ltd. v. Kee Boc, 1 SCRA 1; General Garments Corporation v. Director of Patents, 41 SCRA 50).

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

The records show that the goodwill and reputation of the petitioner's products bearing the trademark LACOSTE date back even before 1964 when LACOSTE clothing apparels were first marketed in the Philippines. To allow Hemandas to continue using the trademark Lacoste for the simple reason that he was the first registrant in the Supplemental Register

11

of a trademark used in international commerce and not belonging to him is to render nugatory the very essence of the law on trademarks and tradenames.

We now proceed to the consideration of the petition in Gobindram Hemandas Suianani u. Hon. Roberto V Ongpin, et al. (G.R. No. 65659).

Actually, three other petitions involving the same trademark and device have been filed with this Court.

In Hemandas & Co. v. Intermediate Appellate Court, et al. (G.R. No. 63504) the petitioner asked for the following relief:

IN VIEW OF ALL THE FOREGOING, it is respectfully prayed (a) that the Resolutions of the respondent Court of January 3, 1983 and February 24, 1983 be nullified; and that the Decision of the same respondent Court of June 30, 1983 be declared to be the law on the matter; (b) that the Director of Patents be directed to issue the corresponding registration certificate in the Principal Register; and (c) granting upon the petitioner such other legal and equitable remedies as are justified by the premises.

On December 5, 1983, we issued the following resolution:

Considering the allegations contained, issues raised and the arguments adduced in the petition for review, the respondent's comment thereon, and petitioner's reply to said comment, the Court Resolved to DENY the petition for lack of merit.

The Court further Resolved to CALL the attention of the Philippine Patent Office to the pendency in this Court of G.R. No. 563796-97 entitled 'La Chemise Lacoste, S.A. v. Hon. Oscar C. Fernandez and Gobindram Hemandas' which was given due course on June 14, 1983 and to the fact that G.R. No. 63928-29 entitled 'Gobindram Hemandas v. La Chemise Lacoste, S.A., et al.' filed on May 9, 1983 was dismissed for lack of merit on September 12, 1983. Both petitions involve the same dispute over the use of the trademark 'Chemise Lacoste'.

The second case of Gobindram Hemandas vs. La Chemise Lacoste, S.A., et al. (G.R. No. 63928-29) prayed for the following:

I. On the petition for issuance of writ of preliminary injunction, an order be issued after due hearing:

l. Enjoining and restraining respondents Company, attorneys-in-fact, and Estanislao Granados from further proceedings in the unfair competition charges pending with the Ministry of Justice filed against petitioner;

2. Enjoining and restraining respondents Company and its attorneys-in-fact from causing undue publication in newspapers of general circulation on their unwarranted claim that petitioner's products are FAKE pending proceedings hereof; and

3. Enjoining and restraining respondents Company and its attorneys-in-fact from sending further threatening letters to petitioner's customers unjustly stating that petitioner's products they are dealing in are FAKE and threatening them with confiscation and seizure thereof.

II. On the main petition, judgment be rendered:

l. Awarding and granting the issuance of the Writ of Prohibition, prohibiting, stopping, and restraining respondents from further committing the acts complained of;

2. Awarding and granting the issuance of the Writ of Mandamus, ordering and compelling respondents National Bureau of Investigation, its aforenamed agents, and State Prosecutor Estanislao Granados to immediately comply with the Order of the Regional Trial Court, National Capital Judicial Region, Branch XLIX, Manila, dated April 22, 1983, which directs the immediate return of the seized items under Search Warrants Nos. 83-128 and 83-129;

3. Making permanent any writ of injunction that may have been previously issued by this Honorable Court in the petition at bar: and

4. Awarding such other and further relief as may be just and equitable in the premises.

As earlier stated, this petition was dismissed for lack of merit on September 12, 1983. Acting on a motion for reconsideration, the Court on November 23, 1983 resolved to deny the motion for lack of merit and declared the denial to be final.

Hemandas v. Hon. Roberto Ongpin (G.R. No. 65659) is the third petition.

In this last petition, the petitioner prays for the setting aside as null and void and for the prohibiting of the enforcement of the following memorandum of respondent Minister Roberto Ongpin:

MEMORANDUM:

FOR: THE DIRECTOR OF PATENTS

Philippine Patent Office

xxx xxx xxx

Pursuant to Executive Order No. 913 dated 7 October 1983 which strengthens the rule-making and adjudicatory powers of the Minister of Trade and Industry and provides inter alia, that 'such rule-making and adjudicatory powers should be revitalized in order that the Minister of Trade and Industry can ...apply more swift and effective solutions and remedies to old and new problems ... such as the infringement of internationally-known tradenames and trademarks ...'and in view of the decision of the Intermediate Appellate Court in the case of LA CHEMISE LACOSTE, S.A., versus RAM SADWHANI [AC-G.R. Sp. No. 13359 (17) June 1983] which affirms the validity of the MEMORANDUM of then Minister Luis R. Villafuerte dated 20 November 1980 confirming our obligations under the PARIS CONVENTION FOR THE PROTECTION OF INDUSTRIAL PROPERTY to which the Republic of the Philippines is a signatory, you are hereby directed to implement measures necessary to effect compliance with our obligations under said convention in general, and, more specifically, to honor our commitment under Section 6 bis thereof, as follows:

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

(a) a declaration by the Minister of Trade and Industry that' the trademark being considered is already well-known in the Philippines such that permission for its use by other than its original owner will constitute a reproduction, imitation, translation or other infringement;

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(b) that the trademark is used in commerce internationally, supported by proof that goods bearing the trademark are sold on an international scale, advertisements, the establishment of factories, sales offices, distributorships, and the like, in different countries, including volume or other measure of international trade and commerce;

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

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

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

2. The word trademark, as used in this MEMORANDUM, shall include tradenames, service marks, logos, signs, emblems, insignia or other similar devices used for Identification and recognition by consumers.

3. The Philippine Patent Office shall refuse all applications for, or cancel the registration of, trademarks which constitute a reproduction, translation or imitation of a trademark owned by a person, natural or corporate, who is a citizen of a country signatory to the PARIS CONVENTION FOR THE PROTECTION OF INDUSTRIAL PROPERTY.

4. The Philippine Patent Office shall give due course to the Opposition in cases already or hereafter filed against the registration of trademarks entitled to protection of Section 6 bis of said PARIS CONVENTION as outlined above, by remanding applications filed by one not entitled to such protection for final disallowance by the Examination Division.

5. All pending applications for Philippine registration of signature and other world famous trademarks filed by applicants other than their original owners or users shall be rejected forthwith. Where such applicants have already obtained registration contrary to the abovementioned PARIS CONVENTION and/or Philippine Law, they shall be directed to surrender their Certificates of Registration to the Philippine Patent Office for immediate cancellation proceedings.

6. Consistent with the foregoing, you are hereby directed to expedite the hearing and to decide without delay the following cases pending before your Office:

1. INTER PARTES CASE NO. 1689-Petition filed by La Chemise Lacoste, S.A. for the cancellation of Certificate of Registration No. SR-2225 issued to Gobindram Hemandas, assignee of Hemandas and Company;

2. INTER PARTES CASE NO. 1658-Opposition filed by Games and Garments Co. against the registration of the trademark Lacoste sought by La Chemise Lacoste, S.A.;

3. INTER PARTES CASE NO. 1786-Opposition filed by La Chemise Lacoste, S.A. against the registration of trademark Crocodile Device and Skiva sought by one Wilson Chua.

Considering our discussions in G.R. Nos. 63796-97, we find the petition in G.R. No. 65659 to be patently without merit and accordingly deny it due course.

In complying with the order to decide without delay the cases specified in the memorandum, the Director of Patents shall limit himself to the ascertainment of facts in issues not resolved by this decision and apply the law as expounded by this Court to those facts.

One final point. It is essential that we stress our concern at the seeming inability of law enforcement officials to stem the tide of fake and counterfeit consumer items flooding the Philippine market or exported abroad from our country. The greater victim is not so much the manufacturer whose product is being faked but the Filipino consuming public and in the case of exportations, our image abroad. No less than the President, in issuing Executive Order No. 913 dated October 7, 1983 to strengthen the powers of the Minister of Trade and Industry for the protection of consumers, stated that, among other acts, the dumping of substandard, imitated, hazardous, and cheap goods, the infringement of internationally known tradenames and trademarks, and the unfair trade practices of business firms has reached such proportions as to constitute economic sabotage. We buy a kitchen appliance, a household tool, perfume, face powder, other toilet articles, watches, brandy or whisky, and items of clothing like jeans, T-shirts, neck, ties, etc. — the list is quite length — and pay good money relying on the brand name as guarantee of its quality and genuine nature only to explode in bitter frustration and genuine nature on helpless anger because the purchased item turns out to be a shoddy imitation, albeit a clever looking counterfeit, of the quality product. Judges all over the country are well advised to remember that court processes should not be used as instruments to, unwittingly or otherwise, aid counterfeiters and intellectual pirates, tie the hands of the law as it seeks to protect the Filipino consuming public and frustrate executive and administrative implementation of solemn commitments pursuant to international conventions and treaties.

WHEREFORE, the petition in G.R. NOS. 63797-97 is hereby GRANTED. The order dated April 22, 1983 of the respondent regional trial court is REVERSED and SET ASIDE. Our Temporary Restraining Order dated April 29, 1983 is ma(i.e. PERMANENT. The petition in G.R. NO. 65659 is DENIED due course for lack of merit. Our Temporary Restraining Order dated December 5, 1983 is LIFTED and SET ASIDE, effective immediately.

SO ORDERED.

Teehankee (Chairman), Melencio-Herrera, Plana, Relova and De la Fuente, JJ., concur.

G.R. No. L-18289 March 31, 1964

ANDRES ROMERO, petitioner, vs.MAIDEN FORM BRASSIERE CO., INC., and THE DIRECTOR OF PATENTS, respondents.

Alafriz Law Office for petitioner.Ross, Selph & Carrascoso for respondent Maiden Form Brassiere Co., Inc.Office of the Solicitor General and Tiburcio S. Evalle for respondent Director of Patents.

BARRERA, J.:

From the decision of the Director of Patents (of January 17, 1961) dismissing his petition for cancellation of the registration of the trademark "Adagio" for brassieres manufactured by respondent Maiden Form Brassiere Co., Inc., petitioner Andres Romero, interposed this appeal.

On February 12, 1957, respondent company, a foreign corporation, filed with respondent Director of Patents an application for registration (pursuant to Republic Act No. 166) of the trademark "Adagio" for the brassieres manufactured by it. In its application, respondent company alleged that said trademark was first used by it in the United States on October 26, 1937, and in the Philippines on August 31, 1946; that it had been continuously used by it in trade in, or with the Philippines for over 10 years; that said trademark "is on the date of this application, actually used by respondent company on the following goods, classified according to the official classification of goods (Rule 82) - Brassieres, Class 40"; and that said trademark is applied or affixed by respondent to the goods by placing thereon a woven label on which the trademark is shown.

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Acting on said application, respondent Director, on August 13, 1957, approved for publication in the Official Gazette said trademark of respondent company, in accordance with Section 7 of Republic Act No. 166 (Trademark Law), having found, inter alia, that said trademark is "a fanciful and arbitrary use of a foreign word adopted by applicant as a trademark for its product; that it is neither a surname nor a geographical term, nor any that comes within the purview of Section 4 of Republic Act No. 166; and that the mark as used by respondent company convincingly shows that it identifies and distinguishes respondent company's goods from others."

On October 17, 1957, respondent Director issued to respondent company a certificate of registration of with, trademark "Adagio".

On February 26, 1958, petitioner filed with respondent Director a petition for cancellation of said trademark, on the grounds that it is a common descriptive name of an article or substance on which the patent has expired; that its registration was obtained fraudulently or contrary to the provisions of Section 4, Chapter II of Republic Act No. 166; and that the application for its registration was not filed in accordance with the provisions of Section 37, Chapter XI of the same Act. Petitioner also alleged that said trademark has not become distinctive of respondent company's goods or business; that it has been used by respondent company to classify the goods (the brassieres) manufactured by it, in the same manner as petitioner uses the same; that said trademark has been used by petitioner for almost 6 years; that it has become a common descriptive name; and that it is not registered in accordance with the requirements of Section 37(a), Chapter XI of Republic Act No. 166.

Issues having been joined, the case was heard and, after hearing, respondent Director (on January 17, 1961) rendered the decision above adverted to.

Petitioner filed a motion for reconsideration of said decision, on the grounds that (1) it is contrary to the evidence, and (2) it is contrary to law. Said motion was denied by respondent Director by resolution of March 7, 1961.

Hence, this appeal.

Appellant claims that the trademark "Adagio" has become a common descriptive name of a particular style of brassiere and is, therefore, unregistrable. It is urged that said trademark had been used by local brassiere manufacturers since 1948, without objection on the part of respondent company.

This claim is without basis in fact. The evidence shows that the trademark "Adagio" is a musical term, which means slowly or in an easy manner, and was used as a trademark by the owners thereof (the Rosenthals of Maiden Form Co., New York) because they are musically inclined. Being a musical term, it is used in an arbitrary (fanciful) sense as a trademark for brassieres manufactured by respondent company. It also appears that respondent company has, likewise, adopted other musical terms such as "Etude" (Exh. W-2), "Chansonette" (Exh. W-3), "Prelude" (Exh. W-4), "Over-ture" (Exh. W-6), and "Concerto" (Exh. V), to identify, as a trademark, the different styles or types of its brassieres. As respondent Director pointed out, "the fact that said mark is used also to designate a particular style of brassiere, does not affect its registrability as a trademark" (Kiekhaefer Corp. v. Willys-Overland Motors, Inc., 111 USPQ 105).1äwphï1.ñët

It is not true that respondent company did not object to the use of said trademark by petitioner and other local brassiere manufacturers. The records show that respondent company's agent, Mr. Schwartz, warned the Valleson Department Store to desist from the sale of the "Adagio" Royal Form brassieres manufactured by petitioner (t.s.n., pp. 27-28, Oct. 7, 1958), and even placed an advertisement (Exhs. 3 & 4) in the local newspapers (Manila Daily Bulletin, Manila Times, Fookien Times, and others) warning the public against unlawful use of said trademark (t.s.n., p. 15, Aug. 17, 1959). The advertisement (Exh. U) in the Manila Times made by respondent company on February 9, 1958, was brought to petitioner's attention (t.s.n., p. 24, Oct. 7, 1958), which must have prompted him to file this present petition for cancellation, on February 26, 1958.

On the other hand, respondent company's long and continuous use of the trademark "Adagio" has not rendered it merely descriptive of the product. In Winthrop Chemical Co. v. Blackman (268 NYS 653), it was held that widespread dissemination does not justify the defendants in the use of the trademark.

Veronal has been widely sold in this country by the plaintiff; over 5,250,000 packages have been sold since 1919. This is a consequence of the long and continued use by the plaintiff of this trademark and is the result of its efforts to inform the profession and the public of its product. This widespread dissemination does not justify the defendants in the use of this trademark. If this argument were sound, then every time a plaintiff obtained the result of having the public purchase its article, that fact of itself would destroy a trademark. Arbitrary trademarks cannot become generic in this way. Jacobs v. Beecham, 221 U.S. 263, 31 S. Ct. 555, 55 L. Ed. 729; Coca-Cola Co. v. Koke Co. of American, 254 U.S. 143, 41 S. Ct. 113, 65 L. Ed. 189. (emphasis supplied.)

Appellant next contends that the trademark "Adagio at the time it was registered (in the Philippines) on October 17, 1957, had long been used by respondent company, only "to designate a particular style or quality of brassiere and, therefore, is unregistrable as a trademark. In support of the contention, he alleges that the sentence "Maidenform bras are packaged for your quick shopping convenience. For other popular Maidenform styles writ for free style booklet to: Maiden Form Brassiere Co., Inc 200 Madison Avenue, New York 16, N.Y." printed on the package (Exh. W), shows that the trademark "Adagio" is used to designate a particular style or quality of brassiere. He also cites portions of the testimonies of his witnesses Bautista and Barro, to the effect that said trademark refers to the style of brassieres sold in the stores of which they are salesmen.

This contention is untenable. Said sentence appearing on the package (Exh. W), standing alone, does not conclusively indicate that the trademark "Adagio" is merely a style of brassiere. The testimony of Mr. Schwartz, witness of respondent company, belies petitioner's claim:

Q. There is a statement at the bottom of Exhibit W which reads, 'There is a Maidenform for every type of figure'. As you stated you are very familiar with these bras manufacture by Maidenform Brassiere Company, what are these types of figures this Exhibit W refer to?

A. This is a product sold primarily in the United States they have cold climate there, and a style to suit the climate and we have different here. This kind of bra very seldom comes here. This type is very expensive and sold primarily in the United States. We do not sell it here; it is very expensive an import restrictions do not allow our dollar allocations for such sort.

As to the testimonies of Bautista and Barro, they are me conclusions of said witnesses. Note that when Bautista was asked why he considered the trademark "Adagio" as a style, he replied that the brand "Adagio" is attached distinguish the style. He stated as follows:

Q. You said that those bras mentioned by you such as Adagio, Prelude, Alloette, are styles, will you please tell us the reason why you said that those are styles?

A. You know his brand like Adagio, Alloette are just attached to the bras just to distinguish the style: It is not the main brand.

Barro, on the other hand, said that "Adagio" is a mark. She declared as follows:

Q. You state that you used to sell brassieres in the store in which you work; when customers come to your store and ask for brassieres, what do they usually ask from you?

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A. Well, I tell you there are so many types and certain types of people ask for certain brassiere. There are people who ask for Royal Form Adagio and there are others who ask for Duchess Ideal Form, and so many kinds of marks.

Brassieres are usually of different types or styles, and appellee has used different trademarks for every type as shown by its labels, Exhibits W-2 (Etude), W-3 (Chansonette), W-4 (Prelude), W-5 (Maidenette), and W-6, (Overture). The mere fact that appellee uses "Adagio" for one type or style, does not affect the validity of such word as a trademark. In. the case of Kiekhaefer Corp. v. Willys-Overland Motors, 111 USPQ 105, it was held that the fact that the word "Hurricane" was used to designate only one model of automobile, did not affect the validity of that word as a trademark. In Minnesota Mining Co. V. Motloid Co., 74 USPQ 235, the applicant sought to register the letters "MM" in diagonal relationship within a circle. Applicant admitted that this mark was used only for its medium price and medium quality denture-base materials. The Assistant Commissioner of Patents held:

It clearly appears, however, that the mark serves to indicate origin of applicant's goods; and the fact that it is used on only one of several types or grades does not affect its registrability as a trade mark.

Appellant also claims that respondent Director erred in registering the trademark in question, despite appellee's non-compliance with Section 37, paragraphs 1 and 4 (a) of Republic Act No. 166.

This contention flows from a misconception of the application for registration of trademark of respondent. As we see it, respondent's application was filed under the provisions of Section 2 of Republic Act No. 166 as amended by Section 1 of Republic Act 865 which reads as follows:

"SEC. 2. What are registrable — Trademarks, ... own by persons, corporations, partnerships or associations domiciled ... in any foreign country may be registered in accordance with the provisions of this Act: Provided, That said trademarks, trade-names, or service marks are actually in use in commerce and services not less than two months in the Philippines before the time the applications for registration are filed: ..."

Section 37 of Republic Act No. 166 can be availed of only where the Philippines is a party to an international convention or treaty relating to trademarks, in which the trade-mark sought to be registered need not be use in the Philippines. The applicability of Section 37 has been commented on by the Director of Patents, in this wise:

Trademark rights in the Philippines, without actual use the trademark in this country can, of course, be created artificially by means of a treaty or convention with another country or countries. Section 37 of the present Philippine Trademark Law, Republic Act No. 166 (incorporated as Rule 82 in the Rules of Practice for Registration of Trademarks) envisions the eventual entrance of the Philippines into such convention treaty. It is provided in said section that applications filed thereunder need not allege use in the Philippines of the trade mark sought to be registered. The Philippines has, however not yet entered into any such treaty or convention and, until she does, actual use in the Philippines of the trademark sought to be registered and allegation in the application of such fact, will be required in all applications for original or renewal registration submitted to the Philippine Patent Office. (Circular Release No. 8.)

Appellant, likewise, contends that the registration the trademark in question was fraudulent or contrary Section 4 of Republic Act No. 166. There is no evidence to show that the registration of the trademark "Adagio" was obtained fraudulently by appellee. The evidence record shows, on the other hand, that the trademark "Adagio" was first exclusively in the Philippines by a appellee in the year 1932. There being no evidence of use of the mark by others before 1932, or that appellee abandoned use thereof, the registration of the mark was made in accordance with the Trademark Law. Granting that appellant used the mark when appellee stopped using it during the period of time that the Government imposed restrictions on importation of respondent's brassiere bearing the trademark, such temporary non-use did not affect the rights of appellee because it was occasioned by government restrictions and was not permanent, intentional, and voluntary.

To work an abandonment, the disuse must be permanent and not ephemeral; it must be intentional and voluntary, and not involuntary or even compulsory. There must be a thorough-going discontinuance of any trade-mark use of the mark in question (Callman, Unfair Competition and Trademark, 2nd Ed., p. 1341).

The use of the trademark by other manufacturers did not indicate an intention on the part of appellee to abandon it.

"The instances of the use by others of the term 'Budweiser, cited by the defendant, fail, even when liberally construed, to indicate an intention upon the part of the complainant to abandon its rights to that name. 'To establish the defense of abandonment, it is necessary to show not only acts indicating a practical abandonment, but an actual intention to abandon. Saxlehner v. Eisener & Mendelson Co., 179 U.S. 19, 21 S. Ct. 7 (45 L. Ed. 60). (Anheuser-Busch, Inc. v. Budweiser Malt Products Corp., 287 F. 245.)

Appellant next argues that respondent Director erred in declaring illegal the appropriation in the Philippines of the trademark in question by appellant and, therefore, said appropriation did not affect appellee's right thereto and the subsequent registration thereof. Appellant urges that its appropriation of the trademark in question cannot be considered illegal under Philippine laws, because of non-compliance by appellee of Section 37 of Republic Act No. 166. But we have already shown that Section 37 is not the provision invoked by respondent because the Philippines is not as yet a party to any international convention or treaty relating to trademarks. The case of United Drug Co. v. Rectanus, 248 U.S. 90, 39 S. Ct. 48, 63 L. Ed. 141, cited by appellant, is not applicable to the present case, as the records show that appellee was the first user of the trademark in the Philippines, whereas appellant was the later user. Granting that appellant used the trade-mark at the time appellee stopped using it due to government restrictions on certain importations, such fact did not, as heretofore stated, constitute abandonment of the trademark as to entitle anyone to its free use.

Non-use because of legal restrictions is not evidence of an intent to abandon. Non-use of their ancient trade-mark and the adoption of new marks by the Carthusian Monks after they had been compelled to leave France was consistent with an intention to retain their right to use their old mark. Abandonment will not be inferred from a disuse over a period of years occasioned by statutory restrictions on the name of liquor. (Nims Unfair Competition and Trade-Mark p. 1269.)

IN VIEW OF ALL THE FOREGOING, we are of the opinion and so hold, that respondent Director of Patents did not err in dismissing the present petition for cancellation of the registered trademark of appellee company, and the decision appealed from is therefore hereby affirmed, with costs against the appellant. So ordered.

Bengzon, C.J., Padilla, Bautista Angelo, Labrador, Reyes, J.B.L., Paredes, Dizon, Regala and Makalintal, JJ., concur.Concepcion, J., took no part.

G.R. No. L-53672 May 31, 1982

BATA INDUSTRIES, LTD., petitioner, vs.THE HONORABLE COURT OF APPEALS; TIBURCIO S. EVALLE, DIRECTOR OF PATENTS, NEW OLYMPIAN RUBBER PRODUCTS CO., INC., respondents.

R E S O L U T I O N

ABAD SANTOS, J.:

On October 27, 1980, the petition in this case was denied for lack of merit. Petitioner moved to reconsider and as required, private respondent submitted comments. A hearing on the motion for reconsideration was held on June 7, 1982. This is Our resolution on the motion for reconsideration.

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In Inter Partes Case No. 654 of the Philippine Patent Office, New Olympian Rubber Products Co., Inc. sought the registration of the mark BATA for casual rubber shoes. It alleged that it has used the mark since July 1, 1970.

Registration was opposed by Bata Industries, Ltd., a Canadian corporation, which alleged that it owns and has not abandoned the trademark BATA.

Stipulated by the parties were the following:

1. Bata Industries, Ltd. has no license to do business in the Philippines;

2. It is not presently selling footwear under the trademark BATA in the Philippines; and

3. It has no licensing agreement with any local entity or firm to sell its products in the Philippines.

Evidence received by the Philippine Patent Office showed that Bata shoes made by Gerbec and Hrdina of Czechoslovakia were sold in the Philippines prior to World War II. Some shoes made by Bata of Canada were perhaps also sold in the Philippines until 1948. However, the trademark BATA was never registered in the Philippines by any foreign entity. Under the circumstances, it was concluded that "opposer has, to all intents and purposes, technically abandoned its trademark BATA in the Philippines."

Upon the other hand, the Philippine Patent Office found that New Olympian Rubber Products Co., Inc.:

... has overwhelmingly and convincingly established its right to the trademark BATA and consequently, its use and registration in its favor. There is no gainsaying the truth that the respondent has spent a considerable amount of money and effort in popularizing the trademark BATA for shoes in the Philippines through the advertising media since it was lawfully used in commerce on July 1, 1970. It can not be denied, therefore, that it is the respondent-applicant's expense that created the enormous goodwill of the trademark BATA in the Philippines and not the opposer as claimed in its opposition to the registration of the BATA mark by the respondent.

Additionally, on evidence of record, having also secured (three) copyright registrations for the word BATA, respondent-applicant's right to claim ownership of the trademark BATA in the Philippines, which it claims to be a Tagalog word which literally means "a little child" (Exh. 5), is all the more fortified.

The Philippine Patent Office dismissed the opposition and ordered the registration of the trademark BATA in favor of the domestic corporation.

Appeal from the decision of the Philippine Patent Office was made to the Court of Appeals by Bata Industries, Ltd. In a decision penned by Justice Justiniano P. Cortez dated August 9, 1979, with Justices Mariano Serrano and Jose B. Jimenez concurring, the PPO decision was reversed. A motion for reconsideration filed by New Olympian Rubber Products Co., Inc. was denied on October 17, 1979, by the same justices.

However, in a resolution on a second motion for reconsideration penned by Justice Hugo E. Gutierrez who is now a member of this Court, to which Justices Corazon J. Agrava and Rodolfo A. Nocon concurred (with the former filing a separate opinion), the decision of August 9, 1979, was set aside and that of the Director of Patents was affirmed.

In addition to points of law, Bata Industries, Ltd. questions "the circumstances surrounding the issuance of the questioned resolutions of the respondent Court of Appeals." In effect, it insinuates that there was something wrong when a new set of justices rendered a completely different decision.

It should be stated that there is nothing wrong and unusual when a decision is reconsidered. This is so when the reconsideration is made by a division composed of the same justices who rendered the decision but much more so when

the reconsideration is made by a different set of justices as happened in this case. Obviously, the new set of justices would have a fresh perspective unencumbered by the views expressed in the decision sought to be reconsidered. Nor should it be a cause for wonder why Justices Gutierrez, Agrava and Nocon had replaced the original justices. Justice Cortez resigned to become a candidate for the governorship of Cagayan (he was elected), while Justices Serrano and Jimenez retired upon reaching the age of 65.

On the merits, the extended resolution penned by Justice Gutierrez does not have to be fortified by Us. We agree with Mr. Justice Gutierrez when he says:

We are satisfied from the evidence that any slight goodwill generated by the Czechoslovakian product during the Commonwealth years was completely abandoned and lost in the more than 35 years that have passed since the liberation of Manila from the Japanese troops.

The applicant-appellee has reproduced excerpts from the testimonies of the opposer-appellant's witnesses to prove that the opposer-appellant was never a user of the trademark BATA either before or after the war, that the appellant is not the successor-in-interest of Gerbec and Hrdina who were not is representatives or agents, and could not have passed any rights to the appellant, that there was no privity of interest between the Czechoslovakian owner and the Canadian appellant and that the Czechoslovakian trademark has been abandoned in Czechoslovakia.

We agree with the applicant-appellee that more than substantial evidence supports the findings and conclusions of the Director of Patents. The appellant has no Philippine goodwill that would be damaged by the registration of the mark in the appellee's favor. We agree with the decision of the Director of Patents which sustains, on the basis of clear and convincing evidence, the right of the appellee to the registration and protection of its industrial property, the BATA trademark.

WHEREFORE, the motion for reconsideration is hereby denied for lack of merit. No special pronouncement as to costs.

SO ORDERED.

Barredo (Chairman), Aquino, Guerrero, De Castro and Escolin, JJ., concur.

Concepcion, Jr., J., is on leave.

G.R. No. L-23035 July 31, 1975

PHILIPPINE NUT INDUSTRY, INC., petitioner, vs.STANDARD BRANDS INCORPORATED and TIBURCIO S. EVALLE as Director of Patents, respondents.

Perfecta E. De Vera for petitioner.

Paredes, Poblador, Cruz and Nazareno for private respondent.

Office of the Solicitor General Arturo A. Alafriz, Acting Assistant Solicitor General Isidro C. Borromeo and Solicitor Francisco J. Bautista for respondent Director.

MUNOZ PALMA, J.:

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Challenged in this petition for review is the decision of respondent Director of Patents which orders the cancellation of Certificate of Registration No. SR-416 issued in favor of herein petitioner Philippine Nut Industry, Inc. (hereinafter called Philippine Nut) for the trademark "PHILIPPINE PLANTERS CORDIAL PEANUTS," upon complaint of Standard Brands Inc. (hereinafter to be called Standard Brands).

The records of the case show the following incidents:

Philippine Nut, a domestic corporation, obtained from the Patent Office on August 10, 1961, Certificate of Registration No. SR-416 covering the trademark "PHILIPPINE PLANTERS CORDIAL PEANUTS," the label used on its product of salted peanuts.

On May 14, 1962, Standard Brands a foreign corporation, 1 filed with the Director of Patents Inter Partes Case No. 268 asking for the cancellation of Philippine Nut's certificate of registration on the ground that "the registrant was not entitled to register the mark at the time of its application for registration thereof" for the reason that it (Standard Brands) is the owner of the trademark "PLANTERS COCKTAIL PEANUTS" covered by Certificate of Registration No. SR-172, issued by the Patent Office on July 28, 1958. Standard Brands alleged in its petition that Philippine Nut's trademark "PHILIPPINE PLANTERS CORDIAL PEANUTS" closely resembles and is confusingly similar to its trademark "PLANTERS COCKTAIL PEANUTS" used also on salted peanuts, and that the registration of the former is likely to deceive the buying public and cause damage to it.

On June 1, 1962, Philippine Nut filed its answer invoking the special defense that its registered label is not confusingly similar to that of Standard Brands as the latter alleges.

At the hearing of October 4, 1962, the parties submitted a partial stipulation of facts. On December 12, 1962, an amended partial stipulation of facts was submitted, the pertinent agreements contained in which are: (1) that Standard Brands is the present owner of the trademark "PLANTERS COCKTAIL PEANUTS" covered by Certificate of Registration No. SR-172 issued on July 28, 1958; (2) that Standard Brands trademark was first used in commerce in the Philippines in December, 1938 and (3) that Philippine Nut's trademark "PHILIPPINE PLANTERS CORDIAL PEANUTS" was first used in the Philippines on December 20, 1958 and registered with the Patent Office on August 10, 1961.

On December 10, 1963, after the presentation of oral and documentary evidence and the filing by the parties of their memoranda, respondent Director of Patents rendered Decision No. 281 giving due course to Standard Brand's petition and ordering the cancellation of Philippine Nut's Certificate of Registration No. SR-416. The Director of Patents found and held that in the labels using the two trademarks in question, the dominant part is the word "Planters", displayed "in a very similar manner" so much so that "as to appearance and general impression" there is "a very confusing similarity," and he concluded that Philippine Nut "was not entitled to register the mark at the time of its filing the application for registration" as Standard Brands will be damaged by the registration of the same. Its motion for reconsideration having been denied, Philippine Nut came up to this Court for a review of said decision.

In seeking a reversal of the decision of respondent Director of Patents, petitioner brings forth eleven assigned errors all of which revolve around one main issue: is the trademark "PHILIPPINE PLANTERS CORDIAL PEANUTS" used by Philippine Nut on its label for salted peanuts confusingly similar to the trademark "PLANTERS COCKTAIL PEANUTS" used by Standard Brands on its product so as to constitute an infringement of the latter's trademark rights and justify its cancellation? 2

The applicable law to the case is found in Republic Act 166 otherwise known as the Trade-Mark Law from which We quote the following pertinent provisions:

Chapter II-A. —

Sec. 4. Registration of trade-marks, trade-names and service-marks on the principal register. — There is hereby established a register of trade-marks, trade-names and service-marks which shall be known as the principal register. The owner of a trade-mark, trade-name or service-mark

used to distinguish his goods, business or services from the goods, business or services of others shall have the right to register the same on the principal register, unless it:

(d) Consists of or comprises a mark or trade-name which so resembles a mark or trade-nameregistered in the Philippines or a mark or trade-name previously used in the Philippines by anotherand not abandoned, as to be likely, when applied to or used in connection with the goods, business or services of the applicant, to cause confusion or mistake or to deceive purchasers; ... (emphasis Ours)

Sec. 17. Grounds for cancellation — Any person, who believes that he is or will be damaged by the registration of a mark or trade-name, may, upon the payment of the prescribed fee, apply to cancel said registration upon any of the following grounds:

(c) That the registration was obtained fraudulently or contrary to the provisions of section four, Chapter II hereof; ....

Sec. 22. Infringement, what constitutes. — Any person who shall use, without the consent of the registrant, any reproduction, counterfeit, copy or colorable imitation of any registered mark or trade-name in connection with the sale, offering for sale, or advertising of any goods, business or services on or in connection with which such use is likely to cause confusion or mistake or to deceive purchasers or others as to the source or origin of such goods or services, or identity of such business; or reproduce, counterfeit, copy or colorably imitate any such mark or trade-name and apply such reproduction, counterfeit, copy, or colorable imitation to labels, signs, prints, packages, wrappers, receptacles or advertisements intended to be used upon or in connection with such goods, business or services, shall be liable to a civil action by the registrant for any or all of the remedies herein provided. (emphasis supplied).

In the cases involving infringement of trademark brought before the Court it has been consistently held that there is infringement of trademark when the use of the mark involved would be likely to cause confusion or mistake in the mind of the public or to deceive purchasers as to the origin or source of the commodity; that whether or not a trademark causes confusion and is likely to deceive the public is a question of fact which is to be resolved by applying the "test of dominancy", meaning, if the competing trademark contains the main or essential or dominant features of another by reason of which confusion and deception are likely to result, then infringement takes pIace; that duplication or imitation is not necessary, a similarity in the dominant features of the trademarks would be sufficient. 3

1. The first argument advanced by petitioner which We believe goes to the core of the matter in litigation is that the Director of Patents erred in holding that the dominant portion of the label of Standard Brands in its cans of salted peanuts consists of the word PLANTERS which has been used in the label of Philippine Nut for its own product. According to petitioner, PLANTERS cannot be considered as the dominant feature of the trademarks in question because it is a mere descriptive term, an ordinary word which is defined in Webster International Dictionary as "one who or that which plants or sows, a farmer or an agriculturist." (pp. 10-11, petitioner's brief)

We find the argument without merit. While it is true that PLANTERS is an ordinary word, nevertheless it is used in the labels not to describe the nature of the product, but to project the source or origin of the salted peanuts contained in the cans. The word PLANTERS printed across the upper portion of the label in bold letters easily attracts and catches the eye of the ordinary consumer and it is that word and none other that sticks in his mind when he thinks of salted peanuts.

In cases of this nature there can be no better evidence as to what is the dominant feature of a label and as to whether there is a confusing similarity in the contesting trademarks than the labels themselves. A visual and graphic presentation of the labels will constitute the best argument for one or the other, hence, we are reproducing hereunder a picture of the cans of salted peanuts of the parties to the case.

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The picture below is part of the documentary evidence appearing in the original records, and it clearly demonstrates the correctness of the finding of respondent Director that the word PLANTERS is the dominant, striking mark of the labels in question.

It is true that there are other words used such as "Cordial" in petitioner's can and "Cocktail" in Standard Brands', which are also prominently displayed, but these words are mere adjectives describing the type of peanuts in the labeled containers and are not sufficient to warn the unwary customer that the two products come form distinct sources. As a whole it is the word PLANTERS which draws the attention of the buyer and leads him to conclude that the salted peanuts contained in the two cans originate from one and the same manufacturer. In fact, when a housewife sends her housemaid to the market to buy canned salted peanuts, she will describe the brand she wants by using the word PLANTERS and not "Cordial" nor "Cocktail".

2. The next argument of petitioner is that respondent Director should not have based his decision simply on the use of the term PLANTERS, and that what he should have resolved is whether there is a confusing similarity in the trademarks of the parties.

It is quite obvious from the record, that respondent Director's decision is based not only on the fact that petitioner herein adopted the same dominant mark of Standard Brands, that is, the word PLANTERS, but that it also used in its label the same coloring scheme of gold, blue, and white, and basically the same lay-out of words such as "salted peanuts" and "vacuum packed" with similar type and size of lettering as appearing in Standard Brands' own trademark, all of which result in a confusing similarity between the two labels. 4 Thus, the decision states: "Furthermore, as to appearance and general impression of the two trademarks, I find a veryconfusing similarity." (Emphasis supplied) 5

Referring again to the picture We have reproduced, the striking similarity between the two labels is quite evident not only in the common use of PLANTERS but also in the other words employed. As a matter of fact, the capital letter "C" of petitioner's "Cordial" is alike to the capital "C" of Standard's "Cocktail", with both words ending with an "1".

Admittedly, no producer or manufacturer may have a monopoly of any color scheme or form of words in a label. But when a competitor adopts a distinctive or dominant mark or feature of another's trademark and with it makes use of the same color ensemble, employs similar words written in a style, type and size of lettering almost identical with those found in the other trademark, the intent to pass to the public his product as that of the other is quite obvious. Hence, there is good reason for Standard Brands' to ask why did petitioner herein use the word PLANTERS, the same coloring scheme, even almost identical size and contour of the cans, the same lay-out of words on its label when there is a myriad of other words, colors, phrases, symbols, and arrangements to choose from to distinguish its product from Standard Brands, if petitioner was not motivated to simulate the label of the latter for its own can of salted peanuts, and thereby deceive the public?

A similar question was asked by this Court in Clarke vs. Manila Candy Co., 36 Phil. 100, when it resolved in favor of plaintiff a case of unfair competition based on an imitation of Clarke's packages and wrappers of its candies the main feature of which was one rooster. The Court queried thus: "... why, with all the birds in the air, and all the fishes in the sea, and all the animals on the face of the earth to choose from, the defendant company (Manila Candy Co.) selected two roosters as its trademark, although its directors and managers must have been well aware of the long-continued use of a rooster by the plaintiff with the sale and advertisement of its goods? ... A cat, a dog, a carabao, a shark or an eagle stamped upon the container in which candies are sold would serve as well as a rooster for purposes of identification as the product of defendant's factory. Why did defendant select two roosters as its trademark ?" (p.109, supra)

Petitioner contends, however, that there are differences between the two trademarks, such as, the presence of the word "Philippine" above PLANTERS on its label, and other phrases, to wit: "For Quality and Price, Its Your Outstanding Buy", the address of the manufacturer in Quezon City, etc., plus a pictorial representation of peanuts overflowing from a tin can, while in the label of Standard Brands it is stated that the product is manufactured in San Francisco, California, and on top of the tin can is printed "Mr. Peanut" and the representation of a "humanized peanut". (pp. 30-33, petitioner's brief)

We have taken note of those alleged differences but We find them insignificant in the sense that they are not sufficient to call the attention of the ordinary buyer that the labeled cans come from distinct and separate sources. The word "Philippine" printed in small type in petitioner's label may simply give to the purchaser the impression that that particular can of PLANTERS salted peanuts is locally produced or canned but that what he is buying is still PLANTERS canned salted peanuts and nothing else. As regards "Mr. Peanut" on Standard Brands' label, the same appears on the top cover and is not visible when the cans are displayed on the shelves, aside from the fact that the figure of "Mr. Peanut" is printed on the tin cover which is thrown away after opening the can, leaving no lasting impression on the consumer. It is also for this reason that We do not agree with petitioner that it is "Mr. Peanut and the Humanized Peanut" which is the trademark of Standard Brands salted peanuts, it being a mere descriptive pictorial representation of a peanut not prominently displayed on the very body of the label covering the can, unlike the term PLANTERS which dominates the label.

It is correctly observed by respondent Director that the merchandize or goods being sold by the parties herein are very ordinary commodities purchased by the average person and many times by the ignorant and unlettered 6 and these are the persons who will not as a rule examine the printed small letterings on the container but will simply be guided by the presence of the striking mark PLANTERS on the label. Differences there will always be, but whatever differences exist, these pale into insignificance in the face of an evident similarity in the dominant feature and overall appearance of the labels of the parties.

It is not necessary, to constitute trademark "infringement", that every word of a trade-mark should be appropriated, but it is sufficient that enough be taken to deceive the public in the purchase of a protected article. (Bunte Bros. v. Standard Chocolates, D.C. Mass., 45 F. Supp. 478, 481)

A trade-name in order to be an `infringement' upon another need not be exactly like it in form and sound, but it is enough if the one so resembles another as to deceive or mislead persons of ordinary caution into the belief that they are dealing with the one concern when in fact they are dealing with the other. (Foss v. Culbertson, 136 P. 2d 711, 718, 17 Wash. 2d 610)

Where a trade-mark contains a dominating or distinguishing word, and purchasing public has come to know and designate the article by such dominating word, the use of such word by another in marking similar goods may constitute Infringement though the marks aside from such dominating word may be dissimilar. (Queen Mfg. Co. v. lsaac Ginsberg & Bros., C.C.A. Mon., 25 F. 2d 284, 287)

(d) "Infringement" of trade-mark does not depend on the use of identical words, nor on the question whether they are so similar that a person looking at one would be deceived into the belief that it was the other; it being sufficient if one mark is so like another in form, spelling, or sound that one with not a very definite or clear recollection as to the real mark is likely to be confused or misled. (Northam Warren Corporation v. Universal Cosmetic Co., C. C. A; III., 18 F. 2d 774, 775)

3. What is next submitted by petitioner is that it was error for respondent Director to have enjoined it from using PLANTERS in the absence of evidence showing that the term has acquired secondary meaning. Petitioner, invoking American jurisprudence, asserts that the first user of a tradename composed of common words is given no special preference unless it is shown that such words have acquired secondary meaning, and this, respondent Standard Brands failed to do when no evidence was presented to establish that fact. (pp. 14-16, petitioner's brief)

The doctrine of secondary meaning is found in Sec. 4 (f), Chapter II-A of the Trade-Mark Law, viz:

Except as expressly excluded in paragraphs (a), (b), (c) and (d) of this section, nothing herein shall prevent the registration of a mark or trade-name used by the applicant which has become distinctive of the applicant's goods, business or services. The Director may accept as prima facieevidence that the mark or trade-name has become distinctive, as applied to or used in connection with the applicant's goods, business or services, proof of substantially exclusive and

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continuous use thereof as a mark or trade-name by the applicant in connection with the sale of goods, business or services for the five years next preceding the date of the filing of the application for its registration. (As amended by Sec. 3, Rep. Act No. 638.)

This Court held that the doctrine is to the effect that a word or phrase originally incapable of exclusive appropriation with reference to an article on the market, because geographically or otherwise descriptive, might nevertheless have been used so long and so exclusively by one producer with reference to his article that, in that trade and to that branch of the purchasing public, the word or phrase has come to mean that the article was his product. 7

By way of illustration, is the word "Selecta" which according to this Court is a common ordinary term in the sense that it may be used or employed by any one in promoting his business or enterprise, but which once adopted or coined in connection with one's business as an emblem, sign or device to characterize its products, or as a badge of authenticity, may acquire a secondary meaning as to be exclusively associated with its products and business, so that its use by another may lead to confusion in trade and cause damage to its business. 8

The applicability of the doctrine of secondary meaning to the situation now before Us is appropriate because there is oral and documentary evidence showing that the word PLANTERS has been used by and closely associated with Standard Brands for its canned salted peanuts since 1938 in this country. Not only is that fact admitted by petitioner in the amended stipulation of facts (see p. 2 of this Decision), but the matter has been established by testimonial (tsn October 4, 1962, pp. 2-8) and documentary evidence consisting of invoices covering the sale of "PLANTERS cocktail peanuts". (Exhibits C to C-4; D to D-10; E to E-10; F to F-2) In other words, there is evidence to show that the term PLANTERS has become a distinctive mark or symbol insofar as salted peanuts are concerned, and by priority of use dating as far back as 1938, respondent Standard Brands has acquired a preferential right to its adoption as its trademark warranting protection against its usurpation by another. Ubi jus ibi remedium. Where there is a right there is a remedy. Standard Brands has shown the existence of a property right(Arce Sons & Co. vs. Selecta Biscuit Co., Inc., supra, pp. 262-263) and respondent Director, has afforded the remedy.

Still on this point, petitioner contends that Standard Brands' use of the trademark PLANTERS was interrupted during the Japanese occupation and in fact was discontinued when the importation of peanuts was prohibited by Central Bank regulations effective July 1, 1953, hence it cannot be presumed that it has acquired a secondary meaning. We hold otherwise. Respondent Director correctly applied the rule that non-use of a trademark on an article of merchandize due to legal restrictions or circumstances beyond one's control is not to be considered as an abandonment.

In the case of Andres Romero vs. Maiden Form Brassiere Co., Inc., L-18289, March 31, 1964, 10 SCRA 556, the same question was raised by petitioner Romero when he filed with the Bureau of Patents a petition to cancel the registration of the trademark "Adagio" for brassieres manufactured by Maiden Form Brassiere Co., Inc. His petition having been dismissed by the Director of Patents, Romero appealed to this Court and one of the issues posed by him was that when the Government imposed restrictions on importations of brassieres bearing that particular trademark, there was abandonment of the same by respondent company which entitled petitioner to adopt it for his own use and which in fact he had been using for a number of years. That argument was met by the Court in the words of Justice Jesus Barrera thus:

... The evidence on record shows, on the other hand, that the trademark "Adagio" was first used exlusively in the Philippines by appellee in the year 1932. There being no evidence of use of the mark by others before 1932, or that appellee abandoned use thereof, the registration of the mark was made in accordance with the Trademark Law. Granting that appellant used the mark when appellee stopped using it during the period of time that the Government imposed restrictions on importation of respondent's brassiere being the trademark, such temporary non-use did not affect the rights of appellee because it was occasioned by government restrictions and was not permanent, intentional, and voluntary.

To work an abandonment, the disuse must be permanent and not ephemeral; it must, be intentional and voluntary, and not involuntary or even compulsory. There must be a thoroughgoing discontinuance of any

trade-mark use of the mark in question (Callman, Unfair Competition and Trademark, 2nd Ed., p. 1341).1äwphï1.ñët

The use of the trademark by other manufacturers did not indicate an intention on the part of appellee to abandon it.

The instances of the use by others of the term Budweiser, cited by the defendant, fail, even when liberally construed, to indicate an intention upon the part of the complainant to abandon its rights to that name. "To establish the defense of abandonment, it is necessary to show not only acts indicating a practical abandonment, but an actual intention to abandon." Sanlehner v. Eisener & Mendelson Co., 179 U.S. 19, 21 S. Ct. 7 (45 L. Ed. 6.0).(Anheuser-Busch, Inc, v. Budweiser Malt Products Corp., 287 F. 245.)

xxx xxx xxx

Non-use because of legal restrictions is not evidence of an intent to abandon. Non-use of their ancient trade-mark and the adoption of new marks by the Carthusian Monks after they had been compelled to leave France was consistent with an intention to retain their right to use their old mark. Abandonment will not be inferred from a disuse over a period of years occasioned by statutory restrictions on the name of liquor. (Nims, Unfair Competition and Trade-Mark, p. 1269.) (pp. 562-564,supra) (emphasis Ours)

Applying the words of Justice Roman Ozaeta in the "Ang Tibay" case (Ang vs. Toribio Teodoro, p. 56, supra) to the case now before Us, petitioner herein must not be allowed to get a free ride on the reputation and selling power of Standard Brands PLANTERS salted peanuts, for a self-respecting person, or a reputable business concern as is the case here, does not remain in the shelter of another's popularity and goodwill but builds one of his own.

4. Findings of fact by the Director of Patents are conclusive and binding on this Court provided they are supported by substantial evidence. 9 The testimonial and documentary evidence in addition to the stipulation of facts submitted by the parties fully support the findings of respondent Director that(1) there is a confusing similarity between the labels or trademarks of Philippine Nut and Standard Brands used in their respective canned salted peanuts; (2) respondent Standard Brands has priority of adoption and use of the label with PLANTERS as the dominant feature and the same has acquired secondary meaning in relation to salted peanuts; and (3) there has been no abandonment or non-use of said trademark by Standard Brands which would justify its adoption by petitioner or any other competitor for the sale of salted peanuts in the market.

PREMISES CONSIDERED, We AFFIRM the decision of respondent Director of Patents with costs against petitioner.

So Ordered.

Castro (Chairman), Makasiar, Esguerra and Martin, JJ., concur.

Teehankee, J., is on leave.

ANCHOR CASE

G.R. No. L-19531 August 10, 1967

THE CLOROX COMPANY, petitioner, vs.THE DIRECTOR OF PATENTS and GO SIU GIAN, respondents.

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Luchauco, Picazo and Agcaoli for petitioner.Gonzalo A. Tejada for respondent Go Siu Gian.Office of the Solicitor General for respondent Director of Patents.

ANGELES, J.:

We have before us petition to review the order of the Director of Patents in "inter Partes Case No. 204," dated January 6, 1961, dismissing the opposition of the Clorox Company to the registration of the trade-mark "OLDROX" in the name of Go Siu Gian, and the resolution of said Official, dated February 12, 1962, denying the Clorox Company's motion and petition for relief from said order.1äwphï1.ñët

The facts of the case, either appearing in the record or admitted by the parties in their pleadings, are as follows:

On April 7, 1959, respondent Go Siu Gian filed with the Patent Office an application for registration of the trademark "OLDROX," with an accompanying statement that he is a citizen of China, residing and doing business in the Philippines at 838 Folgueras St., Manila; that he has adopted the trademark "OLDROX" for his goods (whitening agent for bleaching) in trade and commerce in the country; and that said trademark, shown on printed labels affixed to the goods, or to the containers thereof, has been used by him since February 1, 1959. The application was allowed and published in the issue of the Official Gazette dated April 25, 1960, which was released for circulation on August 22, 1960.

On September 21 of the same year, or within 30 days from the date of its publication in the Official Gazette, an unverified opposition to the application was filed by the law firm Lichauco, Picazo and Agcaoili in behalf of the Clorox Company, herein petitioner.

On January 6, 1961, respondent Director of Patents issued the order appealed from, dismissing the petitioner's opposition to the application upon the ground, which is stated in said order, that the Clorox Company failed to filed the required verified notice of opposition within the period allowed by law. Upon notice of the said order, petitioner's counsel filed a motion with the Patent Office, dated January 10, 1961, advising that it has filed the verified notice of opposition on time, i.e., on November 16, 1960; although it also admitted that the covering letter of said verified opposition was given another case number (Inter Partes Case No. 200, entitled "The Shell Company of the Philippines versus Faustino Co") which is also handled by the same counsel in the Patent Office. Petitioner requested in that motion that the verified opposition be detached from the record of Inter Partes Case No. 200 and to transfer the same in the corresponding file of this case. The motion was opposed by herein respondent Go Siu Gian.

Before the motion could be acted upon by the Director of Patents, petitioner filed on January 26, 1961, a petition for relief from the order dismissing its opposition, alleging circumstances constituting mistake or excusable negligence of its counsel and his employee which led to the misfiling of its verified opposition, and praying that said order of January 6, 1961, be set aside.

After due consideration of the arguments of both parties relative to the aforesaid motion and petition for relief from the order of January 6, 1961, the Director of Patents issued the resolution of February 12, 1962, also appealed from, denying both the motion and the petition for relief, and ordering the issuance of the Certificate of Registration of the trademark "OLDROX" in the name of Go Siu Gian. The Clorox Company has come to Us on Appeal.

In a nutshell, the various errors pointed out in the petitioner's brief which were allegedly committed by the respondent Director of Patents in issuing the order and resolution appealed from, really boil down to two main propositions, namely: (1) that the Director of Patents erred in dismissing its opposition to the registration of the trademark in question, on the ground of failure to file the required "verified" opposition on time; and (2) that said Official erred in denying altogether its motion and petition for relief from said order.

Under the first proposition, the petitioner argues that it was error for the respondent official to have dismissed the opposition, it appearing in an indubitable manner that a verified opposition was timely filed. The Director of Patents, on

the other hand, maintains that the verified opposition cannot be considered as having been filed on time, for the reason that it was misfiled in the record of another opposition case through the negligence of its own counsel.

Section 8 of Republic Act No. 166 requires that an opposition to an application for registration of a trademark should be filed within 30 days from the publication of the application in the Official Gazette. This requirement is relaxed under Rule 187 (c) of the Revised Rules of Practice in Trademark Cases which provide as follows:

Rule 187 (c). Notice filed by attorney. — An unverified notice of opposition may be filed by a duly authorized attorney, but such opposition will be null and void unless verified by the opposer in person within sixty days after such filing. . . .

There is no question that petitioner's counsel filed an unverified notice of opposition to the application for registration of the trademark "OLDROX" within 30 days from the date of its publication in the Official Gazette. There is no disagreement also that the record of the case shows that an unverified opposition was filed, and it was for this reason that the order of January 8, 1961, was issued, because the law requires that for an opposition to be valid, it must be verified. It is not disputed, however, that immediately after it received the notice of dismissal of its opposition, petitioner, in due time, filed a motion dated January 10, 1961, advising the Director of Patents that its verified opposition was filed on time, although it admitted its error in submitting it under a covering letter designating another opposition case. Under the circumstances, it is our considered opinion that the verified opposition mentioned was filed on time, although it was submitted under an erroneous covering letter. That fact alone is no argument to the proposition that a pleading "misfiled" is a pleading "not filed." A covering letter is not part of the pleading. What is important is the fact that the pleading reached the official designated by law to receive it within the prescribed time, regardless of the mistake in the indorsement or covering letter which is not a necessary element of filing. It is the duty of the clerk of court to receive and file the necessary papers of a case in their corresponding files. It is gross negligence on the part of a clerk of court to receive and file pleadings in the record of a case by relying upon a letter of submittal or covering letter without bothering to examine whether or not the pleading or document submitted corresponds to the enclosure mentioned in the letter. And when, as in this case, the pleading is misfiled in the record of another case through the fault of its clerk, it can not be said that the papers were not filed. It is admitted in this case that the verified opposition of herein petitioner was lodged with the proper official authorized to receive. Under the circumstances, we hold, that there was substantial compliance with the requirement of the law.

As a second proposition, petitioner contends that the Director of Patents erred in denying its motion and petition for relief from the order of January 6, 1961, dismissing its opposition to the registration of the trademark in question. It holds the view that said Official should have set aside the order and given due course to its opposition.

The respondents, on the other hand, argue that the petition for relief filed by petitioner before the order dismissing the opposition became final was premature and may not be legally considered for purposes of setting aside said order. This is being too technical about it. The rule is always in favor of liberality in construction so that the real matter in dispute may be submitted to the judgment of the court. Imperfections of form and technicalities of procedure should be disregarded unless substantial rights would otherwise be prejudiced (Gaspar vs. Dorado, et al., G.R. No. L-17884, November 29, 1965). It should be noted that the grounds of fraud, accident, mistake or excusable negligence for new trial are substantially similar to the grounds of a petition for relief under the Rules; the only difference being that a motion for new trial or for reconsideration is filed before the order or judgment becomes final, while a petition for relief should be filed after the finality of the judgment or order, but within the periods prescribed in Section 3 of Rule 38. Had herein respondents so minded, the petition for relief filed by the petitioner in this case, having been filed before the finality of the order dismissing its opposition, could have been treated as a motion. for reconsideration of the order of January 6, 1961, and having been previously apprised of the fact that the verified opposition in this case was misfiled in the record of another case, should have set aside said order. The rule is well settled that courts may vacate judgments and grant new trials or enter new judgments on the grounds of error in fact or in law. They have no power, of course, to vacate judgments after they have become final, in the sense that the party in whose favor they are rendered is entitled as of right, to have execution thereon, but prior thereto, the courts have plenary control over the proceedings including the judgment, and in the exercise of a sound judicial discretion, may take such proper action in this regard as truth and justice may require (Arnedo vs. Llorente and Liongson, 18 Phil. 257). The order of herein respondent dismissing the opposition of petitioner to the registration of the trademark in question may amount to considerable injustice to the opposer Clorox Company, the order having been entered not upon the merits of the controversy; and the possibility of such serious consequences necessitates a careful examination of the grounds upon which it requests that the order be

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set aside. It must be remembered that the only discretion conferred upon officers is a legal discretion, and when anything is left to any officer to be done according to his discretion, the law intends it to be done with a sound discretion and according to law (Coombs vs. Santos, 24 Phil. 446). And when, as in this case, the allegation of the pleading clearly show circumstances constituting mistake and excusable negligence which are grounds for a motion for reconsideration of the order in question, a dismissal of the motion and a denial of the relief sought upon the flimsy excuse that the same was filed as a petition for relief, will amount to an abuse of that discretion. Neither may we consider the argument of herein respondent that the petitioner is not totally deprived of its right to question the registration of the trademark in question because it may still pursue a cancellation proceeding under Sections 17 to 19 of Republic Act No. 166, and Rules 191 to 197 of the Rules of Practice in Trademark Cases. The opposition to a registration and the petition for cancellation are alternative proceedings which a party may avail of according to his purposes, needs, and predicaments (Anchor Trading Company vs. Director of Patents, G.R. No. L-8004, May 30, 1956), and herein petitioner has the right to choose which remedy it deems best for the protection of its rights.

Wherefore and considering all the foregoing, the order and resolution of the Director of Patents appealed from are hereby set aside, and the case remanded to the Patent Office for further proceedings. Costs against the private respondent.

Reyes, J.B.L., Makalintal, Bengzon, J.P., Zaldivar, Sanchez, Castro and Fernando, JJ., concur.Concepcion, C.J. and Dizon, J., are on leave.

G.R. No. L-54158 August 31, 1984

PAGASA INDUSTRIAL CORPORATION, petitioner, vs.COURT OF APPEALS, TIBURCIO S. EVALLE as Director of Patents, and YOSHIDA KOGYO KABUSHIKI KAISHA, respondents.

Quasha, Asperilla, Ancheta, Valmonte, Peña & Marcos and Francisco Lava, Jr. for petitioner.

The Solicitor General for respondent Appellate Court.

Romulo, Mabanta, Buenaventura & delos Angeles for private respondent.

R E S O L U T I O N

AQUINO, J.:

This case is about the conflicting claims of Pagasa Industrial Corporation and Yoshida Kogyo Kabushiki Kaisha for the trademark YKK for zippers.

The Director of Patents issued to Yoshida on November 9, 1961 Certificate of Registration No. 9331 for the said trademark for slide fasteners and zippers in class 41. It claimed to have used the trademark since September 1, 1950.

Notwithstanding that prior registration, the Director on April 4, 1968, or more than six years later, issued to Pagasa Certificate of Registration No. 13756 for the same trademarkfor its zippers, based on alleged use of the trademark since March 1, 1966.

On January 23, 1975, Yoshida asked the Director to cancel the registration in favor of Pagasa. The trademark, used for the same product by two different entities, has caused confusion, mistake and deception. The Director explained that the

duplicitous registration was attributable to the fact that his examiner "miserably overlooked" the anterior registration by Yoshida. Had it not been for such costly oversight, Pagasa's application would have been rejected.

In his decision of May 5, 1977, the Director cancelled Pagasa's certificate of registration in accordance with section 4 (d) and chapter IV of Republic Act No. 166.

Pagasa appealed to the Court of Appeals which in its decision dated February 6, 1980 affirmed the cancellation. It found that prior to 1968 Pagasa knew that Yoshida was the registered owner and user of the YKK trademark which is an acronym of its corporate name.

Tadao Yoshida, the president of Yoshida, and Tsutomu Isaka the export manager, visited in 1960 (1965) Pagasa's factory which was manufacturing zippers under the Royal brand Anacleto Chi, Pagasa's president visited in turn Yoshida's factory in Toyoma,Japan.

The Appellate Court concluded that Pagasa's knowledge that Yoshida was using the YKK trademark precludes the application of the equitable principle of laches, estoppel and acquiescence. It noted that Pagasa acted in bad faith. As observed by Yoshida's counsel, Pagasa's registration of YKK as its own trademark was an act of ingratitude.

Pagasa appealed to this Court. The Second Division in a decision dated November 19, 1982, reversed the decision of the Appellate Court (118 SCRA 526). Yoshida filed a motion for reconsideration which was denied in the resolution of January 12, 1983. It was granted leave to file a second motion for reconsideration over Pagasa's opposition. The case was transferred to the Banc.

We hold that the second motion for reconsideration should be granted. Pagasa contended originally that the Appellate Court erred in holding that Pagasa cannot invoke the equitable principles of laches, estoppel and acquiescence because Yoshida had not abandoned the YKK trademark and Pagasa was aware of its prior existence and registration. It allegedly erred further in ruling that registration gives the registrant a vested right in the trademark.

These contentions are devoid of merit. The appeal should not have been given due course. The Director of Patents sensibly and correctly cancelled the registration in favor of Pagasa which has not shown any semblance of justification for usurping the trademark YKK. The registration in favor of Pagasa was admitted by the Director to be a mistake. He said that Pagasa's application should have been denied outright.

Pagasa cannot rely on equity because he who comes into equity must come with clean hands. Equity refuses to lend its aid in any manner to one seeking its active interposition who has been guilty of unlawful or inequitable conduct in the matter with relation to which he seeks relief (30 C.J.S. 1009).

"Registration is sufficient prima-facie proof that all acts necessary to entitle the mark to registration were duly performed" (87 C.J.S. 421). Obviously, Yoshida's prior registration is superior and must prevail.

WHEREFORE, the decisions of the Director of Patents and the Court of Appeals are affirmed. Costs against the petitioner.

SO ORDERED.

Fernando, C.J., Teehankee, Makasiar, Abad Santos, Melencio-Herrera, Plana, Escolin and Gutierrez, JJ., concur.

Concepcion, Jr., Guerrero, Relova, Cuevas, and De la Fuente, JJ., took no part.

G.R. No. 78298 January 30, 1989

21

WOLVERINE WORLDWIDE, INC., petitioner, vs.HONORABLE COURT OF APPEALS and LOLITO P. CRUZ, respondents.

K. V. Faylona & Associates for petitioner.

Florencio Z. Sioson for private respondent Lolito P. Cruz.

SARMIENTO, J.:

The subject of this petition for review is the resolution of the Court of Appeals 1 granting the private respondents's motion for reconsideration and reviving the decision of the Director of Patents which ordered the dismissal, on the ground of res judicata, of Inter Partes Case No. 807 instituted by the petitioner herein.

On February 8, 1984, the petitioner, a foreign corporation organized and existing under the laws of the United States, brought a petition before the Philippine Patent Office, docketed as Inter Partes Case No. 1807, for the cancellation of Certificate of Registration No. 24986-B of the trademark HUSH PUPPIES and DOG DEVICE issued to the private respondent, a Filipino citizen.

In support of its petition for cancellation, the petitioner alleged, inter alia, that it is the registrant of the internationally known trademark HUSH PUPPIES and the DEVICE of a Dog in the United States and in other countries which are members of the Paris Convention for the Protection of Industrial Property; that the goods sold by the private respondent, on the one hand, and by the petitioner, on the other hand, belong to the same class such that the private respondent's use of the same trademark in the Philippines (which is a member of said Paris Convention) in connection with the goods he sells constitutes an act of unfair competition, as denied in the Paris Convention.

Subsequently, the private respondent moved to dismiss the petition on the ground of res judicata, averring that in 1973, or more than ten years before this petition (Inter Partes Case No. 1807) was filed, the same petitioner filed two petitions for cancellation (Inter Partes Cases Nos. 700 and 701) and was a party to an interference proceeding (Inter Partes Case No. 709), all of which involved the trademark HUSH PUPPIES and DEVICE, before the Philippine Patent Office. The Director of Patents had ruled in all three inter parties cases in favor of Ramon Angeles, the private respondent's predecessor-in-interest, to wit:

WHEREFORE, for all the foregoing considerations,

1. The petitions seeking cancellation of Registration Nos. SR-1099 and SR-1526, respectively, are both denied and accordingly DISMISSED;

2. Respondent-Registrant/Junior Party-Applicant, Roman Angeles, is hereby adjudged as the prior user and adopter of the trademark HUSH PUPPIES & DEVICE, under Appl. Serial No. 17174, and therefore, the same given due course; and

3. Registration No. 14969 of Dexter Sales Company, assignor to Wolverine Worldwide, Inc., covering the trademark HUSH PUPPIES & Representation of a Dogie Head, is hereby CANCELLED. 2

On June 29, 1979, the Court of Appeals affirmed tile above decision, finding the same to be in accordance with law and supported by substantial evidence. 3

In the present case, after both parties had submitted their respective memoranda, the Director of Patents rendered the questioned decision (in Inter Partes Case No. 1807), the dispositive portion of which states:

WHEREFORE, in view of the foregoing considerations this Office is constrained to hold that Respondent's Motion to Dismiss be, as it is hereby, GRANTED and that the subject Petition for Cancellation be, as it is hereby DISMISSED.

Accordingly, Certificate of Registration No. 24986-B issued on May 3, 1983 to the herein Respondent-Registrant, Lolito P. Cruz, for the trademark "HUSH PUPPIES" for use on shoes is, as it is hereby, declared valid and subsisting for the duration of its term unless owner cancelled in accordance with law. 4

On appeal, the Court of Appeals at first set aside the Director's decision; 5 however, upon reconsideration the latter was revived. 6

The principal legal question raised in this petition for review is whether or not the present petition for cancellation (Inter Partes Case No. 1807) is barred by res judicata in the light of the final and executory decision in Inter Partes Cases Nos. 700 701, and 709.

We rule in the affirmative.

The Court has repeatedly held that for a judgment to be a bar to a subsequent case, the following requisites must concur: (1) it must be a final judgment; (2) the court which rendered it had jurisdiction over the subject matter and the parties; (3) it must be a judgment on the merits; and (4) there must be Identity between the two cases, as to parties, — subject matter, and cause of action. 7

Contrary to the petitioner's assertion, the judgment in Inter Partes Cases Nos. 700, 701, and 709 had long since become final and executory. That Sec. 17 of Republic Act 166, also known as the Trademark Law, allows the cancellation of a registered trademark is not a valid premise for the petitioner's proposition that a decision granting registration of a trademark cannot be imbued with the character of absolute finality as is required in res judicata. A judgment or order is final, as to give it the authority of res judicata, if it can no longer be modified by the court issuing it or by any other court. 8 In the case at bar, the decision of the Court of Appeals affirming that of the Director of Patents, in the cancellation cases filed in 1973, was never appealed to us. Consequently, when the period to appeal from the Court of Appeals to this Court lapsed, with no appeal having been perfected, the foregoing judgment denying cancellation of registration in the name of private respondent's predecessor-in-interest but ordering cancellation of registration in the name of the petitioner's predecessor-in-interest, became the settled law in the case. In the words of the Court of Appeals:

The subsequent failure of appellant-oppositor to elevate the decision of the Court of Appeals, which affirmed the ruling of the Director of Patents, to the Supreme Court, sounded the death knell of appellant-oppositor's instant case. Having become final and executory, the decision in Case No. 967 now bars the prosecution of the present action under the principle of res judicata. 9

It must be stressed anew that, generally, the fundamental principle of res judicata applies to all cases and proceedings in whatever form they may be. 10 We now expressly affirm that this principle applies, in the appropriate cases, to proceedings for cancellation of trademarks before the Philippine Patent Office (now Bureau of Patents, Trademarks and Technology Transfer). In Ipekjan Merchandising Co., Inc. vs Court of Tax Appeals, we said:

To say that the doctrine applies exclusively to decisions rendered by what are usually understood as courts would be to unreasonably circumscribe the scope thereof. The more equitable attitude is to allow extension of the defense to decisions of bodies upon whom judicial powers have been conferred. 11

22

Undoubtedly, final decisions, orders, and resolutions, of the Director of Patents are clothed with a judicial character as they are, in fact, reviewable by the Court of Appeals and by us.

The subject judgment is undeniably on the merits of the case, rendered after both parties and actually submitted their evidence.

Between the earlier petitions and the present one there is substantial identity of parties, subject matter, and cause of action.

The petitioner in all of these cases is Wolverine Worldwide, Inc. The respondent-registrant in this case is the assignee of Randelson Agro-Industrial Development, Inc. (formerly known as Randelson Shoes, Inc.) which in turn, acquired its right from Ramon Angeles, the original respondents-registrant.

As regards the subject matter, all of these cases refer to the cancellation of registration of the trademark HUSH PUPPIES and DEVICE of a Dog.

Finally, there is identity of cause of action, which is the alleged wrongful or erroneous registration of the trademark.

It is argued, however, that res judicata does not apply in this particular instance because when the May 9, 1977 decision was handed down by the Director of Patents, Executive Order No. 913 dated October 7, 1983 and the resulting memorandum of Minister Roberto Ongpin dated October 25, 1983 had not yet been issued. (The validity of this memorandum was later upheld by this Court in La Chemise Lacoste, S.A. vs. Fernandez and Sujanani vs. Ongpin). 12 The petitioner underscores the following specific directive contained in the abovementioned memorandum of Minister Ongpin for the Director of Patents:

5. All pending applications for Philippine registration of signature and other world famous trademarks filed by applicants other than their original owners or users shall be rejected forthwith. Where such applicants have already obtained registration contrary to the abovementioned PARIS CONVENTION and/or Philippine Law, they shall be directed to surrender their Certificates of Registration to the Philippine Patent Office for immediate cancellation proceedings. 13

It is thus contended that despite the previous grant of registration to the private respondent, the present petition for cancellation could still be brought, and the same should be granted by the Director of Patents, pursuant to the abovequoted clause. Stated otherwise, the petitioner suggests that the petition is not barred by res judicatabecause while the former petitions were filed under Republic Act 166, the present one was brought pursuant to the cited memorandum which expressly sanctions the cancellation of registration of a trademark granted even prior to the same memorandum.

In the first place, the subject memorandum never amended, nor was it meant to amend, the Trademark Law. It did not indicate a new policy with respect to the registration in the Philippines of world-famous trademarks. The protection against unfair competition, and other benefits, accorded to owners of internationally known marks, as mandated by the Paris Convention, is already guaranteed under the Trademark Law. 14 Thus, the subject memorandum, as well as Executive Order No. 913, merely reiterated the policy already existing at the time of its issuance. As accurately enunciated by the Court of Appeals:

Such being the case, appellant-oppositor could have properly ventilated the issue of whether or not it fell within the protective ambit of the Paris Convention in the previous proceedings which culminated in the registration of the Hush Puppies trademark in appellee-movant's name, i.e., in Case No. 967 before the Philippine Patent Office. The Director of Patents in that case, after hearing both parties and thereafter, deciding that appellee-movant was entitled to the registration of the trademark in its name, must have concluded that appellant-oppositor had not established the fact that it was entitled to the application of the favorable provision; of the Paris Convention. 15

Furthermore, we agree with the conclusion of the Court of Appeals that the memorandum discussed here is subject to the doctrine of res judicata. The same memorandum has, in the words of the Court of Appeals:

... no room for application where the oppositor previously availed of the same remedy to contest and cancel the registration of subject trademark but did not prevail, against the same registrant regarding the same subject matter (the trademark in question) and for the same cause of action. This is the more so when, as in this present controversy, the certificate of registration, cancellation of which is sought anew, was issued by the Patent office after due hearing in the prior appropriate inter partes case, pursuant to a decision of the Director of Patents which was affirmed on appeal by the Court of Appeals, and has become final and executory. 16

In the same light, the repeated filing of petitions for cancellation founded on substantially the same ground as provided in Sec. 17 of the Trademark Law, we rule, is not permissible. For to allow without any limitation whatsoever such a practice would be clearly violative of the time-honored doctrine of res judicata. The present petition for cancellation raises basically the same issue of ownership of the trademark HUSH PUPPIES, which issue was already discussed and settled in Inter Partes Cases Nos. 700, 701, and 709. As pointed out by the private respondent, the petitioner itself expressly recognized the issue of ownership when in the brief it filed in the Court of Appeals it included the following in the assignment of errors:

That the Philippine Patent Office erred in holding that respondent-appellee has established prior use and adoption of the trademark HUSH PUPPIES and is the true and lawful owner thereof, instead of petitioner-appellant herein. (Emphasis supplied). 17

The aforesaid cases, involving as they were the registration of a trademark, necessarily litigated the issue of ownership of such trademark because ownership is, indeed, the basis of registration of a trademark. 18 Thus, Section 4 of R.A. 166 provides: ". . . The owner of a trademark, trade name or service-mark used to distinguish his goods, business or services from the goods, business or services of others shall have the right to register the same on the principal register. . . " Res judicata now bars the petitioner from reopening, by way of another petition for cancellation (the present Inter Partes Case No. 1807), the issue of ownership of the trademark HUSH PUPPIES. Otherwise, there will never be an end to litigation.

WHEREFORE, the petition for review is DENIED.

SO ORDERED.

Paras, Padilla and Regalado, JJ., concur.

Melencio-Herrera, J., took no part.

G.R. No. L-29971 August 31, 1982

ESSO STANDARD EASTERN, INC., petitioner, vs.THE HONORABLE COURT OF APPEALS ** and UNITED CIGARETTE CORPORATION, respondents.

&

TEEHANKEE, J.:1äwphï1.ñët

The Court affirms on the basis of controlling doctrine the appealed decision of the Court of Appeals reversing that of the Court of First Instance of Manila and dismissing the complaint filed by herein petitioner against private respondent for

23

trade infringement for using petitioner's trademark ESSO, since it clearly appears that the goods on which the trademark ESSO is used by respondent is non-competing and entirely unrelated to the products of petitioner so that there is no likelihood of confusion or deception on the part of the purchasing public as to the origin or source of the goods.

Petitioner Esso Standard Eastern, Inc., 1 then a foreign corporation duly licensed to do business in the Philippines, is engaged in the sale of petroleum products which are Identified with its trademark ESSO (which as successor of the defunct Standard Vacuum Oil Co. it registered as a business name with the Bureaus of Commerce and Internal Revenue in April and May, 1962). Private respondent in turn is a domestic corporation then engaged in the manufacture and sale of cigarettes, after it acquired in November, 1963 the business, factory and patent rights of its predecessor La Oriental Tobacco Corporation, one of the rights thus acquired having been the use of the trademark ESSO on its cigarettes, for which a permit had been duly granted by the Bureau of Internal Revenue.

Barely had respondent as such successor started manufacturing cigarettes with the trademark ESSO, when petitioner commenced a case for trademark infringement in the Court of First Instance of Manila. The complaint alleged that the petitioner had been for many years engaged in the sale of petroleum products and its trademark ESSO had acquired a considerable goodwill to such an extent that the buying public had always taken the trademark ESSO as equivalent to high quality petroleum products. Petitioner asserted that the continued use by private respondent of the same trademark ESSO on its cigarettes was being carried out for the purpose of deceiving the public as to its quality and origin to the detriment and disadvantage of its own products.

In its answer, respondent admitted that it used the trademark ESSO on its own product of cigarettes, which was not Identical to those produced and sold by petitioner and therefore did not in any way infringe on or imitate petitioner's trademark. Respondent contended that in order that there may be trademark infringement, it is indispensable that the mark must be used by one person in connection or competition with goods of the same kind as the complainant's.

The trial court, relying on the old cases of Ang vs. Teodoro 2 and Arce & Sons, Inc. vs. Selecta Biscuit Company, 3 referring to related products, decided in favor of petitioner and ruled that respondent was guilty of infringement of trademark.

On appeal, respondent Court of Appeals found that there was no trademark infringement and dismissed the complaint. Reconsideration of the decision having been denied, petitioner appealed to this Court by way of certiorari to reverse the decision of the Court of Appeals and to reinstate the decision of the Court of First Instance of Manila. The Court finds no ground for granting the petition.

The law defines infringement as the use without consent of the trademark owner of any "reproduction, counterfeit, copy or colorable limitation of any registered mark or tradename in connection with the sale, offering for sale, or advertising of any goods, business or services on or in connection with which such use is likely to cause confusion or mistake or to deceive purchasers or others as to the source or origin of such goods or services, or Identity of such business; or reproduce, counterfeit, copy or colorably imitate any such mark or tradename and apply such reproduction, counterfeit, copy or colorable limitation to labels, signs, prints, packages, wrappers, receptacles or advertisements intended to be used upon or in connection with such goods, business or services." 4 Implicit in this definition is the concept that the goods must be so related that there is a likelihood either of confusion of goods or business. 5 But likelihood of confusion is a relative concept; to be determined only according to the particular, and sometimes peculiar, circumstances of each case. 6 It is unquestionably true that, as stated in Coburn vs. Puritan Mills, Inc. 7 "In trademark cases, even more than in other litigation, precedent must be studied in the light of the facts of the particular case.

It is undisputed that the goods on which petitioner uses the trademark ESSO, petroleum products, and the product of respondent, cigarettes, are non-competing. 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. 8 The vast majority of courts today follow the

modern theory or concept of "related goods" 9which the Court has likewise adopted and uniformly recognized and applied. 10

Goods are related when they belong to the same class or have the 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. 11 Thus, biscuits were held related to milk because they are both food products. 12 Soap and perfume, lipstick and nail polish are similarly related because they are common household items now a days. 13 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. 14 Soap and pomade although non- competitive, were held to be similar or to belong to the same class, since both are toilet articles. 15 But no confusion or deception can possibly result or arise when the name "Wellington" which is the trademark for shirts, pants, drawers and other articles of wear for men, women and children is used as a name of a department store. 16

Thus, in Acoje Mining Co., Inc. vs. Director of Patents, 17 the Court, through now Chief Justice Fernando, reversed the patent director's decision on the question of "May petitioner Acoje Mining Company register for the purpose of advertising its product, soy sauce, the trademark LOTUS, there being already in existence one such registered in favor of the Philippine Refining Company for its product, edible oil, it being further shown that the trademark applied for is in smaller type, colored differently, set on a background which is dissimilar as to yield a distinct appearance?" and ordered the granting of petitioner's application for registration ruling that "there is quite a difference between soy sauce and edible oil. If one is in the market for the former, he is not likely to purchase the latter just because of the trademark LOTUS" and "when regard is had for the principle that the two trademarks in their entirety as they appear in their respective labels should be considered in relation to the goods advertised before registration could be denied, the conclusion is inescapable that respondent Director ought to have reached a different conclusion. "

By the same token, in the recent case of Philippine Refining Co., Inc. vs. Ng Sam and Director of Patents, 18the Court upheld the patent director's registration of the same trademark CAMIA for therein respondent's product of ham notwithstanding its already being used by therein petitioner for a wide range of products: lard butter, cooking oil, abrasive detergents, polishing materials and soap of all kinds. The Court, after noting that the same CAMIA trademark had been registered by two other companies, Everbright Development Company and F. E. Zuellig, Inc. for their respective products of thread and yarn (for the former) and textiles, embroideries and laces (for the latter) ruled that "while ham and some of the products of petitioner are classified under Class 47 (Foods and Ingredients of Food), this alone cannot serve as the decisive factor in the resolution of whether or not they 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." The Court, therefore, concluded that "In fine, We hold that the businesses of the parties are non-competitive and their products sounrelated that the use of Identical trademarks is not likely to give rise to confusion, much less cause damage to petitioner."

In the situation before us, the goods are obviously different from each other with "absolutely no iota of similitude" 19 as stressed in respondent court's judgment. They are so foreign to each other as to make it unlikely that purchasers would think that petitioner is the manufacturer of respondent's goods.ït¢@lFº The mere fact that one person has adopted and used a trademark on his goods does not prevent the adoption and use of the same trademark by others on unrelated articles of a different kind. 20

Petitioner uses the trademark ESSO and holds certificate of registration of the trademark for petroleum products, including aviation gasoline, grease, cigarette lighter fluid and other various products such as plastics, chemicals, synthetics, gasoline solvents, kerosene, automotive and industrial fuel, bunker fuel, lubricating oil, fertilizers, gas, alcohol, insecticides and the ESSO Gasul" burner, while respondent's business is solely for the manufacture and sale of the unrelated product of cigarettes. The public knows too well that petitioner deals solely with petroleum products that there is no possibility that cigarettes with ESSO brand will be associated with whatever good name petitioner's ESSO trademark may have generated. Although petitioner's products are numerous, they are of the same class or line of merchandise which are non-competing with respondent's product of cigarettes, which as pointed out in the appealed judgment is beyond petitioner's "zone of potential or natural and logical expansion" 21 When a trademark is used by a party for a product in which the other party does not deal, the use of the same trademark on the latter's product cannot be validly objected to. 22

24

Another factor that shows that the goods involved are non-competitive and non-related is the appellate court's finding that they flow through different channels of trade, thus: "The products of each party move along and are disposed through different channels of distribution. The (petitioner's) products are distributed principally through gasoline service and lubrication stations, automotive shops and hardware stores. On the other hand, the (respondent's) cigarettes are sold in sari-sari stores, grocery stores, and other small distributor outlets. (Respondent's) cigarettes are even peddled in the streets while (petitioner's) 'gasul' burners are not. Finally, there is a marked distinction between oil and tobacco, as well as between petroleum and cigarettes. Evidently, in kind and nature the products of (respondent) and of (petitioner) are poles apart." 23

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." 24

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."

In point of fact and time, the Court's dismissal of the petition at bar was presaged by its Resolution of May 21, 1979 dismissing by minute resolution the petition for review for lack of merit in the Identical case of Shell Company of the Philippines, Ltd vs. Court of Appeals 25, wherein the Court thereby affirmed the patent office's registration of the trademark SHELL as used in the cigarettes manufactured by therein respondent Fortune Tobacco Corporation notwithstanding the therein petitioner Shell Company's opposition thereto as the prior registrant of the same trademark for its gasoline and other petroleum trademarks, on the strength of the controlling authority of Acoje Mining Co. vs. Director of Patents, Supra, and the same rationale that "(I)n the Philippines, where buyers of appellee's (Fortune Corp.'s) cigarettes, which are low cost articles, can be more numerous compared to buyers of the higher priced petroleum and chemical products of appellant (Shell Co.) and where appellant (Shell) is known to be in the business of selling petroleum and petroleum-based chemical products, and no others, it is difficult to conceive of confusion in the minds of the buying public in the sense it can be thought that appellant (Shell) is the manufacturer of appellee's (Fortune's) cigarettes, or that appellee (Fortune) is the manufacturer or processor of appellant's (Shell's) petroleum and chemical products." 26

ACCORDINGLY, the petition is dismissed and the decision of respondent Court of Appeals is hereby affirmed.

Melencio-Herrera, Plana, Relova and Gutierrez, Jr., JJ., concur.1äwphï1.ñët

Makasiar, J., is on leave.

Vasquez, J., took no part.

G.R. No. L-32747 November 29, 1984

FRUIT OF THE LOOM, INC., petitioner, vs.COURT OF APPEALS and GENERAL GARMENTS CORPORATION, respondents.

Lichauco, Picazo & Agcaoli Law Office for petitioner.

MAKASIAR, J.:

This is a petition for review on certiorari of the decision dated October 8, 1970 of the former Court of Appeals reversing the decision of the defunct Court of First Instance of Manila, Branch XIV, ordering the cancellation of private respondent's registration of the trademark FRUIT FOR EVE, enjoining it permanently from using trademark and ordering it to pay herein petitioner P10,000.00 as attorney's fees.

Petitioner, a corporation duly organized and existing under the laws of the State of Rhode Island, United States of America, is the registrant of a trademark, FRUIT OF THE LOOM, in the Philippines Patent Office and was issued two Certificates of Registration Nos. 6227 and 6680, on November 29, 1957 and July 26, 1958, respectively. The classes of merchandise covered by Registration Certificate No. 6227 are, among others, men's, women's and children's underwear, which includes women's panties and which fall under class 40 in the Philippine Patent Office's classification of goods. Registration Certificate No. 6680 covers knitted, netted and textile fabrics.

Private respondent, a domestic corporation, is the registrant of a trademark FRUIT FOR EVE in the Philippine Patent Office and was issued a Certificate of Registration No. 10160, on January 10, 1963 covering garments similar to petitioner's products like women's panties and pajamas.

On March 31, 1965 petitioner filed before the lower court, a complaint for infringement of trademark and unfair competition against the herein private respondent. Petitioner principally alleged in the complaint that private respondent's trademark FRUIT FOR EVE is confusingly similar to its trademark FRUIT OF THE LOOM used also on women's panties and other textile products. Furthermore, it was also alleged therein that the color get-up and general appearance of private respondent's hang tag consisting of a big red apple is a colorable imitation to the hang tag of petitioner.

On April 19, 1965, private respondent filed an answer invoking the special defense that its registered trademark is not confusingly similar to that of petitioner as the latter alleged. Likewise, private respondent stated that the trademark FRUIT FOR EVE is being used on ladies' panties and pajamas only whereas petitioner's trademark is used even on men's underwear and pajamas.

At the pre-trial on May 5, 1965, the following admissions were made: (1) That the trademark FRUIT OF THE LOOM has been registered with the Bureau of Patents and it does not bear the notice 'Reg. Phil. Patent Off.', and (2) That the trademark FRUIT FOR EVE has been registered with the Bureau of Patents and it bears the notice "Reg. Phil. Patent Off." and (3) That at the time of its registration, plaintiff filed no opposition thereto.

After trial, judgment was rendered by the lower court in favor of herein petitioner, the dispositive portion of which reads as follows:

Judgment is, therefore, rendered ordering the Bureau of Patents to cancel the registration of the Trademark "Fruit for Eve", permanently enjoining Defendant from using the trademark "Fruit for Eve", ordering Defendant to pay plaintiff the sum of P10,000.00 as attorney's fees and to pay the costs.

Both parties appealed to the former Court of Appeals, herein petitioner's appeal being centered on the failure of the trial court to award damages in its favor. Private respondent, on the other hand, sought the reversal of the lower court's decision.

On October 8, 1970, the former Court of Appeals, as already stated, rendered its questioned decision reversing the judgment of the lower court and dismissing herein petitioner's complaint.

Petitioner's motion for reconsideration having been denied, the present petition was filed before this Court.

25

The first and second arguments advanced by petitioner are that the respondent court committed an error in holding that the word FRUIT, being a generic word, is not capable of exclusive appropriation by petitioner and that the registrant of a trademark is not entitled to the exclusive use of every word of his mark. Otherwise stated, petitioner argues that the respondent court committed an error in ruling that petitioner cannot appropriate exclusively the word FRUIT in its trademark FRUIT OF THE LOOM.

The third and fourth arguments submitted by petitioner which We believe is the core of the present controversy, are that the respondent court erred in holding that there is no confusing similarity in sound and appearance between the two trademarks in question. According to petitioner, the prominent and dominant features in both of petitioner's and private respondent's trademark are the word FRUIT and the big red apple design; that ordinary or average purchasers upon seeing the word FRUIT and the big red apple in private respondent's label or hang tag would be led to believe that the latter's products are those of the petitioner, The resolution of these two assigned errors in the negative will lay to rest the matter in litigation and there is no need to touch on the other issues raised by petitioner. Should the said questions be resolved in favor of petitioner, then the other matters may be considered.

Petitioner, on its fifth assigned error, blames the former Court of Appeals for not touching the question of the fraudulent registration of private respondent's trademark FRUIT FOR EVE. As may be gleaned from the questioned decision, respondent court did not pass upon the argument of petitioner that private respondent obtained the registration of its trademark thru fraud or misrepresentation because of the said court's findings that there is no confusing similarity between the two trademarks in question. Hence, said court has allegedly nothing to determine as to who has the right to registration because both parties have the right to have their respective trademarks registered.

Lastly, petitioner asserts that respondent court should have awarded damages in its favor because private respondent had clearly profited from the infringement of the former's trademark.

The main issue involved in this case is whether or not private respondent's trademark FRUIT FOR EVE and its hang tag are confusingly similar to petitioner's trademark FRUIT OF THE LOOM and its hang tag so as to constitute an infringement of the latter's trademark rights and justify the cancellation of the former.

In cases involving infringement of trademark brought before this Court it has been consistently held that there is infringement of trademark when the use of the mark involved would be likely to cause confusion or mistake in the mind of the public or to deceive purchasers as to the origin or source of the commodity (Co Tiong Sa vs. Director of Patents, 95 Phil. 1; Alhambra Cigar & Cigarette Co. vs. Mojica, 27 Phil. 266; Sapolin Co. vs. Balmaceda, 67 Phil. 705; La Insular vs. Jao Oge, 47 Phil. 75).

In cases of this nature, there can be no better evidence as to whether there is a confusing similarity in the contesting trademarks than the labels or hang tags themselves. A visual presentation of the labels or hang tags is the best argument for one or the other, hence, We are reproducing hereunder pictures of the hang tags of the products of the parties to the case. The pictures below are part of the documentary evidence appearing on page 124 of the original records.

Petitioner asseverates in the third and fourth assignment of errors, which, as We have said, constitute the main argument, that the dominant features of both trademarks is the word FRUIT. In determining whether the trademarks are confusingly similar, a comparison of the words is not the only determinant 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 (Bristol Myers Co. vs. Director of Patents, 17 SCRA 131).

In the trademarks FRUIT OF THE LOOM and FRUIT FOR EVE, the lone similar word is FRUIT. WE agree with the respondent court that by mere pronouncing the two marks, it could hardly be said that it will provoke a confusion, as to mistake one for the other. Standing by itself, FRUIT OF THE LOOM is wholly different from FRUIT FOR EVE. WE do not agree with petitioner that the dominant feature of both trademarks is the word FRUIT for even in the printing of the trademark in both hang tags, the word FRUIT is not at all made dominant over the other words.

As to the design and coloring scheme of the hang tags, We believe that while there are similarities in the two marks like the red apple at the center of each mark, We also find differences or dissimilarities which are glaring and striking to the eye such as:

1. The shape of petitioner's hang tag is round with a base that looks like a paper rolled a few inches in both ends; while that of private respondent is plain rectangle without any base.

2. The designs differ. Petitioner's trademark is written in almost semi-circle while that of private respondent is written in straight line in bigger letters than petitioner's. Private respondent's tag has only an apple in its center but that of petitioner has also clusters of grapes that surround the apple in the center.

3. The colors of the hang tag are also very distinct from each other. Petitioner's hang tag is fight brown while that of respondent is pink with a white colored center piece. The apples which are the only similarities in the hang tag are differently colored. Petitioner's apple is colored dark red, while that of private respondent is light red.

The similarities of the competing trademarks in this case are completely lost in the substantial differences in the design and general appearance of their respective hang tags. WE have examined the two trademarks as they appear in the hang tags submitted by the parties and We are impressed more by the dissimilarities than by the similarities appearing therein. WE hold that the trademarks FRUIT OF THE LOOM and FRUIT FOR EVE do not resemble each other as to confuse or deceive an ordinary purchaser. The ordinary purchaser must be thought of as having, and credited with, at least a modicum of intelligence (Carnation Co. vs. California Growers Wineries, 97 F. 2d 80; Hyram Walke and Sons vs. Penn-Maryland Corp., 79 F. 2d 836) to be able to see the obvious differences between the two trademarks in question. Furthermore, We believe that a person who buys petitioner's products and starts to have a liking for it, will not get confused and reach out for private respondent's products when she goes to a garment store.

These findings in effect render immaterial the other errors assigned by petitioner which are premised on the assumption that private respondent's trademark FRUIT FOR EVE had infringed petitioner's trademark FRUIT OF THE LOOM.

WHEREFORE, THE DECISION APPEALED FROM IS AFFIRMED. COSTS AGAINST PETITIONER.

SO ORDERED.

Aquino, Concepcion, Jr., Abad Santos, Escolin and Cuevas, JJ., concur.

G.R. No. 78413 November 8, 1989

CAGAYAN VALLEY ENTERPRISES, INC., Represented by its President, Rogelio Q. Lim, petitioner, vs.THE HON. COURT OF APPEALS and LA TONDEÑA, INC., respondents.

Efren M. Cacatian for petitioners.

San Jose, Enrique, Lacas, Santos and Borje for private respondent.

REGALADO, J.:

26

This petition for review on certiorari seeks the nullification of the decision of the Court of Appeals of December 5, 1986 in CA-G.R. CV No. 06685 which reversed the decision of the trial court, and its resolution dated May 5, 1987 denying petitioner's motion for reconsideration.

The following antecedent facts generative of the present controversy are not in dispute.

Sometime in 1953, La Tondeña, Inc. (hereafter, LTI for short) registered with the Philippine Patent Office pursuant to Republic Act No. 623 1 the 350 c.c. white flint bottles it has been using for its gin popularly known as "Ginebra San Miguel". This registration was subsequently renewed on December 4, 1974. 2

On November 10, 1981, LTI filed Civil Case No. 2668 for injunction and damages in the then Branch 1, Court of First Instance of Isabela against Cagayan Valley Enterprises, Inc. (Cagayan, for brevity) for using the 350 c.c., white flint bottles with the mark "La Tondeña Inc." and "Ginebra San Miguel" stamped or blown-in therein by filling the same with Cagayan's liquor product bearing the label "Sonny Boy" for commercial sale and distribution, without LTI's written consent and in violation of Section 2 of Republic Act No. 623, as amended by Republic Act No. 5700. On the same date, LTI further filed an ex parte petition for the issuance of a writ of preliminary injunction against the defendant therein. 3 On November 16, 1981, the court a quo issued a temporary restraining order against Cagayan and its officers and employees from using the 350 c.c. bottles with the marks "La Tondeña" and "Ginebra San Miguel." 4

Cagayan, in its answer, 5 alleged the following defenses:

1. LTI has no cause of action due to its failure to comply with Section 21 of Republic Act No. 166 which requires the giving of notice that its aforesaid marks are registered by displaying and printing the words "Registered in the Phil. Patent Office" or "Reg Phil. Pat. Off.," hence no suit, civil or criminal, can be filed against Cagayan;

2. LTI is not entitled to any protection under Republic Act No. 623, as amended by Republic Act No. 5700, because its products, consisting of hard liquor, are not among those contemplated therein. What is protected under said law are beverages like Coca-cola, Royal Tru-Orange, Lem-o-Lime and similar beverages the bottles whereof bear the words "Reg Phil. Pat. Off.;"

3. No reservation of ownership on its bottles was made by LTI in its sales invoices nor does it require any deposit for the retention of said bottles; and

4. There was no infringement of the goods or products of LTI since Cagayan uses its own labels and trademark on its product.

In its subsequent pleadings, Cagayan contended that the bottles they are using are not the registered bottles of LTI since the former was using the bottles marked with "La Tondeña, Inc." and "Ginebra San Miguel" but without the words "property of" indicated in said bottles as stated in the sworn statement attached to the certificate of registration of LTI for said bottles.

On December 18, 1981, the lower court issued a writ of preliminary injunction, upon the filing of a bond by LTI in the sum of P50,000.00, enjoining Cagayan, its officers and agents from using the aforesaid registered bottles of LTI. 6

After a protracted trial, which entailed five (5) motions for contempt filed by LTI against Cagayan, the trial court rendered judgment 7 in favor of Cagayan, ruling that the complaint does not state a cause of action and that Cagayan was not guilty of contempt. Furthermore, it awarded damages in favor of Cagayan.

LTI appealed to the Court of Appeals which, on December 5, 1986 rendered a decision in favor of said appellant, the dispositive portion whereof reads:

WHEREFORE, the decision appealed from is hereby SET ASIDE and judgment is rendered permanently enjoining the defendant, its officers and agents from using the 350 c.c. white flint bottles with the marks of ownership "La Tondeña, Inc." and "Ginebra San Miguel", blown-in or stamped on said bottles as containers for defendant's products.

The writ of preliminary injunction issued by the trial court is therefore made permanent.

Defendant is ordered to pay the amounts of:

(1) P15,000.00 as nominal or temperate damages;

(2) P50,000.00 as exemplary damages;

(3) P10,000.00 as attorney's fees; and

(4) Costs of suit. 8

On December 23, 1986, Cagayan filed a motion for reconsideration which was denied by the respondent court in its resolution dated May 5, 1987, hence the present petition, with the following assignment of errors:

I. The Court of Appeals gravely erred in the decision granting that "there is, therefore, no need for plaintiff to display the words "Reg. Phil. Pat. Off." in order for it to succeed in bringing any injunction suit against defendant for the illegal use of its bottles. Rep. Act No. 623, as amended by Rep. Act No. 5700 simply provides and requires that the marks or names shall be stamped or marked on the containers."

II. The Court of Appeals gravely erred in deciding that "neither is there a reason to distinguish between the two (2) sets of marked bottles-those which contain the marks "Property of La Tondeña, Inc., Ginebra San Miguel," and those simply marked La Tondeña Inc., Ginebra San Miguel'. By omitting the words "property of" plaintiff did not open itself to violation of Republic Act No. 623, as amended, as having registered its marks or names it is protected under the law."

III. The Honorable Court of Appeals gravely erred in deciding that the words "La Tondeña, Inc. and Ginebra San Miguel" are sufficient notice to the defendant which should have inquired from the plaintiff or the Philippine Patent Office, if it was lawful for it to re-use the empty bottles of the plaintiff.

IV. The Honorable Court of Appeals gravely erred in deciding that defendant-appellee cannot claim good faith from using the bottles of plaintiff with marks "La Tondeña, Inc." alone, short for the description contained in the sworn statement of Mr. Carlos Palanca, Jr., which was a requisite of its original and renewal registrations.

V. The Honorable Court of Appeals gravely erred in accommodating the appeal on the dismissals of the five (5) contempt charges.

27

VI. The Honorable Court of Appeals gravely erred in deciding that the award of damages in favor of the defendant-appellee, petitioner herein, is not in order. Instead it awarded nominal or temperate, exemplary damages and attorney's fees without proof of bad faith.9

The pertinent provisions of Republic Act No. 623, as amended by Republic Act No. 5700, provides:

SECTION 1. Persons engaged or licensed to engage in the manufacture, bottling, or selling of soda water, mineral or aerated waters, cider, milk, cream or other lawful beverages in bottles, boxes, casks, kegs, or barrels and other similar containers, or in the manufacturing, compressing or selling of gases such as oxygen, acytelene, nitrogen, carbon dioxide ammonia, hydrogen, chloride, helium, sulphur, dioxide, butane, propane, freon, melthyl chloride or similar gases contained in steel cylinders, tanks, flasks, accumulators or similar containers, with the name or the names of their principals or products, or other marks of ownership stamped or marked thereon, may register with the Philippine Patent Office a description of the names or marks, and the purpose for which the containers so marked and used by them, under the same conditions, rules, and regulations, made applicable by law or regulation to the issuance of trademarks.

SEC. 2. It shall be unlawful for any person, without the written consent of the manufacturer, bottler, or seller, who has succesfully registered the marks of ownership in accordance with the provisions of the next preceding section, to fill such bottles, boxes, kegs, barrels, steel cylinders, tanks, flasks, accumulators or other similar containers so marked or stamped, for the purpose of sale, or to sell, disposed of, buy or traffic in, or wantonly destroy the same, whether filled or not, to use the same, for drinking vessels or glasses or drain pipes, foundation pipes, for any other purpose than that registered by the manufacturer, bottler or seller. Any violation of this section shall be punished by a fine of not more than one thousand pesos or imprisonment of not more than one year or both.

SEC. 3. The use by any person other than the registered manufacturer, bottler or seller, without written permission of the latter of any such bottle, cask, barrel, keg, box, steel cylinders, tanks, flask, accumulators, or other similar containers, or the possession thereof without written permission of the manufacturer, by any junk dealer or dealer in casks, barrels, kegs boxes, steel cylinders, tanks, flasks, accumulators or other similar containers, the same being duly marked or stamped and registered as herein provided, shall give rise to a prima facie presumption that such use or possession is unlawful.

The above-quoted provisions grant protection to a qualified manufacturer who successfully registered with the Philippine Patent Office its duly stamped or marked bottles, boxes, casks and other similar containers. The mere use of registered bottles or containers without the written consent of the manufacturer is prohibited, the only exceptions being when they are used as containers for "sisi," bagoong," "patis" and similar native products. 10

It is an admitted fact that herein petitioner Cagayan buys from junk dealers and retailers bottles which bear the marks or names La Tondeña Inc." and "Ginebra San Miguel" and uses them as containers for its own liquor products. The contention of Cagayan that the aforementioned bottles without the words "property of" indicated thereon are not the registered bottles of LTI, since they do not conform with the statement or description in the supporting affidavits attached to the original registration certificate and renewal, is untenable.

Republic Act No. 623 which governs the registration of marked bottles and containers merely requires that the bottles, in order to be eligible for registration, must be stamped or marked with the names of the manufacturers or the names of their principals or products, or other marks of ownership. No drawings or labels are required but, instead, two photographs of the container, duly signed by the applicant, showing clearly and legibly the names and other marks of ownership sought to be registered and a bottle showing the name or other mark or ownership, irremovably stamped or marked, shall be submitted. 11

The term "Name or Other Mark of Ownership" 12 means the name of the applicant or the name of his principal, or of the product, or other mark of ownership. The second set of bottles of LTI without the words "property of" substantially complied with the requirements of Republic Act No. 623, as amended, since they bear the name of the principal, La Tondeña Inc., and of its product, Ginebra San Miguel. The omitted words "property of" are not of such vital indispensability such that the omission thereof will remove the bottles from the protection of the law. The owner of a trade-mark or trade-name, and in this case the marked containers, does not abandon it by making minor modifications in the mark or name itself. 13 With much more reason will this be true where what is involved is the mere omission of the words "property of" since even without said words the ownership of the bottles is easily Identifiable. The words "La Tondeña Inc." and "Ginebra San Miguel" stamped on the bottles, even without the words "property of," are sufficient notice to the public that those bottles so marked are owned by LTI.

The claim of petitioner that hard liquor is not included under the term "other lawful beverages" as provided in Section I of Republic Act No. 623, as amended by Republic Act No. 5700, is without merit. The title of the law itself, which reads " An Act to Regulate the Use of Duly Stamped or Marked Bottles, Boxes, Casks, Kegs, Barrels and Other Similar Containers" clearly shows the legislative intent to give protection to all marked bottles and containers of all lawful beverages regardless of the nature of their contents. The words "other lawful beverages" is used in its general sense, referring to all beverages not prohibited by law. Beverage is defined as a liquor or liquid for drinking. 14 Hard liquor, although regulated, is not prohibited by law, hence it is within the purview and coverage of Republic Act No. 623, as amended.

Republic Act No. 623, as amended, has for its purpose the protection of the health of the general public and the prevention of the spread of contagious diseases. It further seeks to safeguard the property rights of an important sector of Philippine industry. 15 As held by this Court in Destileria Ayala, Inc. vs. Tan Tay & Co., 16 the purpose of then Act 3070, was to afford a person a means of Identifying the containers he uses in the manufacture, preservation, packing or sale of his products so that he may secure their registration with the Bureau of Commerce and Industry and thus prevent other persons from using them. Said Act 3070 was substantially reenacted as Republic Act No. 623. 17

The proposition that Republic Act No. 623, as amended, protects only the containers of the soft drinks enumerated by petitioner and those similar thereto, is unwarranted and specious. The rule of ejusdem generiscannot be applied in this case. To limit the coverage of the law only to those enumerated or of the same kind or class as those specifically mentioned will defeat the very purpose of the law. Such rule of ejusdem generis is to be resorted to only for the purpose of determining what the intent of the legislature was in enacting the law. If that intent clearly appears from other parts of the law, and such intent thus clearly manifested is contrary to the result which would be reached by the appreciation of the rule of ejusdem generis, the latter must give way.18

Moreover, the above conclusions are supported by the fact that the Philippine Patent Office, which is the proper and competent government agency vested with the authority to enforce and implement Republic Act No. 623, registered the bottles of respondent LTI as containers for gin and issued in its name a certificate of registration with the following findings:

It appearing, upon due examination that the applicant is entitled to have the said MARKS OR NAMES registered under R.A. No. 623, the said marks or names have been duly registered this day in the PATENT OFFICE under the said Act, for gin, Ginebra San Miguel. 19

While executive construction is not necessarily binding upon the courts, it is entitled to great weight and consideration. The reason for this is that such construction comes from the particular branch of government called upon to implement the particular law involved. 20

Just as impuissant is petitioners contention that respondent court erred in holding that there is no need for LTI to display the words "Reg Phil. Pat. Off." in order to succeed in its injunction suit against Cagayan for the illegal use of the bottles. To repeat, Republic Act No. 623 governs the registration of marked bottles and containers and merely requires that the bottles and/or containers be marked or stamped by the names of the manufacturer or the names of their principals or products or other marks of ownership. The owner upon registration of its marked bottles, is vested by law with an exclusive right to use the same to the exclusion of others, except as a container for native products. A violation of said right gives use to a cause of action against the violator or infringer.

28

While Republic Act No. 623, as amended, provides for a criminal action in case of violation, a civil action for damages is proper under Article 20 of the Civil Code which provides that every person who, contrary to law, wilfully or negligently causes damage to another, shall indemnify the latter for the same. This particular provision of the Civil Case was clearly meant to complement all legal provisions which may have inadvertently failed to provide for indemnification or reparation of damages when proper or called for. In the language of the Code Commission "(t)he foregoing rule pervades the entire legal system, and renders it impossible that a person who suffers damage because another has violated some legal provisions, should find himself without relief." 21Moreover, under Section 23 of Republic Act No. 166, as amended, a person entitled to the exclusive use of a registered mark or tradename may recover damages in a civil action from any person who infringes his rights. He may also, upon proper showing, be granted injunction.

It is true that the aforesaid law on trademarks provides:

SEC. 21. Requirements of notice of registration of trade-mark.-The registrant of a trade-mark, heretofore registered or registered under the provisions of this Act, shall give notice that his mark is registered by displaying with the same as used the words 'Registered in the Philippines Patent Office' or 'Reg Phil. Pat. Off.'; and in any suit for infringement under this Act by a registrant failing so to mark the goods bearing the registered trade-mark, no damages shall be recovered under the provisions of this Act, unless the defendant has actual notice of the registration.

Even assuming that said provision is applicable in this case, the failure of LTI to make said marking will not bar civil action against petitioner Cagayan. The aforesaid requirement is not a condition sine qua non for filing of a civil action against the infringer for other reliefs to which the plaintiff may be entitled. The failure to give notice of registration will not deprive the aggrieved party of a cause of action against the infringer but, at the most, such failure may bar recovery of damages but only under the provisions of Republic Act No. 166.

However, in this case an award of damages to LTI is ineluctably called for. Petitioner cannot claim good faith. The record shows that it had actual knowledge that the bottles with the blown-in marks "La Tondeña Inc." and "Ginebra San Miguel" are duly registered. In Civil Case No. 102859 of the Court of First Instance of Manila, entitled "La Tondeña Inc. versus Diego Lim, doing business under the name and style 'Cagayan Valley Distillery,' " a decision was rendered in favor of plaintiff therein on the basis of the admission and/or acknowledgment made by the defendant that the bottles marked only with the words "La Tondeña Inc." and "Ginebra San Miguel" are registered bottles of LTI. 22

Petitioner cannot avoid the effect of the admission and/or acknowledgment made by Diego Lim in the said case. While a corporation is an entity separate and distinct from its stock-holders and from other corporations with which it may be connected, where the discreteness of its personality is used to defeat public convenience, justify wrong, protect fraud, or defend crime, the law will regard the corporation as an association of persons, or in the case of two corporations, merge them into one. When the corporation is the mere alter ego or business conduit of a person, it may be disregaded. 23

Petitioner's claim that it is separate and distinct from the former Cagayan Valley Distillery is belied by the evidence on record. The following facts warrant the conclusion that petitioner, as a corporate entity, and Cagayan Valley Distillery are one and the same. to wit: (1) petitioner is being managed by Rogelio Lim, the son of Diego Lim, the owner and manager of Cagayan Valley Distellery; (2) it is a family corporation; 24 (3) it is an admitted fact that before petitioner was incorporated it was under a single proprietorship; 25 (4) petitioner is engaged in the same business as Cagayan Valley Distillery, the manufacture of wines and liquors; and (5) the factory of petitioner is located in the same place as the factory of the former Cagayan Valley Distillery.

It is thus clear that herein petitioner is a mere continuation and successor of Cagayan Valley Distillery. It is likewise indubitable that the admission made in the former case, as earlier explained, is binding on it as cogent proof that even before the filing of this case it had actual knowledge that the bottles in dispute were registered containers of LTI As held in La Campana Coffee Factory, Inc., et al. vs. Kaisahan Ng Mga Manggagawa sa La Campana (KKM), et al., 26 where the main purpose in forming the corporation was to evade one's subsidiary liability for damages in a criminal case, the

corporation may not be heard to say that it has a personality separate and distinct from its members, because to allow it to do so would be to sanction the use of the fiction of corporate entity as a shield to further an end subversive of justice.

Anent the several motions of private respondent LTI to have petitioner cited for contempt, we reject the argument of petitioner that an appeal from a verdict of acquittal in a contempt, proceeding constitutes double jeopardy. A failure to do something ordered by the court for the benefit of a party constitutes civil contempt. 27As we held in Converse Rubber Corporation vs. Jacinto Rubber & Plastics Co., Inc.:

...True it is that generally, contempt proceedings are characterized as criminal in nature, but the more accurate juridical concept is that contempt proceedings may actually be either civil or criminal, even if the distinction between one and the other may be so thin as to be almost imperceptible. But it does exist in law. It is criminal when the purpose is to vindicate the authority of the court and protect its outraged dignity. It is civil when there is failure to do something ordered by a court to be done for the benefit of a party (3 Moran Rules of Court, pp. 343-344, 1970 ed.; see also Perkins vs. Director of Prisons, 58 Phil. 272; Harden vs. Director of Prisons, 81 Phil. 741.) And with this distinction in mind, the fact that the injunction in the instant case is manifestly for the benefit of plaintiffs makes of the contempt herein involved civil, not criminal. Accordingly, the conclusion is inevitable that appellees have been virtually found by the trial court guilty of civil contempt, not criminal contempt, hence, the rule on double jeopardy may not be invoked. 28

The contempt involved in this case is civil and constructive in nature, it having arisen from the act of Cagayan in violating the writ of preliminary injunction of the lower court which clearly defined the forbidden act, to wit:

NOW THEREFORE, pending the resolution of this case by the court, you are enjoined from using the 350 c.c. white flint bottles with the marks La Tondeña Inc.,' and 'Ginebra San Miguel' blown-in or stamped into the bottles as containers for the defendant's products. 19

On this incident, two considerations must be borne in mind. Firstly, an injunction duly issued must be obeyed, however erroneous the action of the court may be, until its decision is overruled by itself or by a higher court.30 Secondly, the American rule that the power to judge a contempt rests exclusively with the court contemned does not apply in this Jurisdiction. The provision of the present Section 4, Rule 71 of the Rules of Court as to where the charge may be filed is permissive in nature and is merely declaratory of the inherent power of courts to punish contumacious conduct. Said rules do not extend to the determination of the jurisdiction of Philippine courts. 31 In appropriate case therefore, this Court may, in the interest of expedient justice, impose sanctions on contemners of the lower courts.

Section 3 of Republic Act No. 623, as amended, creates a prima facie presumption against Cagayan for its unlawful use of the bottles registered in the name of LTI Corollarily, the writ of injunction directing petitioner to desist from using the subject bottles was properly issued by the trial court. Hence, said writ could not be simply disregarded by Cagayan without adducing proof sufficient to overcome the aforesaid presumption. Also, based on the findings of respondent court, and the records before us being sufficient for arbitrament without remanding the incident to the court a quo petitioner can be adjudged guilty of contempt and imposed a sanction in this appeal since it is a cherished rule of procedure for this Court to always strive to settle the entire controversy in a single proceeding, 32 We so impose such penalty concordant with the preservative principle and as demanded by the respect due the orders, writs and processes of the courts of justice.

WHEREFORE, judgment is hereby rendered DENYING the petition in this case and AFFIRMING the decision of respondent Court of Appeals. Petitioner is hereby declared in contempt of court and ORDERED to pay a fine of One Thousand Pesos (P1,000.00), with costs.

SO ORDERED.

Paras, Padilla and Sarmiento, JJ., concur.

29

G.R. No. L-78325 January 25, 1990

DEL MONTE CORPORATION and PHILIPPINE PACKING CORPORATION, petitioners, vs.COURT OF APPEALS and SUNSHINE SAUCE MANUFACTURING INDUSTRIES, respondents.

Bito, Misa & Lozada for petitioners.

Reynaldo F. Singson for private respondent.

CRUZ, J.:

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

Petitioner Del Monte Corporation is a foreign company organized under the laws of the United States and not engaged in business in the Philippines. Both the Philippines and the United States are signatories to the Convention of Paris of September 27, 1965, which grants to the nationals of the parties rights and advantages which their own nationals enjoy for the repression of acts of infringement and unfair competition.

Petitioner Philippine Packing Corporation (Philpack) is a domestic corporation duly organized under the laws of the Philippines. On April 11, 1969, Del Monte granted Philpack the right to manufacture, distribute and sell in the Philippines various agricultural products, including catsup, under the Del Monte trademark and logo.

On October 27,1965, Del Monte authorized Philpack to register with the Philippine Patent Office the Del Monte catsup bottle configuration, for which it was granted Certificate of Trademark Registration No. SR-913 by the Philippine Patent Office under the Supplemental Register. 1 On November 20, 1972, Del Monte also obtained two registration certificates for its trademark "DEL MONTE" and its logo. 2

Respondent Sunshine Sauce Manufacturing Industries was issued a Certificate of Registration by the Bureau of Domestic Trade on April 17,1980, to engage in the manufacture, packing, distribution and sale of various kinds of sauce, identified by the logo Sunshine Fruit Catsup. 3 This logo was registered in the Supplemental Register on September 20, 1983. 4 The product itself was contained in various kinds of bottles, including the Del Monte bottle, which the private respondent bought from the junk shops for recycling.

Having received reports that the private respondent was using its exclusively designed bottles and a logo confusingly similar to Del Monte's, Philpack warned it to desist from doing so on pain of legal action. Thereafter, claiming that the demand had been ignored, Philpack and Del Monte filed a complaint against the private respondent for infringement of trademark and unfair competition, with a prayer for damages and the issuance of a writ of preliminary injunction. 5

In its answer, Sunshine alleged that it had long ceased to use the Del Monte bottle and that its logo was substantially different from the Del Monte logo and would not confuse the buying public to the detriment of the petitioners. 6

After trial, the Regional Trial Court of Makati dismissed the complaint. It held that there were substantial differences between the logos or trademarks of the parties; that the defendant had ceased using the petitioners' bottles; and that in any case the defendant became the owner of the said bottles upon its purchase thereof from the junk yards. Furthermore, the complainants had failed to establish the defendant's malice or bad faith, which was an essential element of infringement of trademark or unfair competition. 7

This decision was affirmed in toto by the respondent court, which is now faulted in this petition for certiorariunder Rule 45 of the Rules of Court.

Section 22 of R.A. No. 166, otherwise known as the Trademark Law, provides in part as follows:

Sec. 22. Infringement, what constitutes. — Any person who shall use, without the consent of the registrant, any reproduction, counterfeit, copy or colorable imitation of any registered mark or trade-name in connection with the sale, offering for sale, or advertising of any goods, business or services on or in connection with which such use is likely to cause confusion or mistake or to deceive purchasers or others as to the source or origin of such goods or services or identity of such business; or reproduce, counterfeit copy or colorably imitate any such mark or trade name and apply such reproduction, counterfeit copy or colorable imitation to labels, signs, prints, packages, wrappers, receptacles or advertisements intended to be used upon or in connection with such goods, business or services, shall be liable to a civil action by the registrant for any or all of the remedies herein provided.

Sec. 29 of the same law states as follows:

Sec. 29. Unfair competition, rights and remedies. — A person who has identified in the mind of the public the goods he manufactures or deals in, his business or services from those of others, whether or not a mark or tradename is employed, has a property right in the goodwill of the said goods, business or services so identified, which will be protected in the same manner as other property rights. Such a person shall have the remedies provided in section twenty- three, Chapter V hereof.

Any person who shall employ deception or any other means contrary to good faith by which he shall pass off the goods manufactured by him or in which he deals, or his business, or services for those of the one having established such goodwill, or who shall commit any acts calculated to produce said result, shall be guilty of unfair competition, and shall be subject to an action therefor.

In particular, and without in any way limiting the scope of unfair competition, the following shall be deemed guilty of unfair competition:

(a) Any person, who in selling his goods shall give them the general appearance of goods of another manufacturer or dealer, either as to the goods themselves or in the wrapping of the packages in which they are contained, or the devices or words thereon, or in any other feature of their appearance, which would likely influence purchasers to believe that the goods offered are those of a manufacturer or dealer other than the actual manufacturer or dealer, or who otherwise clothes the goods with such appearance as shall deceive the public and defraud another of his legitimate trade, or any subsequent vendor of such goods or any agent of any vendor engaged in selling such goods with a like purpose;

(b) Any person who by any artifice, or device, or who employs ally other means calculated to induce the false belief that such person is offering the services of another who has identified such services in the mind of the public; or

(c) Any person who shall make any false statement in the course of trade or who shall commit any other act contrary to good faith of a nature calculated to discredit the goods, business or services of another.

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To arrive at a proper resolution of this case, it is important to bear in mind the following distinctions between infringement of trademark and unfair competition.

(1) Infringement of trademark is the unauthorized use of a trademark, whereas unfair competition is the passing off of one's goods as those of another.

(2) In infringement of trademark fraudulent intent is unnecessary whereas in unfair competition fraudulent intent is essential.

(3) In infringement of trademark the prior registration of the trademark is a prerequisite to the action, whereas in unfair competition registration is not necessary. 8

In the challenged decision, the respondent court cited the following test laid down by this Court in a number of cases:

In determining whether two trademarks are confusingly similar, the two marks in their entirety as they appear in the respective labels must be considered in relation to the goods to which they are attached; the discerning eye of the observer must focus not only on the predorninant words but also on the other features appearing on both labels. 9

and applying the same, held that there was no colorable imitation of the petitioners' trademark and logo by the private respondent. The respondent court agreed with the findings of the trial court that:

In order to resolve the said issue, the Court now attempts to make a comparison of the two products, to wit:

1. As to the shape of label or make:

Del Monte: Semi-rectangular with a crown or tomato shape design on top of the rectangle.

Sunshine: Regular rectangle.

2. As to brand printed on label:

Del Monte: Tomato catsup mark.

Sunshine: Fruit catsup.

3. As to the words or lettering on label or mark:

Del Monte: Clearly indicated words packed by Sysu International, Inc., Q.C., Philippines.

Sunshine: Sunshine fruit catsup is clearly indicated "made in the Philippines by Sunshine Sauce Manufacturing Industries" No. 1 Del Monte Avenue, Malabon, Metro Manila.

4. As to color of logo:

Del Monte: Combination of yellow and dark red, with words "Del Monte Quality" in white.

Sunshine: White, light green and light red, with words "Sunshine Brand" in yellow.

5. As to shape of logo:

Del Monte: In the shape of a tomato.

Sunshine: Entirely different in shape.

6. As to label below the cap:

Del Monte: Seal covering the cap down to the neck of the bottle, with picture of tomatoes with words "made from real tomatoes."

Sunshine: There is a label below the cap which says "Sunshine Brand."

7. As to the color of the products:

Del Monte: Darker red.

Sunshine: Lighter than Del Monte.

While the Court does recognize these distinctions, it does not agree with the conclusion that there was no infringement or unfair competition. It seems to us that the lower courts have been so pre-occupied with the details that they have not seen the total picture.

It has been correctly held that side-by-side comparison is not the final test of similarity. 10 Such comparison requires a careful scrutiny to determine in what points the labels of the products differ, as was done by the trial judge. The ordinary buyer does not usually make such scrutiny nor does he usually have the time to do so. The average shopper is usually in a hurry and does not inspect every product on the shelf as if he were browsing in a library. Where the housewife has to return home as soon as possible to her baby or the working woman has to make quick purchases during her off hours, she is apt to be confused by similar labels even if they do have minute differences. The male shopper is worse as he usually does not bother about such distinctions.

The question is not whether the two articles are distinguishable by their label when set side by side but whether the general confusion made by the article upon the eye of the casual purchaser who is unsuspicious and off his guard, is such as to likely result in his confounding it with the original. 11 As observed in several cases, the general impression of the ordinary purchaser, buying under the normally prevalent conditions in trade and giving the attention such purchasers usually give in buying that class of goods is the touchstone. 12

It has been held that in making purchases, the consumer must depend upon his recollection of the appearance of the product which he intends to purchase. 13 The buyer having in mind the mark/label of the respondent must rely upon his memory of the petitioner's mark. 14 Unlike the judge who has ample time to minutely examine the labels in question in the comfort of his sala, the ordinary shopper does not enjoy the same opportunity.

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A number of courts have held that to determine whether a trademark has been infringed, we must consider the mark as a whole and not as dissected. If the buyer is deceived, it is attributable to the marks as a totality, not usually to any part of it. 15 The court therefore should be guided by its first impression, 16 for a buyer acts quickly and is governed by a casual glance, the value of which may be dissipated as soon as the court assumes to analyze carefully the respective features of the mark. 17

It has also been held that it is not the function of the court in cases of infringement and unfair competition to educate purchasers but rather to take their carelessness for granted, and to be ever conscious of the fact that marks need not be identical. A confusing similarity will justify the intervention of equity. 18 The judge must also be aware of the fact that usually a defendant in cases of infringement does not normally copy but makes only colorable changes. 19 Well has it been said that the most successful form of copying is to employ enough points of similarity to confuse the public with enough points of difference to confuse the courts. 20

We also note that the respondent court failed to take into consideration several factors which should have affected its conclusion, to wit: age, training and education of the usual purchaser, the nature and cost of the article, whether the article is bought for immediate consumption and also the conditions under which it is usually purchased . 21 Among these, what essentially determines the attitude of the purchaser, specifically his inclination to be cautious, is the cost of the goods. To be sure, a person who buys a box of candies will not exercise as much care as one who buys an expensive watch. As a general rule, an ordinary buyer does not exercise as much prudence in buying an article for which he pays a few centavos as he does in purchasing a more valuable thing. 22 Expensive and valuable items are normally bought only after deliberate, comparative and analytical investigation. But mass products, low priced articles in wide use, and matters of everyday purchase requiring frequent replacement are bought by the casual consumer without great care. 23 In this latter category is catsup.

At that, even if the labels were analyzed together it is not difficult to see that the Sunshine label is a colorable imitation of the Del Monte trademark. The predominant colors used in the Del Monte label are green and red-orange, the same with Sunshine. The word "catsup" in both bottles is printed in white and the style of the print/letter is the same. Although the logo of Sunshine is not a tomato, the figure nevertheless approximates that of a tomato.

As previously stated, the person who infringes a trade mark does not normally copy out but only makes colorable changes, employing enough points of similarity to confuse the public with enough points of differences to confuse the courts. What is undeniable is the fact that when a manufacturer prepares to package his product, he has before him a boundless choice of words, phrases, colors and symbols sufficient to distinguish his product from the others. When as in this case, Sunshine chose, without a reasonable explanation, to use the same colors and letters as those used by Del Monte though the field of its selection was so broad, the inevitable conclusion is that it was done deliberately to deceive . 24

It has been aptly observed that the ultimate ratio in cases of grave doubt is the rule that as between a newcomer who by the confusion has nothing to lose and everything to gain and one who by honest dealing has already achieved favor with the public, any doubt should be resolved against the newcomer inasmuch as the field from which he can select a desirable trademark to indicate the origin of his product is obviously a large one. 25

Coming now to the second issue, we find that the private respondent is not guilty of infringement for having used the Del Monte bottle. The reason is that the configuration of the said bottle was merely registered in the Supplemental Register. In the case of Lorenzana v. Macagba, 26 we declared that:

(1) Registration in the Principal Register gives rise to a presumption of the validity of the registration, the registrant's ownership of the mark and his right to the exclusive use thereof. There is no such presumption in the registration in the Supplemental Register.

(2) Registration in the Principal Register is limited to the actual owner of the trademark and proceedings therein on the issue of ownership which

may be contested through opposition or interference proceedings or, after registration, in a petition for cancellation.

Registration in the Principal Register is constructive notice of the registrant's claim of ownership, while registration in the Supplemental Register is merely proof of actual use of the trademark and notice that the registrant has used or appropriated it. It is not subject to opposition although it may be cancelled after the issuance. Corollarily, registration in the Principal Register is a basis for an action for infringement while registration in the Supplemental Register is not.

(3) In applications for registration in the Principal Register, publication of the application is necessary. This is not so in applications for registrations in the Supplemental Register.

It can be inferred from the foregoing that although Del Monte has actual use of the bottle's configuration, the petitioners cannot claim exclusive use thereof because it has not been registered in the Principal Register. However, we find that Sunshine, despite the many choices available to it and notwithstanding that the caution "Del Monte Corporation, Not to be Refilled" was embossed on the bottle, still opted to use the petitioners' bottle to market a product which Philpack also produces. This clearly shows the private respondent's bad faith and its intention to capitalize on the latter's reputation and goodwill and pass off its own product as that of Del Monte.

The Court observes that the reasons given by the respondent court in resolving the case in favor of Sunshine are untenable. First, it declared that the registration of the Sunshine label belied the company's malicious intent to imitate petitioner's product. Second, it held that the Sunshine label was not improper because the Bureau of Patent presumably considered other trademarks before approving it. Third, it cited the case of Shell Co. v. Insular Petroleum, 27 where this Court declared that selling oil in containers of another with markings erased, without intent to deceive, was not unfair competition.

Regarding the fact of registration, it is to be noted that the Sunshine label was registered not in the Principal Register but only in the Supplemental Register where the presumption of the validity of the trademark, the registrant's ownership of the mark and his right to its exclusive use are all absent.

Anent the assumption that the Bureau of Patent had considered other existing patents, it is reiterated that since registration was only in the Supplemental Register, this did not vest the registrant with the exclusive right to use the label nor did it give rise to the presumption of the validity of the registration.

On the argument that no unfair competition was committed, the Shell Case is not on all fours with the case at bar because:

(1) In Shell, the absence of intent to deceive was supported by the fact that the respondent therein, before marketing its product, totally obliterated and erased the brands/mark of the different companies stenciled on the containers thereof, except for a single isolated transaction. The respondent in the present case made no similar effort.

(2) In Shell, what was involved was a single isolated transaction. Of the many drums used, there was only one container where the Shell label was not erased, while in the case at hand, the respondent admitted that it made use of several Del Monte bottles and without obliterating the embossed warning.

(3) In Shell, the product of respondent was sold to dealers, not to ultimate consumers. As a general rule, dealers are well acquainted with the manufacturer from whom they make their purchases and since they are more experienced, they cannot be so easily deceived like the

32

inexperienced public. There may well be similarities and imitations which deceive all, but generally the interests of the dealers are not regarded with the same solicitude as are the interests of the ordinary consumer. For it is the form in which the wares come to the final buyer that is of significance. 28

As Sunshine's label is an infringement of the Del Monte's trademark, law and equity call for the cancellation of the private respondent's registration and withdrawal of all its products bearing the questioned label from the market. With regard to the use of Del Monte's bottle, the same constitutes unfair competition; hence, the respondent should be permanently enjoined from the use of such bottles.

The court must rule, however, that the damage prayed for cannot be granted because the petitioner has not presented evidence to prove the amount thereof. Section 23 of R.A. No. 166 provides:

Sec. 23. Actions and damages and injunction for infringement. — Any person entitled to the exclusive use of a registered mark or trade name may recover damages in a civil action from any person who infringes his rights, and the measure of the damages suffered shall be either the reasonable profit which the complaining party would have made, had the defendant not infringed his said rights or the profit which the defendant actually made out of the infringement, or in the event such measure of damages cannot be readily ascertained with reasonable certainty the court may award as damages reasonable percentage based upon the amount of gross sales of the defendant or the value of the services in connection with which the mark or trade name was used in the infringement of the rights of the complaining party. In cases where actual intent to mislead the public or to defraud the complaining party shall be shown, in the discretion of the court, the damages may be doubled.

The complaining party, upon proper showing may also be granted injunction.

Fortunately for the petitioners, they may still find some small comfort in Art. 2222 of the Civil Code, which provides:

Art. 2222. The court may award nominal damages in every obligation arising from any source enumerated in Art. 1157, or in every case where any property right has been invaded.

Accordingly, the Court can only award to the petitioners, as it hereby does award, nominal damages in the amount of Pl,000.00.

WHEREFORE, the petition is GRANTED. The decision of the Court of Appeals dated December 24, 1986 and the Resolution dated April 27,1987, are REVERSED and SET ASIDE and a new judgment is hereby rendered:

(1) Canceling the private respondent's Certificate of Register No. SR-6310 and permanently enjoining the private respondent from using a label similar to that of the petitioners.

(2) Prohibiting the private respondent from using the empty bottles of the petitioners as containers for its own products.

(3) Ordering the private respondent to pay the petitioners nominal damages in the amount of Pl,000.00, and the costs of the suit.

SO ORDERED.

Narvasa Gancayco, Griño-Aquino and Medialdea, JJ., concur.

G.R. No. 103543 July 5, 1993

ASIA BREWERY, INC., petitioner, vs.THE HON. COURT OF APPEALS and SAN MIGUEL CORPORATION, respondents.

Abad Santos & Associates and Sycip, Salazar, Hernandez & Gatmaitan for petitioner.

Roco, Bunag, Kapunan Law Office for private respondent.

GRIÑO-AQUINO, J.:

On September 15, 1988, San Miguel Corporation (SMC) filed a complaint against Asia Brewery Inc. (ABI) for infringement of trademark and unfair competition on account of the latter's BEER PALE PILSEN or BEER NA BEER product which has been competing with SMC's SAN MIGUEL PALE PILSEN for a share of the local beer market. (San Miguel Corporation vs. Asia Brewery Inc., Civ. Case. No. 56390, RTC Branch 166, Pasig, Metro Manila.).

On August 27, 1990, a decision was rendered by the trial Court, presided over by Judge Jesus O. Bersamira, dismissing SMC's complaint because ABI "has not committed trademark infringement or unfair competition against" SMC (p. 189, Rollo).

SMC appealed to the Court of Appeals (C.A.-G.R. CV No. 28104). On September 30, 1991, the Court of Appeals (Sixth Division composed of Justice Jose C. Campos, Jr., chairman and ponente, and Justices Venancio D. Aldecoa Jr. and Filemon H. Mendoza, as members) reversed the trial court. The dispositive part of the decision reads as follows:

In the light of the foregoing analysis and under the plain language of the applicable rule and principle on the matter, We find the defendant Asia Brewery Incorporated GUILTY of infringement of trademark and unfair competition. The decision of the trial court is hereby REVERSED, and a new judgment entered in favor of the plaintiff and against the defendant as follows:

(1) The defendant Asia Brewery Inc. its officers, agents, servants and employees are hereby permanently enjoined and restrained from manufacturing, putting up, selling, advertising, offering or announcing for sale, or supplying Beer Pale Pilsen, or any similar preparation, manufacture or beer in bottles and under labels substantially identical with or like the said bottles and labels of plaintiff San Miguel Corporation employed for that purpose, or substantially identical with or like the bottles and labels now employed by the defendant for that purpose, or in bottles or under labels which are calculated to deceive purchasers and consumers into the belief that the beer is the product of the plaintiff or which will enable others to substitute, sell or palm off the said beer of the defendant as and for the beer of the plaintiff-complainant.

(2) The defendant Asia Brewery Inc. is hereby ordered to render an accounting and pay the San Miguel Corporation double any and all the payments derived by defendant from operations of its business and the sale of goods bearing the mark "Beer Pale Pilsen" estimated at approximately Five Million Pesos (P5,000,000.00); to recall all its products bearing the mark "Beer Pale Pilsen" from its retailers and deliver these as well as all labels, signs, prints, packages, wrappers, receptacles and advertisements bearing the infringing mark and all plates, molds, materials and other means of making the same to the Court authorized to execute this judgment for destruction.

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(3) The defendant is hereby ordered to pay plaintiff the sum of Two Million Pesos (P2,000,000.00) as moral damages and Half a Million Pesos (P5,000,000.00) by way of exemplary damages.

(4) The defendant is further ordered to pay the plaintiff attorney's fees in the amount of P250,000.00 plus costs to this suit. (p. 90, Rollo.)

Upon a motion for reconsideration filed by ABI, the above dispositive part of the decision, was modified by the separate opinions of the Special Sixth Division 1 so that it should read thus:

In the light of the foregoing analysis and under the plain language of the applicable rule and principle on the matter, We find the defendant Asia Brewery Incorporated GUILTY of infringement of trademark and unfair competition. The decision of the trial court is hereby REVERSED, and a new judgment entered in favor of the plaintiff and against the defendant as follows:

(1) The defendant Asia Brewery Inc., its officers, agents, servants and employees are hereby permanently enjoined and restrained from manufacturing, putting up, selling, advertising, offering or announcing for sale, or supplying Beer Pale Pilsen, or any similar preparation, manufacture or beer in bottles and under labels substantially identical with or like the said bottles and labels of plaintiff San Miguel Corporation employed for that purpose, or substantially identical with or like the bottles and labels now employed by the defendant for that purpose, or in bottles or under labels which are calculated to deceive purchasers and consumers into the belief that the beer if the product of the plaintiff or which will enable others to substitute, sell or palm off the said beer of the defendant as and for the beer of the plaintiff-complainant.

(2) The defendant Asia Brewery Inc. is hereby ordered 2 to recall all its products bearing the mark Beer Pale Pilsen from its retailers and deliver these as well as all labels, signs, prints, packages, wrappers, receptacles and advertisements bearing the infringing mark and all plates, molds, materials and other means of making the same to the Court authorized to execute this judgment for destruction.

(3) The defendant is hereby ordered to pay plaintiff the sum of Two Million Pesos (P2,000,000.00) as moral damages and Half a Million Pesos (P500,000.00) by way of exemplary damages.

(4) The defendant is further ordered to pay the plaintiff attorney's fees in the amount of P250,000.00 plus costs of this suit.

In due time, ABI appealed to this Court by a petition for certiorari under Rule 45 of the Rules of Court. The lone issue in this appeal is whether ABI infringes SMC's trademark: San Miguel Pale Pilsen with Rectangular Hops and Malt Design, and thereby commits unfair competition against the latter. It is a factual issue (Phil. Nut Industry Inc. v. Standard Brands Inc., 65 SCRA 575) and as a general rule, the findings of the Court of Appeals upon factual questions are conclusive and ought not to be disturbed by us. However, there are exceptions to this general rule, and they are:

(1) When the conclusion is grounded entirely on speculation, surmises and conjectures;

(2) When the inference of the Court of Appeals from its findings of fact is manifestly mistaken, absurd and impossible;

(3) Where there is grave abuse of discretion;

(4) When the judgment is based on a misapprehension of facts;

(5) When the appellate court, in making its findings, went beyond the issues of the case, and the same are contrary to the admissions of both the appellant and the appellee;

(6) When the findings of said court are contrary to those of the trial court;

(7) When the findings are without citation of specific evidence on which they are based;

(8) When the facts set forth in the petition as well as in the petitioner's main and reply briefs are not disputed by the respondents; and

(9) When the findings of facts of the Court of Appeals are premised on the absence of evidence and are contradicted on record. (Reynolds Philippine Corporation vs. Court of Appeals, 169 SCRA 220, 223 citing, Mendoza vs. Court of Appeals, 156 SCRA 597; Manlapaz vs. Court of Appeals, 147 SCRA 238; Sacay vs. Sandiganbayan, 142 SCRA 593, 609; Guita vs. CA, 139 SCRA 576; Casanayan vs. Court of Appeals, 198 SCRA 333, 336; also Apex Investment and Financing Corp. vs. IAC, 166 SCRA 458 [citing Tolentino vs. De Jesus, 56 SCRA 167; Carolina Industries, Inc. vs. CMS Stock Brokerage, Inc., 97 SCRA 734; Manero vs. CA, 102 SCRA 817; and Moran, Jr. vs. CA, 133 SCRA 88].)

Under any of these exceptions, the Court has to review the evidence in order to arrive at the correct findings based on the record (Roman Catholic Bishop of Malolos, Inc. vs. IAC, 191 SCRA 411, 420.) Where findings of the Court of Appeals and trial court are contrary to each other, the Supreme Court may scrutinize the evidence on record. (Cruz vs. CA, 129 SCRA 222, 227.)

The present case is one of the exceptions because there is no concurrence between the trial court and the Court of Appeals on the lone factual issue of whether ABI, by manufacturing and selling its BEER PALE PILSEN in amber colored steinie bottles of 320 ml. capacity with a white painted rectangular label has committed trademark infringement and unfair competition against SMC.

Infringement of trademark is a form of unfair competition (Clarke vs. Manila Candy Co., 36 Phil. 100, 106). Sec. 22 of Republic Act No. 166, otherwise known as the Trademark Law, defines what constitutes infringement:

Sec. 22. Infringement, what constitutes. — Any person who shall use, without the consent of the registrant, any reproduction, counterfeit, copy or colorable imitation of any registered mark or trade-name in connection with the sale, offering for sale, or advertising of any goods, business or services on or in connection with which such use is likely to cause confusion or mistake or to deceive purchasers or others as to the source or origin of such goods or services, or identity of such business; or reproduce, counterfeit, copy or colorably imitate any such mark or trade-name and apply such reproduction, counterfeit, copy, or colorable imitation to labels, signs, prints, packages, wrappers, receptacles or advertisements intended to be used upon or in connection with such goods, business or services, shall be liable to a civil action by the registrant for any or all of the remedies herein provided. (Emphasis supplied.)

This definition implies that only registered trade marks, trade names and service marks are protected against infringement or unauthorized use by another or others. The use of someone else's registered trademark, trade name or service mark is unauthorized, hence, actionable, if it is done "without the consent of the registrant." (Ibid.)

The registered trademark of SMC for its pale pilsen beer is:

San Miguel Pale Pilsen With Rectangular Hops and Malt Design. (Philippine Bureau of Patents, Trademarks and Technology Transfer Trademark Certificate of Registration No. 36103, dated 23

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Oct. 1986, (p. 174, Rollo.)

As described by the trial court in its decision (Page 177, Rollo):

. . . . a rectangular design [is] bordered by what appears to be minute grains arranged in rows of three in which there appear in each corner hop designs. At the top is a phrase written in small print "Reg. Phil. Pat. Off." and at the bottom "Net Contents: 320 Ml." The dominant feature is the phrase "San Miguel" written horizontally at the upper portion. Below are the words "Pale Pilsen" written diagonally across the middle of the rectangular design. In between is a coat of arms and the phrase "Expertly Brewed." The "S" in "San" and the "M" of "Miguel," "P" of "Pale" and "Pilsen" are written in Gothic letters with fine strokes of serifs, the kind that first appeared in the 1780s in England and used for printing German as distinguished from Roman and Italic. Below "Pale Pilsen" is the statement "And Bottled by" (first line, "San Miguel Brewery" (second line), and "Philippines" (third line). (p. 177, Rollo; Emphasis supplied.)

On the other hand, ABI's trademark, as described by the trial court, consists of:

. . . a rectangular design bordered by what appear to be buds of flowers with leaves. The dominant feature is "Beer" written across the upper portion of the rectangular design. The phrase "Pale Pilsen" appears immediately below in smaller block letters. To the left is a hop design and to the right, written in small prints, is the phrase "Net Contents 320 ml." Immediately below "Pale Pilsen" is the statement written in three lines "Especially brewed and bottled by" (first line), "Asia Brewery Incorporated" (second line), and "Philippines" (third line), (p. 177, Rollo; Emphasis supplied.)

Does ABI's BEER PALE PILSEN label or "design" infringe upon SMC's SAN MIGUEL PALE PILSEN WITH RECTANGULAR MALT AND HOPS DESIGN? The answer is "No."

Infringement is determined by the "test of dominancy" rather than by differences or variations in the details of one trademark and of another. The rule was formulated in Co Tiong Sa vs. Director of Patents, 95 Phil. 1, 4 (1954); reiterated in Lim Hoa vs. Director of Patents, 100 Phil. 214, 216-217 (1956), thus:

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

In Forbes, Munn & Co. (Ltd.) vs. Ang San To, 40 Phil. 272, 275, the test was similarity or "resemblance between the two (trademarks) such as would be likely to cause the one mark to be mistaken for the other. . . . [But] this is not such similitude as amounts to identity."

In Phil. Nut Industry Inc. vs. Standard Brands Inc., 65 SCRA 575, the court was more specific: the test is "similarity in the dominant features of the trademarks."

What are the dominant features of the competing trademarks before us?

There is hardly any dispute that the dominant feature of SMC's trademark is the name of the product: SAN MIGUEL PALE PILSEN, written in white Gothic letters with elaborate serifs at the beginning and end of the letters "S" and "M" on an amber background across the upper portion of the rectangular design.

On the other hand, the dominant feature of ABI's trademark is the name: BEER PALE PILSEN, with the word "Beer" written in large amber letters, larger than any of the letters found in the SMC label.

The trial court perceptively observed that the word "BEER" does not appear in SMC's trademark, just as the words "SAN MIGUEL" do not appear in ABI's trademark. Hence, there is absolutely no similarity in the dominant features of both trademarks.

Neither in sound, spelling or appearance can BEER PALE PILSEN be said to be confusingly similar to SAN MIGUEL PALE PILSEN. No one who purchases BEER PALE PILSEN can possibly be deceived that it is SAN MIGUEL PALE PILSEN. No evidence whatsoever was presented by SMC proving otherwise.

Besides the dissimilarity in their names, the following other dissimilarities in the trade dress or appearance of the competing products abound:

(1) The SAN MIGUEL PALE PILSEN bottle has a slender tapered neck.

The BEER PALE PILSEN bottle has a fat, bulging neck.

(2) The words "pale pilsen" on SMC's label are printed in bold and laced letters along a diagonal band, whereas the words "pale pilsen" on ABI's bottle are half the size and printed in slender block letters on a straighthorizontal band. (See Exhibit "8-a".).

(3) The names of the manufacturers are prominently printed on their respective bottles.

SAN MIGUEL PALE PILSEN is "Bottled by the San Miguel Brewery, Philippines," whereas BEER PALE PILSEN is "Especially brewed and bottled by Asia Brewery Incorporated, Philippines."

(4) On the back of ABI's bottle is printed in big, bold letters, under a row of flower buds and leaves, its copyrighted slogan:

"BEER NA BEER!"

Whereas SMC's bottle carries no slogan.

(5) The back of the SAN MIGUEL PALE PILSEN bottle carries the SMC logo, whereas the BEER PALE PILSEN bottle has no logo.

(6) The SAN MIGUEL PALE PILSEN bottle cap is stamped with a coat of arms and the words "San Miguel Brewery Philippines" encircling the same.

The BEER PALE PILSEN bottle cap is stamped with the name "BEER" in the center, surrounded by the words "Asia Brewery Incorporated Philippines."

(7) Finally, there is a substantial price difference between BEER PALE PILSEN (currently at P4.25 per bottle) and SAN MIGUEL PALE PILSEN (currently at P7.00 per bottle). One who pays only P4.25 for a bottle of beer cannot expect to receive San Miguel Pale Pilsen from the storekeeper or bartender.

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The fact that the words pale pilsen are part of ABI's trademark does not constitute an infringement of SMC's trademark: SAN MIGUEL PALE PILSEN, for "pale pilsen" are generic words descriptive of the color ("pale"), of a type of beer ("pilsen"), which is a light bohemian beer with a strong hops flavor that originated in the City of Pilsen in Czechoslovakia and became famous in the Middle Ages. (Webster's Third New International Dictionary of the English Language, Unabridged. Edited by Philip Babcock Gove. Springfield, Mass.: G & C Merriam Co., [c] 1976, page 1716.) "Pilsen" is a "primarily geographically descriptive word," (Sec. 4, subpar. [e] Republic Act No. 166, as inserted by Sec. 2 of R.A. No. 638) hence, non-registerable and not appropriable by any beer manufacturer. The Trademark Law provides:

Sec. 4. . . .. The owner of trade-mark, trade-name or service-mark used to distinguish his goods, business or services from the goods, business or services of others shall have the right to register the same [on the principal register], unless it:

xxx xxx xxx

(e) Consists of a mark or trade-name which, when applied to or used in connection with the goods, business or services of the applicant is merely descriptive or deceptively misdescriptive of them, or when applied to or used in connection with the goods, business or services of the applicant isprimarily geographically descriptive or deceptively misdescriptive of them, or is primarily merely a surname." (Emphasis supplied.)

The words "pale pilsen" may not be appropriated by SMC for its exclusive use even if they are part of its registered trademark: SAN MIGUEL PALE PILSEN, any more than such descriptive words as "evaporated milk," "tomato ketchup," "cheddar cheese," "corn flakes" and "cooking oil" may be appropriated by any single manufacturer of these food products, for no other reason than that he was the first to use them in his registered trademark. In Masso Hermanos, S.A. vs. Director of Patents, 94 Phil. 136, 139 (1953), it was held that a dealer in shoes cannot register "Leather Shoes" as his trademark because that would be merely descriptive and it would be unjust to deprive other dealers in leather shoes of the right to use the same words with reference to their merchandise. No one may appropriate generic or descriptive words. They belong to the public domain (Ong Ai Gui vs. Director of Patents, 96 Phil. 673, 676 [1955]):

A word or a combination of words which is merely descriptive of an article of trade, or of its composition, characteristics, or qualities, cannot be appropriated and protected as a trademark to the exclusion of its use by others. . . . inasmuch as all persons have an equal right to produce and vend similar articles, they also have the right to describe them properly and to use any appropriate language or words for that purpose, and no person can appropriate to himself exclusively any word or expression, properly descriptive of the article, its qualities, ingredients or characteristics, and thus limit other persons in the use of language appropriate to the description of their manufactures, the right to the use of such language being common to all. This rule excluding descriptive terms has also been held to apply to trade-names. As to whether words employed fall within this prohibition, it is said that the true test is not whether they are exhaustively descriptive of the article designated, but whether in themselves, and as they are commonly used by those who understand their meaning, they are reasonably indicative and descriptive of the thing intended. If they are thus descriptive, and not arbitrary, they cannot be appropriated from general use and become the exclusive property of anyone. (52 Am. Jur. 542-543.)

. . . . Others may use the same or similar descriptive word in connection with their own wares, provided they take proper steps to prevent the public being deceived. (Richmond Remedies Co. vs. Dr. Miles Medical Co., 16 E. [2d] 598.)

. . . . A descriptive word may be admittedly distinctive, especially if the user is the first creator of the article. It will, however, be denied protection, not because it lacks distinctiveness, but rather because others are equally entitled to its use. (2 Callman. Unfair Competition and Trademarks, pp. 869-870.)" (Emphasis supplied.)

The circumstance that the manufacturer of BEER PALE PILSEN, Asia Brewery Incorporated, has printed its name all over the bottle of its beer product: on the label, on the back of the bottle, as well as on the bottle cap, disproves SMC's charge that ABI dishonestly and fraudulently intends to palm off its BEER PALE PILSEN as SMC's product. In view of the visible differences between the two products, the Court believes it is quite unlikely that a customer of average intelligence would mistake a bottle of BEER PALE PILSEN for SAN MIGUEL PALE PILSEN.

The fact that BEER PALE PILSEN like SAN MIGUEL PALE PILSEN is bottled in amber-colored steinie bottles of 320 ml. capacity and is also advertised in print, broadcast, and television media, does not necessarily constitute unfair competition.

Unfair competition is the employment of deception or any other means contrary to good faith by which a person shall pass off the goods manufactured by him or in which he deals, or his business, or services, for those of another who has already established goodwill for his similar goods, business or services, or any acts calculated to produce the same result. (Sec. 29, Republic Act No. 166, as amended.) The law further enumerates the more common ways of committing unfair competition, thus:

Sec. 29. . . .

In particular, and without in any way limiting the scope of unfair competition, the following shall be deemed guilty of unfair competition:

(a) Any person, who in selling his goods shall give them the general appearance of goods of another manufacturer or dealer, either as to the goods themselves or in the wrapping of the packages in which they are contained, or the devices or words thereon, or in any other feature of their appearance, which would be likely to influence purchasers to believe that the goods offered are those of a manufacturer or dealer other than the actual manufacturer or dealer, or who otherwise clothes the goods with such appearance as shall deceive the public and defraud another of his legitimate trade, or any subsequent vendor of such goods or any agent of any vendor engaged in selling such goods with a like purpose.

(b) Any person who by any artifice, or device, or who employs any other means calculated to induce the false belief that such person is offering the services of another who has identified such services in the mind of the public; or

(c) Any person who shall make any false statement in the course of trade or who shall commit any other act contrary to good faith of a nature calculated to discredit the goods, business or services of another.

In this case, the question to be determined is whether ABI is using a name or mark for its beer that has previously come to designate SMC's beer, or whether ABI is passing off its BEER PALE PILSEN as SMC's SAN MIGUEL PALE PILSEN.

. . ..The universal test question is whether the public is likely to be deceived. Nothing less than conduct tending to pass off one man's goods or business as that of another will constitute unfair competition. Actual or probable deception and confusion on the part of the customers by reason of defendant's practices must always appear. (Shell Co., of the Philippines, Ltd. vs. Insular Petroleum Refining Co. Ltd. et al., 120 Phil. 434, 439.)

The use of ABI of the steinie bottle, similar but not identical to the SAN MIGUEL PALE PILSEN bottle, is not unlawful. As pointed out by ABI's counsel, SMC did not invent but merely borrowed the steinie bottle from abroad and it claims neither patent nor trademark protection for that bottle shape and design. (See rollo, page 55.) The Cerveza Especial and the Efes Pale Pilsen use the "steinie" bottle. (See Exhibits 57-D, 57-E.) The trial court found no infringement of SMC's bottle —

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The court agrees with defendant that there is no infringement of plaintiff's bottle, firstly, because according to plaintiff's witness Deogracias Villadolid, it is a standard type of bottle called steinie, and to witness Jose Antonio Garcia, it is not a San Miguel Corporation design but a design originally developed in the United States by the Glass Container Manufacturer's Institute and therefore lacks exclusivity. Secondly, the shape was never registered as a trademark. Exhibit "C" is not a registration of a beer bottle design required under Rep. Act 165 but the registration of the name and other marks of ownership stamped on containers as required by Rep. Act 623. Thirdly, the neck of defendant's bottle is much larger and has a distinct bulge in its uppermost part. (p. 186, Rollo.)

The petitioner's contention that bottle size, shape and color may not be the exclusive property of any one beer manufacturer is well taken. SMC's being the first to use the steinie bottle does not give SMC a vested right to use it to the exclusion of everyone else. Being of functional or common use, and not the exclusive invention of any one, it is available to all who might need to use it within the industry. Nobody can acquire any exclusive right to market articles supplying simple human needs in containers or wrappers of the general form, size and character commonly and immediately used in marketing such articles (Dy Buncio vs. Tan Tiao Bok, 42 Phil. 190, 194-195.)

. . . protection against imitation should be properly confined to nonfunctional features. Even if purely functional elements are slavishly copied, the resemblance will not support an action for unfair competition, and the first user cannot claim secondary meaning protection. Nor can the first user predicate his claim to protection on the argument that his business was established in reliance on any such unpatented nonfunctional feature, even "at large expenditure of money." (Callman Unfair Competition, Trademarks and Monopolies, Sec. 19.33 [4th Ed.].) (Petition for Review, p. 28.)

ABI does not use SMC's steinie bottle. Neither did ABI copy it. ABI makes its own steinie bottle which has a fat bulging neck to differentiate it from SMC's bottle. The amber color is a functional feature of the beer bottle. As pointed out by ABI, all bottled beer produced in the Philippines is contained and sold in amber-colored bottles because amber is the most effective color in preventing transmission of light and provides the maximum protection to beer. As was ruled in California Crushed Fruit Corporation vs. Taylor B. and Candy Co., 38 F2d 885, a merchant cannot be enjoined from using a type or color of bottle where the same has the useful purpose of protecting the contents from the deleterious effects of light rays. Moreover, no one may have a monopoly of any color. Not only beer, but most medicines, whether in liquid or tablet form, are sold in amber-colored bottles.

That the ABI bottle has a 320 ml. capacity is not due to a desire to imitate SMC's bottle because that bottle capacity is the standard prescribed under Metrication Circular No. 778, dated 4 December 1979, of the Department of Trade, Metric System Board.

With regard to the white label of both beer bottles, ABI explained that it used the color white for its label because white presents the strongest contrast to the amber color of ABI's bottle; it is also the most economical to use on labels, and the easiest to "bake" in the furnace (p. 16, TSN of September 20, 1988). No one can have a monopoly of the color amber for bottles, nor of white for labels, nor of the rectangular shape which is the usual configuration of labels. Needless to say, the shape of the bottle and of the label is unimportant. What is all important is the name of the product written on the label of the bottle for that is how one beer may be distinguished form the others.

In Dy Buncio v. Tan Tiao Bok, 42 Phil. 190, 196-197, where two competing tea products were both labelled as Formosan tea, both sold in 5-ounce packages made of ordinary wrapping paper of conventional color, both with labels containing designs drawn in green ink and Chinese characters written in red ink, one label showing a double-decked jar in the center, the other, a flower pot, this court found that the resemblances between the designs were not sufficient to mislead the ordinary intelligent buyer, hence, there was no unfair competition. The Court held:

. . . . In order that there may be deception of the buying public in the sense necessary to constitute unfair competition, it is necessary to suppose a public accustomed to buy, and therefore to some extent familiar with, the goods in question. The test of fraudulent simulation is

to be found in the likelihood of the deception of persons in some measure acquainted with an established design and desirous of purchasing the commodity with which that design has been associated. The test is not found in the deception, or possibility of the deception, of the person who knows nothing about the design which has been counterfeited, and who must be indifferent as between that and the other. The simulation, in order to be objectionable, must be such as appears likely to mislead the ordinarily intelligent buyer who has a need to supply and is familiar with the article that he seeks to purchase.

The main thrust of SMC's complaint if not infringement of its trademark, but unfair competition arising form the allegedly "confusing similarity" in the general appearance or trade dress of ABI's BEER PALE PILSEN beside SMC's SAN MIGUEL PALE PILSEN (p. 209, Rollo)

SMC claims that the "trade dress" of BEER PALE PILSEN is "confusingly similar" to its SAN MIGUEL PALE PILSEN because both are bottled in 320 ml. steinie type, amber-colored bottles with white rectangular labels.

However, when as in this case, the names of the competing products are clearly different and their respective sources are prominently printed on the label and on other parts of the bottle, mere similarity in the shape and size of the container and label, does not constitute unfair competition. The steinie bottle is a standard bottle for beer and is universally used. SMC did not invent it nor patent it. The fact that SMC's bottle is registered under R.A. No. 623 (as amended by RA 5700, An Act to Regulate the Use of Duly Stamped or Marked Bottles, Boxes, Casks, Kegs, Barrels and Other Similar Containers) simply prohibits manufacturers of other foodstuffs from the unauthorized use of SMC's bottles by refilling these with their products. It was not uncommon then for products such as patis (fish sauce) and toyo (soy sauce) to be sold in recycled SAN MIGUEL PALE PILSEN bottles. Registration of SMC's beer bottles did not give SMC a patent on the steinie or on bottles of similar size, shape or color.

Most containers are standardized because they are usually made by the same manufacturer. Milk, whether in powdered or liquid form, is sold in uniform tin cans. The same can be said of the standard ketchup or vinegar bottle with its familiar elongated neck. Many other grocery items such as coffee, mayonnaise, pickles and peanut butter are sold in standard glass jars. The manufacturers of these foodstuffs have equal right to use these standards tins, bottles and jars for their products. Only their respective labels distinguish them from each other. Just as no milk producer may sue the others for unfair competition because they sell their milk in the same size and shape of milk can which he uses, neither may SMC claim unfair competition arising from the fact that ABI's BEER PALE PILSEN is sold, like SMC's SAN MIGUEL PALE PILSEN in amber steinie bottles.

The record does not bear out SMC's apprehension that BEER PALE PILSEN is being passed off as SAN MIGUEL PALE PILSEN. This is unlikely to happen for consumers or buyers of beer generally order their beer by brand. As pointed out by ABI's counsel, in supermarkets and tiendas, beer is ordered by brand, and the customer surrenders his empty replacement bottles or pays a deposit to guarantee the return of the empties. If his empties are SAN MIGUEL PALE PILSEN, he will get SAN MIGUEL PALE PILSEN as replacement. In sari-sari stores, beer is also ordered from the tindera by brand. The same is true in restaurants, pubs and beer gardens — beer is ordered from the waiters by brand. (Op. cit. page 50.)

Considering further that SAN MIGUEL PALE PILSEN has virtually monopolized the domestic beer market for the past hundred years, those who have been drinking no other beer but SAN MIGUEL PALE PILSEN these many years certainly know their beer too well to be deceived by a newcomer in the market. If they gravitate to ABI's cheaper beer, it will not be because they are confused or deceived, but because they find the competing product to their taste.

Our decision in this case will not diminish our ruling in "Del Monte Corporation vs. Court of Appeals and Sunshine Sauce Manufacturing Industries," 181 SCRA 410, 419, 3 that:

. . . to determine whether a trademark has been infringed, we must consider the mark as a whole and not as dissected. If the buyer is deceived, it is attributable to the marks as a totality, not usually to any part of it.

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That ruling may not apply to all kinds of products. The Court itself cautioned that in resolving cases of infringement and unfair competition, the courts should "take into consideration several factors which would affect its conclusion, to wit: the age, training and education of the usual purchaser, the nature and cost of the article, whether the article is bought for immediate consumption and also the conditions under which it is usually purchased" (181 SCRA 410, 418-419).

The Del Monte case involved catsup, a common household item which is bought off the store shelves by housewives and house help who, if they are illiterate and cannot identify the product by name or brand, would very likely identify it by mere recollection of its appearance. Since the competitor, Sunshine Sauce Mfg. Industries, not only used recycled Del Monte bottles for its catsup (despite the warning embossed on the bottles: "Del Monte Corporation. Not to be refilled.") but also used labels which were "a colorable imitation" of Del Monte's label, we held that there was infringement of Del Monte's trademark and unfair competition by Sunshine.

Our ruling in Del Monte would not apply to beer which is not usually picked from a store shelf but ordered by brand by the beer drinker himself from the storekeeper or waiter in a pub or restaurant.

Moreover, SMC's brand or trademark: "SAN MIGUEL PALE PILSEN" is not infringed by ABI's mark: "BEER NA BEER" or "BEER PALE PILSEN." ABI makes its own bottle with a bulging neck to differentiate it from SMC's bottle, and prints ABI's name in three (3) places on said bottle (front, back and bottle cap) to prove that it has no intention to pass of its "BEER" as "SAN MIGUEL."

There is no confusing similarity between the competing beers for the name of one is "SAN MIGUEL" while the competitor is plain "BEER" and the points of dissimilarity between the two outnumber their points of similarity.

Petitioner ABI has neither infringed SMC's trademark nor committed unfair competition with the latter's SAN MIGUEL PALE PILSEN product. While its BEER PALE PILSEN admittedly competes with the latter in the open market, that competition is neither unfair nor fraudulent. Hence, we must deny SMC's prayer to suppress it.

WHEREFORE, finding the petition for review meritorious, the same is hereby granted. The decision and resolution of the Court of Appeals in CA-G.R. CV No. 28104 are hereby set aside and that of the trial court is REINSTATED and AFFIRMED. Costs against the private respondent.

SO ORDERED.

Narvasa, C.J., Bidin, Regalado, Romero, Nocon, Bellosillo and Melo, JJ., concur.

Feliciano, J., took no part.

G.R. No. 91385 January 4, 1994

HEIRS OF CRISANTA Y. GABRIEL-ALMORADIE, herein represented by the special administrator LORENZO B. ALMORADIE of the Intestate Estate of the Late Crisanta Y. Gabriel-Almoradie and LORENZO B. ALMORADIE, petitioners, vs.COURT OF APPEALS and EMILIA M. SUMERA, herein sued in her capacity as special administratrix of the Testate Estate of the late DR. JOSE R. PEREZ, respondents.

Romeo Lagman, Valdecantos, Evangelista Law Offices for petitioners.

Jesus I. Santos Law Office for private respondent.

NOCON, J.:

Just for the record, the present case, involving the same parties and the same trademark has been twice before the Director of Patents, twice before the trial courts, four times before the Court of Appeals and twice before this Court.

On review before us is the decision of the Court of Appeals in the case entitled "Emilia M. Sumera v. Crisanta Y. Gabriel, CA-G.R. CV No. 12866" 1 which reversed and set aside the order of the Regional Trial Court in Civil Case No. C-8147, 2 dismissing the complaint filed by private respondent, Emilia M. Sumera against Crisanta Y. Gabriel for Infringement of Trademarks and Damages with Prayer for Issuance of a Writ of Preliminary Injunction.

Historical antecedents of the case at bar relate as far back as 1953 when the late Dr. Jose Perez discovered a beauty soap for bleaching, which whitens or sometimes softens the skin. A certificate of label approval was issued in his name by the Bureau of Health on June 6, 1958 for the said product with the label reading "Dr. Perez' Wonder Beauty Soap." Not surprisingly, he later developed an improved formula for his soap after continued laboratory experimentation, for which he obtained another certificate of label approval from the Bureau of Health on August 10, 1959, also describing the product as "Dr. Perez Wonder Beauty Soap (Improved Formula)." 3

Needing a marketing firm for wider distribution of his soap, he entered into an agreement on January 1959 with a certain company named "Manserco," owned and managed by Mariano S. Yangga, for the distribution of his soap.

This venture, however, did not last long, as the corporation allegedly went bankrupt. He then terminated his agreement with Manserco and forged an "Exclusive Distributorship Agreement" with Crisanta Y. Gabriel, who happened to be the sister of Mariano S. Yangga. What could have been a good business relation turned sour; instead a series of legal battles transpired thereafter between them in the Patent and Trademark Office, the trial court, the Court of Appeals and this Court.

I. On October 3, 1960, Gabriel filed an application with the Patent Office to register the trademark "WONDER." Said application was denied on November 18, 1960 on the ground that Gabriel was not the owner of the trademark sought to be registered and that as shown in the labels submitted, it appeared that Dr. Jose R. Perez is the owner of the said mark. On the other hand, on May 11, 1961, Perez obtained in his name a certificate of registration No. SR-389 covering the same trademark "WONDER" for beauty soap. 4

II. Thereafter, Perez filed a complaint for Unfair Competition with Injunction and Damages, dated August 8, 1961, docketed as Civil CaseNo. 2422, against Gabriel. In the said complaint, Perez alleged that Gabriel, without just cause and in violation of the terms of the distributorship agreement, stopped selling and distributing "WONDER" soap, and instead on October 3, 1960 Gabriel tried to register the trademark "WONDER" in her name.

On September 7, 1961, a writ of preliminary injunction was issued against Gabriel, restraining her "from making, manufacturing, and producing 'Wonder Bleaching Beauty Soap' with the same labels and chemical ingredients as those of the plaintiff, and from advertising, selling and distributing the same products." 5 As to what happened to this civil suit, or whether the case was ever terminated remains unknown and is not on record.

III. Meanwhile, on October 19, 1962, Gabriel, in Inter Partes CaseNo. 280, filed a Petition to Cancel Certificate of Registration No. SR-389 covering the trademark "WONDER" for beauty soap in the name of Dr. Perez. On July 15, 1964, a decision was rendered by Director of Patents Tiburcio S. Evalle denying said petition. Her motion for reconsideration thereof having been denied, Gabriel filed a petition for review before this Court, entitled "Crisanta Y. Gabriel v. Dr. Jose R. Perez and Hon. Tiburcio Evalle as Director of Patents," G.R. No. L-24075. 6

The above case was decided in favor of Perez since the court found out that:

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. . . the trademark "WONDER" has long been identified and associated with the product manufactured and produced by the Dr. Jose R. Perez Cosmetic Laboratory. It would thus appear that the decision under review is but in consonance with the sound purposes or objects of a trademark. Indeed, a contrary ruling would have resulted in the cancellation of the trademark in question and in granting the pending application of herein petitioner to register the same trademark in her favor to be used on her bleaching soap, which is of the same class as that of respondent. And the effect on the public as well as on respondent Dr. Jose R. Perez would have been disastrous. Such a situation would sanction a false implication that the product to be sold by her (Gabriel) is still that manufactured by respondent7

xxx xxx xxx

On the claim of Gabriel that the exclusive ownership of the trademark "WONDER" is vested in her by virtue of her agreement with Perez, the court further said:

The fact that paragraph 6 (Exh. "F-2") of the (Distributorship) agreement provides that the petitioner 'has the exclusive right of ownership of the packages and that said party is responsible for the costs as well as the design and manner of packaging the same' did not necessarily grant her the right to the exclusive use of the trademark; because the agreement never mentioned transfer of ownership of the trademark. It merely empowers the petitioner as exclusive distributor to own the package and to create a design at her pleasure, but not the right to appropriate unto herself the sole ownership of the trademark so as to entitle her to registration in the Patent Office. . . . (emphasis supplied)

The exclusive distributor does not acquire any proprietary interest in the principal's trademark.

In the absence of any inequitable conduct on the part of the manufacturer, an exclusive distributor who employs the trademark of the manufacturer does not acquire proprietary interest in the mark which will extinguish the rights of the manufacturer, and a registration of the trademark by the distributor as such belongs to the manufacturer, provided the fiduciary relationship does not terminate, before application for registration is filed. (87 CJS 258-259, citing cases.) 8

IV. The issue of ownership of the trademark "WONDER" having been settled as pronounced in the above decision, Emilia M. Sumera, in her capacity as special administratrix of the estate of Dr. Jose R. Perez, who died on October 9, 1971, filed on January 31, 1975, with the Philippine Patent Office an application for registration of the trademark "WONDER" for beauty soap in the Principal Register. The application was later amended to change the name of the applicant to "The Testate of the late Dr. Jose R. Perez, represented by Emilia Sumera as Special Administratrix." Gabriel opposed anew the application alleging among others that 1) she is the owner of the trademark "WONDER" used for beauty soap and had been using it prior to the alleged date of first use of applicant (Sumera); 2) that the trademark "WONDER" which she created and adopted is well known throughout the Philippines and even abroad, that the use thereof by the applicant (Sumera) would result in confusion in her business to her damage and prejudice. 9

The Director of Patents dismissed the opposition on the ground of res judicata, the issues having been resolved in G.R. No. L-24075. The application was approved and Certificate of Registration No. 25610 in the Principal Register was issued for the trademark "WONDER" in the name of "The Testate Estate of Dr. Jose R. Perez." 10

The foregoing decision of the Director of Patents was appealed before the Court of Appeals and the appellate court in CA-G.R. SP-07446-R 11 said:

Appellant Gabriel's insistence that there is no identity of parties between G.R. No. L-24075 and the case at bar is untenable. The fact that Emilia Sumera was not a party in the first case is of no moment, inasmuch as her participation in the case at bar is merely as representative of the

estate of the late Dr. Perez, being the Special Administratrix. It should be noted that the application for registration of the trademark filed by Emilia Sumera was amended and the name of the applicant was changed to the Testate Estate of the late Dr. Jose R. Perez, who is deemed the owner of the trademark.

xxx xxx xxx

It should be noted that appellant Gabriel's petition for cancellation of the trademark in the supplemental register in the name of Dr. Perez was based on her claim of ownership of said trademark. The decision in said case, (G.R. No. L-24075) shows that both parties endevored to prove their rights of ownership of the trademark "Wonder". In the case at bar, the same parties again assert their rights of ownership of the same trademark. It is clear, therefore, that between the two suits, there is identity of cause of action, i.e., the same parties' claim of ownership of the trademark "Wonder." What is different here only is the form of action. But the employment of two different forms of action does not enable one to escape the operation of the principle that one and the same cause of action shall not be twice litigated. (Yusingco v. Ong Hing Lian, G.R. No. L-26523, Dec. 24, 1971, 42 SCRA 589, 605). 12

V. Despite the foregoing, Gabriel continued distributing and selling beauty soap products using the mark "Wonder." Thus, on December 18, 1979, Sumera filed an action against Gabriel for Infringement of Trademark with Damages and a Prayer for a Writ of Preliminary Injunction before the Regional Trial Court (Civil Case No. C-8147, case at bar under our review). The trial court granted a temporary restraining order and in the Order of February 28, 1980, Gabriel was enjoined from using the trademark "Wonder." 13 Subsequently, Gabriel filed a motion to quash the temporary restraining order invoking as a ground res judicata, alleging the pendency of Civil CaseNo. 2422, filed before the Court of First Instance of Bulacan, Branch III, involving the same parties and trademark. Perhaps unaware of the events prior to the filing of the present complaint, 14 or so we would like to think, the court, on March 17, 1980, ordered the lifting of the temporary restraining order issued on February 28, 1980.

As a consequence, on March 28, 1980, Sumera filed a motion to reinstate the restraining order issued on February 28, 1980, while Gabriel filed a reply to the opposition on April 15, 1980 and on April 25, 1980, she filed her answer with counterclaim and a prayer for the issuance of a writ of preliminary injunction. In her answer, she again alleged that 1) the registrations of the trademark "WONDER" (SR-2138 and Reg. No. 25610) in the name of Dr. Perez were unlawfully, irregularly and fraudulently procured; 2) that the trademark "WONDER" has been registered with the Patents Office in the name of a certain Go hay as early as 1959, which registration was assigned to her and as successor-in-interest, her right to the trademark dates back from 1959; 3) and that she created and developed the package bearing the trademark "WONDER" and is the true and lawful owner thereof.

In an order dated September 15, 1980, the trial court issued a writ of preliminary injunction against Sumera and the estate of Dr. Jose R. Perez. 15 This prompted Sumera to elevate the matter to the Court of Appeals in a petition for certiorari questioning the court's order. Initially, the appellate court sustained the order of the trial court. Nevertheless, upon motion for reconsideration of Sumera, the appellate court on September 8, 1961 16modified its earlier decision of February 24, 1981 and said:

While it is true that it is not Our role in this present posture of the case to decide who of the parties is entitled (to) the use of the trademark "Wonder" for that has to be decided by respondent Court on the merits of the case before it, the fact remains that the Patent Office had issued in favor of petitioner a certificate of registration for the use of the trademark "Wonder" for the manufacture, sale, etc. of bleaching and beauty soap in the same way that the Patent Office had also issued a certificate of registration in favor of Go Hay, private respondents' assignor, for the use of the trademark "Wonder" in the manufacture, sale, etc. of laundry soap in bars and cakes. Private respondents, however, claimed that they are entitled to the use of said trademark not only on laundry soaps in cakes and bars but to all goods falling under Classification No. 3 which includes 'bleaching preparations and other substances for laundry use; cleaning, polishing, scouring abrasive preparations; soap, perfumery, essential oils, cosmetics, hair lotions, dentifrices which, according to private respondents, includes bleaching and beauty soap and,

39

therefore, under the patent which was issued on June 30, 1959 prior to one issued to Dr. Perez on May 11, 1961, private respondents were entitled to the exclusive use of said trademark and to restrain petitioner from the use of said trademark even on bleaching soap. (emphasis ours).

On the other hand, petitioner claimed that the right of the Estate of Dr. Perez to use the said trademark, especially as against private respondents, had been sustained by the Supreme Court in its decision in Gabriel vs. Perez, 55 SCRA 406.

While We maintain Our original position that We should not decide in the case before Us who is better entitled to the use of said trademark, We are bound to accord prima facie validity to the certificates of registration issued to both petitioner and private respondents until the certificates of registration issued by the Patent Office in favor of petitioner or to private respondents as assignee of Go Hay are annulled or set aside in a proper proceedings. Accordingly, We find it necessary to reconsider Our decision sustaining the order of respondent Court issuing a preliminary injunction against petitioner, for an injunction against petitioner preventing her to avail of the right to the use of the trademark "Wonder" under the certificate of registration issued by the Patent Office in favor of Dr. Perez which until now remained valid as it had not been set aside by competent authority, would be clearly iniquitous and unjust. In the same manner, private respondents should not be restrained from availing of their rights to the use of the trademark "Wonder." The end result would be, during the pendency of the case before the lower Court, both petitioner and private respondents should be permitted to manufacture and distribute articles which are covered by their respective trademarks.

IN VIEW OF THE FOREGOING, Our decision of February 24, 1981 is hereby MODIFIED in the sense that the order of respondent Court of September 15, 1980 to the extent that it granted the issuance of a preliminary injunction restraining petitioner from using the trademark "Wonder" in the manufacture, advertisement, packing, marketing, distribution and sale of beauty soap is hereby SET ASIDE and the preliminary injunction issued pursuant to said order declared NULL and VOID. 17

VI. While Civil Case No. C-8147 was still pending, Luis M. Duka, Jr., Assistant to the Director, Philippine Patent Office, in an order datedNovember 16, 1984, cancelled Certificate of Registration No. SR-2138 in the Supplemental Registrar and No. 25610 in the Principal Registrar, of the trademark "WONDER" both in the name of the "Testate Estate of Dr. Jose R. Perez," for failure to file the required Fifth Anniversary Affidavit of Use/Non Use. 18 Gabriel then, alleging the above cancellation, filed an "Omnibus Motion" on December 19, 1984, for the issuance of a restraining order, 19 which was granted by the trial court on January 4, 1985. 20

However, on June 5, 1985, upon motion for reconsideration of Sumera, the court lifted its order of January 4, 1985 and ordered the Sheriff to return to respondent the equipment, machineries and products seized. 21Nevertheless, on July 17, 1985, the trial court, upon motion for reconsideration of Gabriel and despite the opposition of Sumera to said motion, lifted its Order of June 5, 1985, reinstated its Order of January 4, 1985, and ordered anew the seizing of respondent's equipment, machineries and products. 22

Hence, Sumera sought again the intervention of the Court of Appeals and filed a petition for review oncertiorari. On July 25, 1986, the appellate court in AC-G.R. SP No. 06915 23 granted the petition of Sumera and said:

The only issue this Court has to resolve is whether or not the respondent Judge acted with grave abuse of discretion amounting to want or absence of jurisdiction in issuing the questioned order dated January 4, 1985, ordering the confiscation of the equipments of the petitioners and the Order dated July 17, 1985, ordering the reinstatement of his Order of January 4, 1985, after it was recalled in his Order of June 5, 1985.

In fact, the issue raised in the instant case, appears to be the same as the issue raised in the above quoted decision of the Court of Appeals in CA-G.R. SP 07446-R, where the trademark already registered already registered in the name of Dr. Jose R. Perez was also cancelled for failure to file an affidavit of use within one year following the fifth anniversary of the date of issue of the certificate of registration, as required under Section 12 of Republic Act No. 166. The petition for registration of Emilia M. Sumera, in her capacity as Special Administratrix of the estate of Dr. Jose R. Perez, was also opposed by Crisanta Y. Gabriel. And in said case, the Court of Appeals decided against the opposition of Crisanta Gabriel of the registration of the application filed by Emilia M. Sumera, in representation of the testate estate of Dr. Jose R. Perez, for the registration of the trademark "WONDER" for beauty soap, granted by the Director of Patents. The Court of Appeals, and as already above quoted, held that the question of ownership of the trademark "WONDER" having been decided inG.R. No. L-24075, the employment of two different forms of action shall not be twice litigated.

Furthermore, the Former Third Division of the Appellate Court (in CA-G.R. No SP-1167-R 24 [sic]) in its decision dated February 4, 1981, as amended by its Resolution dated September 8, 1981, declared null and void the Order of the same respondent Judge ordering a preliminary injunction, restraining Sumera from using the trademark "WONDER" in the manufacture, advertisements, packaging, marketing, distribution and sale of beauty soap. 25

xxx xxx xxx

We find merit in the petition. Considering the previous decisions not only of the former Court of Appeals but of the Supreme Court, the questioned Order in effect pre-judged the very issues raised in the pleadings of the parties, without the benefit of a full blown trial or hearing as required by the Rules. The sole justification of the respondent Judge in issuing the Order of July 17, 1985 reinstating its Order of January 4, 1985 is the alleged cancellation of the trademark of petitioner by the Bureau of Patents on November 16, 1984. Such, however, is without legal basis, as the cancellation Order was not yet final, considering the filing of a motion to set aside the order of cancellation based on the ground that the period for filing of the affidavit of use had not yet expired. Until such time that the motion to set aside the order of cancellation is final, trademark of petitioners was prematurely deemed or non-existent. The only effect of said cancellation, assuming it to be valid, is that it would deprive the registrant of the protection afforded him by law, which is the protection from infringement of trademark, and it was erroneous and a grave abuse of discretion for the respondent Judge to assume that when the registration of petitioner was cancelled, private respondent became exclusive owner of the exclusion of plaintiff Sumera, of the trademark 'WONDER' and thus, plaintiff Sumera in pending case Civil Case No. C-8147 should, during the pendency of said case, be preliminary enjoined, as provided in the questioned order of July 17, 1985 in relation to the Order of January 4, 1985.

Private respondents (sic) claim that, "(p)petitioner's invocation of the decision in G.R. No. L-24075 (Crisanta Y. Gabriel v. Dr. Jose R. Perez, et al) wherein she alleged that the ownership of the trademark "WONDER" for beauty soap in favor of petitioner was upheld," as well as the decision of the hen Court of Appeals in CA-G.R. No. SP No. 07746-R is now of no moment because after the promulgation of the decisions in said cases the circumstances between the parties (petitioner and private respondents herein) have changed materially with the private respondent Gabriel's acquisition of Go Hay's prior trademark "Wonder." Thus under existing jurisprudence, the said decisions could not be enforced or made applicable as this would produce inequity and injustice to private respondent Gabriel." . . . is without merit, considering that she merely stepped into the shoes of Go Hay, and thus, could have no better right than Go Hay as against Emilia Sumera (in her capacity as Special Administratrix of the Estate of the late Dr. Jose R. Perez). 26

VII. Unfortunately, even before the foregoing decision was rendered, petitioner Gabriel on August 13, 1985, filed with the Court a Manifestation and Motion to Dismiss Plaintiff's Complaint for having been Rendered Moot and Academic. 27 In the said motion, petitioner reiterated that since Certificate

40

No. SR-2138 and Certificate No. 25610 both of the registration of the trademark "WONDER" in the name of the Estate of Dr. Jose R. Perez, had been cancelled in Cancellation Order No. 143, dated November 16, 1984, respondent Sumera's cause of action had become non-existent, as she no longer had rights to protect and interest to pursue. Thus, finally, on December 24, 1985, the court without waiting for the resolution of the Court of Appeals in AC-G.R. SP No. 06915, resolved to dismiss the case. 28

Once more respondent Sumera pleaded before the Court of Appeals to review and set aside the order of the trial court dismissing Civil CaseNo. C-8147. The Court of Appeals granted the petition and in its considered opinion, said:

The court a quo in dismissing the complaint for "Infringement of Trademark, Damages and with a prayer for Issuance of a Writ of Preliminary Injunction," only considered the injunctive relief which was issued to protect the present right of the defendants confining as basis for dismissal the second paragraph of Section 23 of RA 166, as amended, providing that "the complaining party upon proper showing may also be granted injunction," but it failed to consider the main paragraph ofSection 23, supra, providing that any person entitled to the exclusive use of a trademark "may recover damages in a civil action from any person who infringes his right . . . ." This section is clear. It allows a party to file "actions; and damages and injunction for infringement." 29

xxx xxx xxx

The order is half-baked because the court a quo failed to make a definite ruling on the pivotal question of whether or not plaintiff is entitled to damages as a consequence of the infringement of the trademark which she claims to be the registered owner at the very least from the time the (trademark) was registered in her (predecessor's) name up to the time that it was cancelled on November 19, 1984.

Indeed, this Court already interdicted to the same presiding judge in Emilia M. Sumera, etc. vs. Hon.Alfredo M. Gorgonio etc., Et Al.,AC-G.R. SP No. 06915, July 25, 1986, of the necessity of a "full blown trial" or hearing of the issues raised in the pleadings as required by the Rules to avoid any conception of judgment without hearing of full examination. 30

Petitioner now comes to us arguing that our decision in the case of Gabriel v. Perez, supra, has becomefunctus officio on account of the prior registration of the trademark "WONDER" by Go Hay and its subsequent assignment to petitioner's predecessors; and that the Cancellation No. 143, dated November 16, 1984 involving private respondent's trademark rendered the Civil Case No. C-8147 moot and academic.

We are not convinced. Suffice it to say that these issues herein raised have been squarely met in the decisions (CA-G.R. SP-07446-R; CA-G.R.No. SP-11670-R; AC-G.R. SP No. 06915 and CA-G.R.R. CV No. 12886) rendered by the appellate court, all of which we agree with. We find that the trial court erred in dismissing the complaint of private respondent, Sumera, without determining whether there was indeed infringement. Because, contrary to the presumption of the trial court, the complaint in Civil Case No. C-8147 is not merely for preliminary injunction, but for infringement of trademark and for damages.

In the interest of the public and for the expeditious administration of justice the issue on infringement shall be resolved by the court considering that this case has dragged on for years and has gone from one forum to another.

It is a rule of procedure for the Supreme Court to strive to settle the entire controversy in a single proceeding leaving no root or branch to bear the seeds of future litigation. No useful purpose will be served if the case or the determination of

an issue in a case is remanded to the trial court only to have its decision raised again to the Court of Appeals and from there to the Supreme Court. 31

We laid down the rule that the remand of the case or of an issue to the lower court for further reception of evidence is not necessary where the Court is in position to resolve the dispute based on the records before it and particularly where the ends of justice would not be subserved by the remand thereof. 32 Moreover, the Supreme Court is clothed with ample authority to review matters, even though those not raised on appeal if it finds that their consideration is necessary in arriving at a just disposition of the case. 33

R.A. 166 describes what constitutes infringement:

Sec. 22. Infringement, what constitutes — Any person who shall use, without the consent of the registrant, any reproduction, counterfeit, copy or colorable imitation of any registered mark or trade-name in connection with the sale, offering for sale or advertising of any goods, business or services on or in connection with which such use is likely to cause confusion or mistake or to deceive purchasers or others as to the source or origin of such goods or services, or identity of such business; or reproduce, counterfeit, copy or colorably imitate any such mark or trade name and apply such reproduction, counterfeit, copy or colorable imitation to labels, signs, prints, packages, wrappers, receptacles or advertisements intended to be used upon or in connection with such goods, business or services, shall be liable to a civil action by the registrant for any or all of the remedies herein provided.

The law also provides that any person whose trademark or trade name is infringed may recover damages in a civil action, and upon proper showing, may also be granted injunction. 34

We cannot help but note Gabriel's propensity to infringe Dr. Perez' trademark, an act which she has been doing since 1960. Assuming arguendo that she was able to obtain a valid assignment of the trademark "Wonder GH" from Go Hay, still there is no reason to believe that Gabriel, or her assigns, has been infringing respondent's trademark since 1960, when she violated the distributorship agreement and appropriated the mark as her own and went on, even when the trademark "Wonder GH" was allegedly assigned to her.

The records at hand, show the two marks as registered in the Patents Office as follows:

DRAWING

Glaring is the fact that the only difference in the above figures is the "supposed origin" of the product ("Dr. Perez" as against "C.Y. Gabriel") which are not even as eye catching as the word "WONDER" itself. Apparently, Gabriel never used or adopted the trademark of Go Hay in her products, instead she has all along been using the trademark registered in the name of Perez.

Petitioner's continued use of respondent's trademark on her product, instead of the assigned mark "WONDER GH" is a clear act of abandonment due to non-use, which is in fact a ground for cancellation of registration under Sec. 17 (b) of R.A. 166. What is worse is that there is obvious bad faith on the part of Gabriel in acquiring the mark "Wonder GH." Undoubtedly her intent in having the mark assigned to her is merely to give color to the use of the mark "WONDER" on her products. Particularly so since the Director of Patents in October 1960, denied the registration to Gabriel of the trademark "WONDER" because it was found that the mark was already in use and is owned by Dr. Jose Perez. And then again i 1978, petitioner failed to convince the Director of Patents and the Court of Appeals that she has a right over the same trademark.

Petitioner's argument that the word "Wonder" could not be appropriated exclusively as a trademark by private respondent has no leg to stand on. The matter restricting the exclusive use of a trademark is only true overunrelated goods. The law requires that in the adoption of a mark there should not be any likelihood of confusion, mistake or deception to the consumer. 35 Records show that the trademark Gabriel claims to own, through assignment from Go Hay,

41

with certificate of registration no. 33957 in the Principal Register and registration no. SR-4217 in the Supplemental Register is principally for laundry soap in bars and cakes. 36 On the other hand, the mark "WONDER" registered to the testate estate of Jose R. Perez was registered principally for beauty soap. 37 This fact would not have been relevant if no confusion results thereby. In the case at bar, although the presentation of the marks as registered appears to be different, still confusion is bound to result, since the marks are used on related goods (bleaching beauty soap as against laundry soap).

There is likewise no merit in petitioner's assertion that Cancellation Order No. 143, dated November 16, 1984, rendered Civil Case No. C-8147 moot and academic. We reiterate the findings of the Court of Appeals in AC G.R.Sp. 06915, supra. The cancellation order was issued allegedly due to respondent's failure to file the affidavit of use as required by Sec. 12 ofR.A. 166. It is not, however, clear whether such order has become final as respondent filed a motion to set aside the order, alleging that it was issued prematurely.

Even assuming that the order has become final, still petitioner could not have acquired an exclusive right over the mark "WONDER" as a matter of course. The only effect of cancellation is that it would deprive the registrant protection from infringement. Sec. 22 of R.A. 166, states that only a registrant of a mark can file a case for infringement. On the other hand, Sec. 19 states that any right conferred upon the registrant under the provisions of R.A. 166 terminates/only when judgment or order of cancellation has become final. The present complaint was filed sometime in December 1979, almost 5 years prior to the alleged cancellation order. Thus, until the time that the right is finally terminated, respondent still has a cause of action against petitioners.

Ultimately, what draws the axe against petitioners is the principle of"first to use" on which our Trademark Law is based. We have said and reiterated in the case of La Chemise Lacoste v. Fernandez, that:

The purpose of the law protecting a trademark cannot be overemphasized. They are to point out distinctly the origin of ownership of the article to which it is affixed, to secure to him, who has been instrumental in bringing into market a superior article of merchandise, the fruit of his industry and skill, and to prevent fraud and imposition. 38 (emphasis ours)

Sec. 2 of R.A. 166 states that as a condition precedent to registration the trademark, trade name or service marks should have been in actual use in commerce in the Philippines before the time of the filing of the application. A careful perusal of the record shows that although Go Hay, assignor of Gabriel, first registered the trademark "Wonder GH" on October 17, 1958 39 while the registration of the trademark "WONDER" in the name of Dr. Perez was registered in the Supplemental Register on May 11, 1961 and then the Principal Register on January 3, 1978, the certificate of registration issued to Go Hay showed that the mark "Wonder GH" was first used on July 1, 1958, 40 while that of the mark "WONDER" in favor of Dr. Perez was recorded to have been in use since March 3, 1953, 41 or five (5) years prior to Go Hay's use. Thus, all things being equal, it is then safe to conclude that Dr. Perez had a better right to the mark "WONDER." The registration of the mark "Wonder GH" should have been cancelled in the first place because its use in commerce was much later and its existence would likely cause confusion to the consumer being attached on the product of the same class as that of the mark "WONDER."

Considering the foregoing, we find that petitioners have been infringing the trademark "WONDER" which rightfully belongs to respondent. However since the original complaint calls for a determination of damages as a result of the infringement, the trial court is ordered to receive evidence to ascertain the amount thereof. As an incident thereto, the trial court will also have to find out whether the cancellation order has become final and if it did, when it became final. On the other hand the registration of the trademark "Wonder G.H." assigned to C.Y. Gabriel should be and is hereby ordered cancelled since we found that: a) its procurement was tainted with bad faith; b) its continued existence would cause confusion to the consumers; and c) it is not being used by the assignees. 42

WHEREFORE, the petition is hereby DISMISSED for lack of merit. Petitioners, having been found to be infringing the mark "WONDER", are permanently enjoined from using the mark. This case is hereby REMANDED to the trial court only for the purpose of determining the amount of damages due to the respondent. Finally, the registration of the trademark

"Wonder G.H." is hereby ORDERED cancelled. Let a certification of this case be issued to the Director of Patents for appropriate action.

SO ORDERED.

Narvasa, C.J., Padilla, Regalado and Puno, JJ., concur.

G.R. No. 115115 July 18, 1995

CONRAD AND COMPANY, INC., petitioner, vs.HON. COURT OF APPEALS, FITRITE INC., and VICTORIA BISCUITS CO., INC., respondents.

VITUG, J.:

In an Amended Decision, dated 20 April 1994, the Court of Appeals reversed an order of the Regional Trial Court ("RTC") which dismissed Civil Case No. 91-3119 for "Injunction with Damages with Prayer for Preliminary Injunction" filed by herein private respondents Fitrite, Inc., and Victoria Biscuits Co., Inc., against petitioner Conrad and Company, Inc.

The RTC, acting on a motion to dismiss filed by petitioner, ordered the dismissal of the complaint. Accordingly, for purposes of this review, the facts alleged in the complaint, narrated by the appellate court and hereunder reproduced, should be deemed hypothetically admitted.

. . . Plaintiffs appellants FITRITE, INC. and VICTORIA BISCUIT CO., INC. [private respondents here], both domestic corporations, are engaged in the business of manufacturing, selling and distributing biscuits and cookies bearing the trademark "SUNSHINE" in the Philippines. Defendant CONRAD AND COMPANY [petitioner here] is also engaged in the business of importing, selling and distributing biscuits and cookies in the Philippines.

Sometime in April 1982, plaintiff FITRITE filed in the Bureau of Patents, Trademarks and Technology Transfer (hereto referred as BPTTT) applications for registration of the trademark "SUNSHINE," both in the Supplemental and Principal Registers, to be used on biscuits and cookies. Since March 31, 1981 FITRITE had exclusively used this trademark in the concept of owner on its biscuits and cookies. On May 20, 1983 FITRITE's application for this trademark in the Supplemental Register was approved by the BPTTT and FITRITE was issued a Certificate of Registration No. SR-6217 for a term of 20 years from the date of approval. On March 22, 1990 FITRITE's application for the same trademark in the Principal Register was approved by BPTTT and FITRITE was issued a Certificate of Registration No. 47590 for a term of 20 years from said date of approval. On June 28, 1984 FITRITE authorized its sister company, co-plaintiff VICTORIA BISCUIT CO., to use this trademark on its biscuits and cookies, as well as to manufacture, promote, sell and distribute products bearing said trademark.

On September 7, 1990, FITRITE assigned its trademark "SUNSHINE AND DEVICE LABEL," together with its interest and business goodwill to said VICTORIA BISCUIT. From the time FITRITE was issued the Certificate of Registration for this trademark on May 20, 1983 up to the filing of the complaint a quo FITRITE and VICTORIA BISCUIT have been manufacturing, selling and distributing on a massive scale biscuits and cookies bearing this trademark; so that through the years of extensive marketing of plaintiffs' biscuits and cookies with this trademark, their

42

products have become popularly known and enjoyed wide acceptability in Metro Manila and in the provinces.

Then sometime in June 1990, through the affidavit executed on May 30, 1990 by defendant CONRAD's own Import Manager and Executive Assistant by the name of Raul Olaya, plaintiffs succeeded in tracing and discovered that CONRAD had been importing, selling and distributing biscuits and cookies, and other food items bearing this trademark in the Philippines. Although CONRAD had never before been engaged in the importation, sale and distribution of products similar to those of plaintiffs, on April 18, 1988 CONRAD was suddenly designated exclusive importer and dealer of the products of "Sunshine Biscuits, Inc." for sale in the Philippine market; and on April 21, 1988, per the affidavit of said Raul Olaya, CONRAD made its first importation, which was continuously repeated up to the present (May 30, 1990 [date of the affidavit]), altogether consisting of 51,575 cartons and amounting to $579,224.35.

Those acts of CONRAD, done without plaintiffs' consent, were deliberately calculated to mislead and deceive the purchasers by making them believe that its (CONRAD'S) "Sunshine" products had originated from plaintiffs and thereby inducing them to patronize those products, all to the damage and prejudice of both the purchasing public and plaintiffs. Through their counsel, plaintiffs addressed a letter to CONRAD demanding, among other things, that it cease and desist from continuing with those acts, but the demand was ignored. Being acts of infringement and unfair competition in violation of plaintiffs' rights, plaintiffs can validly avail themselves of the remedies against infringement under Sec. 23 of Republic Act No. 166, as amended, as well as of the remedies against unfair competition under Sec. 29 of the same statute. 1

In seeking the dismissal of the complaint filed by private respondents with the trial court, petitioner invoked, among other grounds, litis pendentia, the doctrine of primary jurisdiction and failure to state a cause of action.

The trial court, agreeing with petitioner, granted the motion to dismiss the complaint in an Order, dated 26 February 1992, reading thusly:

The Court agrees with defendant that internationally accepted trademarks enjoy protection under Philippine laws. Defendant having been granted distributorship by Sunshine Biscuits USA over Philippine territory it follows that the resolution of the issue with respect to the ownership of Sunshine Biscuits which is the basis of plaintiffs' claim is lodged under the exclusive jurisdiction of the BPTTT. The action filed by defendant's principal in whose name the trademark "SUNSHINE BISCUITS" is alleged to be registered in the United States should be considered as including defendant Conrad and Company, Inc., it being the beneficiary/agent/assignee of said Sunshine Biscuits, Inc. Thus, the Court finds the ground of forum shopping applicable to the case at bar. It cannot also be denied that there is another action pending between the same parties for the same cause. Plaintiffs, therefore, should not have filed this case with this court. It must, therefore, be summarily dismissed. The ground of litis pendentia is no doubt meritorious. The doctrine of primary jurisdiction should be made to apply in this case considering that the BPTTT had already acquired jurisdiction over the suit brought by defendant's principal against the plaintiffs involving the right of plaintiffs to use said trademark. No doubt the BPTTT is better situated, considering its experience and special knowledge to determine the matters of fact involved. Indeed, the rulings laid down by the Supreme Court on the point is along this trend.

WHEREFORE, premises considered, the Motion To Dismiss filed by defendant is hereby GRANTED. The instant case filed by plaintiffs is hereby ordered DISMISSED. 2 (Emphasis ours)

Unsuccessful in their attempt to have the order reconsidered, private respondents brought the case to the Court of Appeals (CA-G.R. CV No. 38822).

In an amended decision, dated 20 April 1994, the appellate court reversed the order of the trial court and ordered the reinstatement of the case, holding, in part, thusly:

1. It was a motion to dismiss that CONRAD filed instead of an answer where its "affirmative defense" could have been alleged and later raised in a motion for preliminary hearing for reception of evidence and not, as CONRAD did, raise such defense in a mere motion to dismiss, although such defense involved factual matters outside of the allegations contained in the complaint;

2. No evidence whatever had been introduced before the outright dismissal, despite the fact that the factual issues involved in CONRAD's "affirmative defense" were whether the "SUNSHINE" trademark has been registered in the United States of America as claimed by CONRAD; if so registered, whether such registration antedated the registered trademark of FITRITE in the Philippines; whether Sunshine Biscuits, Inc., CONRAD's principal, is the actual registrant thereof; and whether CONRAD is truly an agent of Sunshine Biscuits, Inc. who is protected by the alleged American "SUNSHINE" trademark and therefore vested with the legal capacity to raise such "affirmative defense" in the action a quo; etc.; and

3. Unless and until FITRITE's certificates both in the Supplemental and Principal Registers as registrant of said "SUNSHINE" trademark are cancelled by BPTTT, or so long as said "SUNSHINE" trademark has not been successfully proved by CONRAD in the action a quo as belonging to Sunshine Biscuits, Inc. or so long as said trademark has not been successfully proved by Sunshine Biscuits, Inc. in the cancellation proceeding before BPTTT as belonging to it (Sunshine Biscuits), for all legal intents and purposes the trademark belongs to FITRITE and all those acts of importing, selling and distributing by CONRAD constitute infringement as defined in said Sec. 22 of Republic Act No. 166, as amended.

xxx xxx xxx

In sum, we find the appeal impressed with merit, considering that FITRITE is the registrant of the "SUNSHINE" trademark in the Philippines; that CONRAD's claim that its principal, Sunshine Biscuits, Inc., is the registrant of a "SUNSHINE" trademark in the United States of America is a mere allegation still subject to proof; that there is no identity of causes of action and because the

43

cause before BPTTT is the cancellability of FITRITE's registration while the cause in the case a quo is infringement by CONRAD of said "SUNSHINE" trademark of FITRITE; that there is implied admission that CONRAD has been importing, selling and distributing biscuits, cookies and other food items bearing said "SUNSHINE" trademark without FITRITE's consent; that so long as the cancellation proceeding remains pending in BPTTT, said "SUNSHINE" trademark belongs exclusively to FITRITE in the Philippines, and any person using it without FITRITE's consent is guilty of infringement.

WHEREFORE, the Court hereby:

(1) SETS ASIDE the appealed order dated February 26, 1992 dismissing the complaint a quo;

(2) REINSTATES the complaint;

(3) ORDERS defendant Conrad and Company, Inc. to file its answer within the reglementary period from receipt hereof;

(4) ORDERS the lower court to proceed with the action a quo, although for a good cause shown the lower court, in its sound discretion, may suspend the action pending outcome of the cancellation proceeding between Sunshine Biscuits, Inc. and Fitrite, Inc. in Inter Partes Case No. 3397 before BPTTT, subject to the condition provided for in No. (5) below;

(5) ORDERS defendant-appellee Conrad and Company, Inc. to desist and refrain from importing, manufacturing, selling and distributing in the Philippines any goods bearing the trademark "SUNSHINE & DEVICE LABEL" registered in FITRITE's name pending final decision in the action a quo, it being understood that this order, to effect such desistance and enjoin defendant-appellee from the aforesaid activities, shall be considered as the Writ of Injunction itself and an integral part of this Amended Decision.

No pronouncement as to costs.

SO ORDERED. 3 (Emphasis ours.)

In the instant petition for review, which has additionally prayed for a writ of preliminary injunction or for a temporary restraining order, petitioner tells us that the appellate court has erred —

1. When it ordered the issuance of a writ of preliminary injunction, upon private respondents, posting of a bond in the sum of P10,000.00, despite the pendency of the cancellation proceedings in Inter Partes case Nos. 3397 and 3739, and in subsequently amending its decision by issuing the writ of preliminary injunction itself.

2. When respondent court failed to apply and totally disregarded the provisions of the Paris Convention for the protection of industrial property, as well as the memorandum of the Minister of Trade, dated November 20, 1980.

3. In holding that the doctrine of primary jurisdiction by the Bureau of Patents, Trademarks and Technology Transfer (BPTTT) is not applicable in this case, and in further holding that the issues involved in this case is not whether the "SUNSHINE" trademark in question is registerable or cancellable.

4. Respondent court erred in holding that the ground of litis pendentia under the Rules of Court does not apply in this case for the reason that the cause of action in the cancellation proceedings before the BPTTT is not the same as the cause of action in the case a quo.

5. In ordering the lower court to proceed with the action a quo, although for a good cause shown the lower court, in its sound discretion, may suspend the action pending outcome of the cancellation proceeding between Sunshine Biscuits, Inc. and Fitrite, Inc. in inter partes Case No. 3397 and 3739 before BPTTT. 4

The petition was given due course; however, neither a writ of preliminary injunction nor a restraining order was issued by this Court.

Unadorned, the issues would revolve simply around the question of whether or not the Court of Appeals committed reversible error (1) in allowing the trial court to proceed with the case for "injunction with damages" filed by private respondents notwithstanding the pendency of an administrative case for the cancellation of the former's trademark filed by supposedly "petitioner's principal" with the Bureau of Patents, Trademarks and Technology Transfer ("BPTTT"); and (2) in meanwhile issuing an injunction order against petitioner.

We find for private respondents.

The assailed amended decision of the appellate court reinstated the complaint for "Injunction with Damages with Prayer for Preliminary Injunction" filed by private respondents with the trial court and ordered petitioner to file its answer. The appellate court enjoined petitioner in the meantime from importing, manufacturing, selling and distributing in the Philippines goods bearing the trademark "Sunshine and Device Label" duly registered with BPTTT in private respondents' name.

Petitioner, invoking the case of Developers Group of Companies vs. Court of Appeals (219 SCRA 715), contends that the "Petitions for Cancellation" of Fitrite's Certificate of Registration No. SR-6217 and No. 47590 in the Supplemental Register and the Principal Register, respectively, which Sunshine Biscuits, Inc., of the United States of America filed in 1989 and in 1990 (docketed Inter Partes Case No. 3397 and 3739) with BPTTT cast a cloud of doubt on private respondents' claim of ownership and exclusive right to the use of the trademark "Sunshine." Considering that this matter is at issue before the BPTTT, which has primary jurisdiction over the case, petitioner argues, an injunctive relief from any court would be precipitate and improper.

The appellate court, in disposing of petitioner's argument, points out:

Notwithstanding those provisions, it is CONRAD's contention — relying on the ruling in Industrial Enterprises, Inc. vs. Court of Appeals (G.R. No. 88550, 184 SCRA 426 [1990]) — that, because technical matters or intricate issues of fact regarding the ownership of the trademark in question are involved, its determination requires the expertise, specialized skills and knowledge of the proper administrative body, which is BPTTT, which has the primary jurisdiction over the action a quo; and therefore the trial court should, and as it correctly did, yield its jurisdiction to BPTTT.

The trial court erred in adopting such fallacious argument. The issue involved in the action a quo is not whether the "SUNSHINE" trademark in question is registerable or cancellable — which is the issue pending in BPTTT that may be technical in nature requiring "expertise, specialized skills and knowledge" — since the trademark has already been registered in both the Supplemental and Principal Registers of BPTTT in the name of FITRITE; actually, the issue involved in the action a quois whether CONRAD's acts of importing, selling and distributing biscuits, cookies and other food items bearing said registered "SUNSHINE" trademark in the Philippines without the consent of its registrant (FITRITE) constitute infringement thereof in contemplation of Sec. 22 of Republic Act No. 166, as amended. Under Sec. 22, the elements that constitute infringement are simply (1) the use by any person, without the consent of the

44

registrant, (2) of any registered mark or trade-name in connection with the sale, business or services, among other things, bearing such registered mark or trade-name. This, clearly, is a factual question that does not require any specialized skill and knowledge for resolution to justify the exercise of primary jurisdiction by BPTTT.

But, even assuming — which is not the case — that the issue involved here is technical in nature requiring specialized skills and knowledge, still Industrialized Enterprises does not authorize the outright dismissal of a case originally cognizable in the courts; what it says is where primary jurisdiction comes into play in a case "the judicial process is suspended pending referral of such issues to the administrative body for its view. 5

We cannot see any error in the above disquisition. It might be mentioned that while an application for the administrative cancellation of a registered trademark on any of the grounds enumerated in Section 17 6 of Republic Act No. 166, as amended, otherwise known as the Trade-Mark Law, falls under the exclusive cognizance of BPTTT (Sec. 19, Trade-Mark Law), an action, however, for infringement or unfair competition, as well as the remedy of injunction and relief for damages, is explicitly and unquestionably within the competence and jurisdiction of ordinary courts.

Private respondents are the holder of Certificate of Registration No. 47590 (Principal Register) for the questioned trademark. In Lorenzana vs. Macagba, 154 SCRA 723, cited with approval in Del Monte Corporation vs. Court of Appeals, 181 SCRA 410, we have declared that registration in the Principal Register gives rise to a presumption of validity of the registration and of the registrant's ownership and right to the exclusive use of the mark. It is precisely such a registration that can serve as the basis for an action for infringement. 7 An invasion of this right entitles the registrant to court protection and relief. Section 23 and Section 27, Chapter V, of the Trade-Mark Law provides:

Sec. 23. Actions, and damages and injunction for infringement. — Any person entitled to the exclusive use of a registered mark or trade-name may recover damages in a civil action from any person who infringes his rights, and the measure of the damages suffered shall be either the reasonable profit which the complaining party would have made, had the defendant not infringe his said rights, or the profit which the defendant actually made out of the infringement, or in the event such measure of damages cannot be readily ascertained with reasonable certainty, then the court may award as damages a reasonable percentage based upon the amount of gross sales of the defendant or the value of the services in connection with which the mark or trade-name was used in the infringement of the rights of the complaining party. In cases where actual intent to mislead the public or to defraud the complaining party shall be shown, in the discretion of the court, the damages may be doubled.

The complaining party, upon proper showing, may also be granted injunction.

Sec. 27. Jurisdiction of [Regional Trial Court]. All actions under this Chapter and Chapters VI and VII hereof shall be brought before the proper [Regional Trial Court].

Surely, an application with BPTTT for an administrative cancellation of a registered trade mark cannot per sehave the effect of restraining or preventing the courts from the exercise of their lawfully conferred jurisdiction. A contrary rule would unduly expand the doctrine of primary jurisdiction which, simply expressed, would merely behoove regular courts, in controversies involving specialized disputes, to defer to the findings of resolutions of administrative tribunals on certain technical matters. This rule, evidently, did not escape the appellate court for it likewise decreed that for "good cause shown, the lower court, in its sound discretion, may suspend the action pending outcome of the cancellation proceedings" before BPTTT.

Needless to say, we cannot at this stage delve into the merits of the cancellation case. In this instance, the sole concern, outside of the jurisdictional aspect of the petition hereinbefore discussed, would be that which focuses on the propriety of the injunction order of the appellate court. On this score, the appellate court has said:

Thus, having the exclusive right over said trademark, FITRITE should be protected in the use thereof (Philips Export B.V. vs. Court of Appeals, G.R. No. 96161, 206 SCRA 457 [1992]); and considering that it is apparent from the record that the invasion of the right FITRITE sought to protect is material and substantial; that such right of FITRITE is clear and unmistakable; and that there is an urgent necessity to prevent serious damage to FITRITE's business interest, goodwill and profit, thus under the authority of Sec. 23 of said Republic Act No. 166, as amended, a preliminary injunction may be issued in favor of FITRITE to maintain the status quo pending trial of the action a quo on the merits without prejudice to the suspension of such action if the aforesaid cancellation proceeding before the BPTTT has not been concluded. 8 (Emphasis supplied.)

The appellate court's finding that there is an urgent necessity for the issuance of the writ of preliminary injunction pending resolution by BPTTT of the petition for cancellation filed by Sunshine USA in Inter Partes Case No. 3397 would indeed appear to have merit. The prematurity of petitioner's motion to dismiss places the case at bench quite apart from that of Developers Group of Companies, Inc. vs. Court of Appeals, 219 SCRA 715. The allegations of the complaint, perforced hypothetically deemed admitted by petitioner, would here justify the issuance by appellate court of its injunction order. Petitioner, itself, does not even appear to be a party in the administrative case (Inter Partes Case No. 3397). The averment that Sunshine USA is petitioner's principal, and that it has a prior foreign registration that should be respected conformably with the Convention of the Union of Paris for the Protection of Industrial Property are mere asseverations in the motion to dismiss which, along with some other factual assertions, are yet to be established.

All given, we find no reversible error on the part of the appellate court in its appealed decision.

In closing, the Court would urge the Bureau of Patents, Trademarks and Technology Transfer to resolve with dispatch the administrative cases (Inter Partes Case No. 3397 and No. 3739) referred to in this decision.

WHEREFORE, the petition for review is DENIED for lack of merit, and the questioned amended decision of the Court of Appeals is AFFIRMED. Costs against petitioner.

Romero, Melo and Francisco, JJ., concur.

Feliciano, J., concurs in the result.

G.R. No. 100098 December 29, 1995

EMERALD GARMENT MANUFACTURING CORPORATION, petitioner, vs.HON. COURT OF APPEALS, BUREAU OF PATENTS, TRADEMARKS AND TECHNOLOGY TRANSFER and H.D. LEE COMPANY, INC., respondents.

KAPUNAN, J.:

In this petition for review on certiorari under Rule 45 of the Revised Rules of Court, Emerald Garment Manufacturing Corporation seeks to annul the decision of the Court of Appeals dated 29 November 1990 in CA-G.R. SP No. 15266 declaring petitioner's trademark to be confusingly similar to that of private respondent and the resolution dated 17 May 1991 denying petitioner's motion for reconsideration.

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The record reveals the following antecedent facts:

On 18 September 1981, private respondent H.D. Lee Co., Inc., a foreign corporation organized under the laws of Delaware, U.S.A., filed with the Bureau of Patents, Trademarks & Technology Transfer (BPTTT) a Petition for Cancellation of Registration No. SR 5054 (Supplemental Register) for the trademark "STYLISTIC MR. LEE" used on skirts, jeans, blouses, socks, briefs, jackets, jogging suits, dresses, shorts, shirts and lingerie under Class 25, issued on 27 October 1980 in the name of petitioner Emerald Garment Manufacturing Corporation, a domestic corporation organized and existing under Philippine laws. The petition was docketed as Inter Partes Case No. 1558. 1

Private respondent, invoking Sec. 37 of R.A. No. 166 (Trademark Law) and Art. VIII of the Paris Convention for the Protection of Industrial Property, averred that petitioner's trademark "so closely resembled its own trademark, 'LEE' as previously registered and used in the Philippines, and not abandoned, as to be likely, when applied to or used in connection with petitioner's goods, to cause confusion, mistake and deception on the part of the purchasing public as to the origin of the goods." 2

In its answer dated 23 March 1982, petitioner contended that its trademark was entirely and unmistakably different from that of private respondent and that its certificate of registration was legally and validly granted. 3

On 20 February 1984, petitioner caused the publication of its application for registration of the trademark "STYLISTIC MR. LEE" in the Principal Register." 4

On 27 July 1984, private respondent filed a notice of opposition to petitioner's application for registration also on grounds that petitioner's trademark was confusingly similar to its "LEE" trademark. 5 The case was docketed as Inter Partes Case No. 1860.

On 21 June 1985, the Director of Patents, on motion filed by private respondent dated 15 May 1985, issued an order consolidating Inter Partes Cases Nos. 1558 and 1860 on grounds that a common question of law was involved. 6

On 19 July 1988, the Director of Patents rendered a decision granting private respondent's petition for cancellation and opposition to registration.

The Director of Patents found private respondent to be the prior registrant of the trademark "LEE" in the Philippines and that it had been using said mark in the Philippines. 7

Moreover, the Director of Patents, using the test of dominancy, declared that petitioner's trademark was confusingly similar to private respondent's mark because "it is the word 'Lee' which draws the attention of the buyer and leads him to conclude that the goods originated from the same manufacturer. It is undeniably the dominant feature of the mark." 8

On 3 August 1988, petitioner appealed to the Court of Appeals and on 8 August 1988, it filed with the BPTTT a Motion to Stay Execution of the 19 July 1988 decision of the Director of Patents on grounds that the same would cause it great and irreparable damage and injury. Private respondent submitted its opposition on 22 August 1988. 9

On 23 September 1988, the BPTTT issued Resolution No. 88-33 granting petitioner's motion to stay execution subject to the following terms and conditions:

1. That under this resolution, Respondent-Registrant is authorized only to dispose of its current stock using the mark "STYLISTIC MR. LEE";

2. That Respondent-Registrant is strictly prohibited from further production, regardless of mode and source, of the mark in question (STYLISTIC MR. LEE) in addition to its current stock;

3. That this relief Order shall automatically cease upon resolution of the Appeal by the Court of Appeals and, if the Respondent's appeal loses, all goods bearing the mark "STYLISTIC MR. LEE" shall be removed from the market, otherwise such goods shall be seized in accordance with the law.

SO ORDERED. 10

On 29 November 1990, the Court of Appeals promulgated its decision affirming the decision of the Director of Patents dated 19 July 1988 in all respects. 11

In said decision the Court of Appeals expounded, thus:

xxx xxx xxx

Whether or not a trademark causes confusion and is likely to deceive the public is a question of fact which is to be resolved by applying the "test of dominancy", meaning, if the competing trademark contains the main or essential or dominant features of another by reason of which confusion and deception are likely to result, then infringement takes place; that duplication or imitation is not necessary, a similarity in the dominant features of the trademark would be sufficient.

The word "LEE" is the most prominent and distinctive feature of the appellant's trademark and all of the appellee's "LEE" trademarks. It is the mark which draws the attention of the buyer and leads him to conclude that the goods originated from the same manufacturer. While it is true that there are other words such as "STYLISTIC", printed in the appellant's label, such word is printed in such small letters over the word "LEE" that it is not conspicuous enough to draw the attention of ordinary buyers whereas the word "LEE" is printed across the label in big, bold letters and of the same color, style, type and size of lettering as that of the trademark of the appellee. The alleged difference is too insubstantial to be noticeable. Even granting arguendo that the word "STYLISTIC" is conspicuous enough to draw attention, the goods may easily be mistaken for just another variation or line of garments under the ap appelle's "LEE" trademarks in view of the fact that the appellee has registered trademarks which use other words in addition to the principal mark "LEE" such as "LEE RIDERS", "LEESURES" and "LEE LEENS". The likelihood of confusion is further made more probable by the fact that both parties are engaged in the same line of business. It is well to reiterate that the determinative factor in ascertaining whether or not the marks are confusingly similar to each other is not whether the challenged mark would actually cause confusion or deception of the purchasers but whether the use of such mark would likely cause confusion or mistake on the part of the buying public.

xxx xxx xxx

The appellee has sufficiently established its right to prior use and registration of the trademark "LEE" in the Philippines and is thus entitled to protection from any infringement upon the same. It is thus axiomatic that one who has identified a peculiar symbol or mark with his goods thereby acquires a property right in such symbol or mark, and if another infringes the trademark, he thereby invokes this property right.

The merchandise or goods being sold by the parties are not that expensive as alleged to be by the appellant and are quite ordinary commodities purchased by the average person and at times, by the ignorant and the unlettered. Ordinary purchasers will not as a rule examine the small letterings printed on the label but will simply be guided by the presence of the striking mark "LEE". Whatever difference there may be will pale in insignificance in the face of an evident similarity in the dominant features and overall appearance of the labels of the parties. 12

46

xxx xxx xxx

On 19 December 1990, petitioner filed a motion for reconsideration of the above-mentioned decision of the Court of Appeals.

Private respondent opposed said motion on 8 January 1991 on grounds that it involved an impermissible change of theory on appeal. Petitioner allegedly raised entirely new and unrelated arguments and defenses not previously raised in the proceedings below such as laches and a claim that private respondent appropriated the style and appearance of petitioner's trademark when it registered its "LEE" mark under Registration No. 44220.13

On 17 May 1991, the Court of Appeals issued a resolution rejecting petitioner's motion for reconsideration and ruled thus:

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A defense not raised in the trial court cannot be raised on appeal for the first time. An issue raised for the first time on appeal and not raised timely in the proceedings in the lower court is barred by estoppel.

The object of requiring the parties to present all questions and issues to the lower court before they can be presented to this Court is to have the lower court rule upon them, so that this Court on appeal may determine whether or not such ruling was erroneous. The purpose is also in furtherance of justice to require the party to first present the question he contends for in the lower court so that the other party may not be taken by surprise and may present evidence to properly meet the issues raised.

Moreover, for a question to be raised on appeal, the same must also be within the issues raised by the parties in their pleadings. Consequently, when a party deliberately adopts a certain theory, and the case is tried and decided based upon such theory presented in the court below, he will not be permitted to change his theory on appeal. To permit him to do so would be unfair to the adverse party. A question raised for the first time on appeal, there having opportunity to raise them in the court of origin constitutes a change of theory which is not permissible on appeal.

In the instant case, appellant's main defense pleaded in its answer dated March 23, 1982 was that there was "no confusing similarity between the competing trademark involved. On appeal, the appellant raised a single issue, to wit:

The only issue involved in this case is whether or not respondent-registrant's trademark "STYLISTIC MR. LEE" is confusingly similar with the petitioner's trademarks "LEE or LEERIDERS, LEE-LEENS and LEE-SURES."

Appellant's main argument in this motion for reconsideration on the other hand is that the appellee is estopped by laches from asserting its right to its trademark. Appellant claims although belatedly that appellee went to court with "unclean hands" by changing the appearance of its trademark to make it identical to the appellant's trademark.

Neither defenses were raised by the appellant in the proceedings before the Bureau of Patents. Appellant cannot raise them now for the first time on appeal, let alone on a mere motion for reconsideration of the decision of this Court dismissing the appellant's appeal.

While there may be instances and situations justifying relaxation of this rule, the circumstance of the instant case, equity would be better served by applying the settled rule it appearing that appellant has not given any reason at all as to why the defenses raised in its motion for reconsideration was not invoked earlier. 14

xxx xxx xxx

Twice rebuffed, petitioner presents its case before this Court on the following assignment of errors:

I. THE COURT OF APPEALS ERRED IN NOT FINDING THAT PRIVATE RESPONDENT CAUSED THE ISSUANCE OF A FOURTH "LEE" TRADEMARK IMITATING THAT OF THE PETITIONER'S ON MAY 5, 1989 OR MORE THAN EIGHT MONTHS AFTER THE BUREAU OF PATENT'S DECISION DATED JULY 19, 1988.

II. THE COURT OF APPEALS ERRED IN RULING THAT THE DEFENSE OF ESTOPPEL BY LACHES MUST BE RAISED IN THE PROCEEDINGS BEFORE THE BUREAU OF PATENTS, TRADEMARKS AND TECHNOLOGY TRANSFER.

III. THE COURT OF APPEALS ERRED WHEN IT CONSIDERED PRIVATE RESPONDENT'S PRIOR REGISTRATION OF ITS TRADEMARK AND DISREGARDED THE FACT THAT PRIVATE RESPONDENT HAD FAILED TO PROVE COMMERCIAL USE THEREOF BEFORE FILING OF APPLICATION FOR REGISTRATION. 15

In addition, petitioner reiterates the issues it raised in the Court of Appeals:

I. THE ISSUE INVOLVED IN THIS CASE IS WHETHER OR NOT PETITIONER'S TRADEMARK SYTLISTIC MR. LEE, IS CONFUSINGLY SIMILAR WITH THE PRIVATE RESPONDENT'S TRADEMARK LEE OR LEE-RIDER, LEE-LEENS AND LEE-SURES.

II. PETITIONER'S EVIDENCES ARE CLEAR AND SUFFICIENT TO SHOW THAT IT IS THE PRIOR USER AND ITS TRADEMARK IS DIFFERENT FROM THAT OF THE PRIVATE RESPONDENT.

III. PETITIONER'S TRADEMARK IS ENTIRELY DIFFERENT FROM THE PRIVATE RESPONDENT'S AND THE REGISTRATION OF ITS TRADEMARK IS PRIMA FACIE EVIDENCE OF GOOD FAITH.

IV. PETITIONER'S "STYLISTIC MR. LEE" TRADEMARK CANNOT BE CONFUSED WITH PRIVATE RESPONDENT'S LEE TRADEMARK. 16

Petitioner contends that private respondent is estopped from instituting an action for infringement before the BPTTT under the equitable principle of laches pursuant to Sec. 9-A of R.A. No. 166, otherwise known as the Law on Trade-marks, Trade-names and Unfair Competition:

Sec. 9-A. Equitable principles to govern proceedings. — In opposition proceedings and in all other inter partes proceedings in the patent office under this act, equitable principles of laches, estoppel, and acquiescence, where applicable, may be considered and applied.

Petitioner alleges that it has been using its trademark "STYLISTIC MR. LEE" since 1 May 1975, yet, it was only on 18 September 1981 that private respondent filed a petition for cancellation of petitioner's certificate of registration for the

47

said trademark. Similarly, private respondent's notice of opposition to petitioner's application for registration in the principal register was belatedly filed on 27 July 1984. 17

Private respondent counters by maintaining that petitioner was barred from raising new issues on appeal, the only contention in the proceedings below being the presence or absence of confusing similarity between the two trademarks in question. 18

We reject petitioner's contention.

Petitioner's trademark is registered in the supplemental register. The Trademark Law (R.A. No. 166) provides that "marks and tradenames for the supplemental register shall not be published for or be subject to opposition, but shall be published on registration in the Official Gazette." 19 The reckoning point, therefore, should not be 1 May 1975, the date of alleged use by petitioner of its assailed trademark but 27 October 1980, 20 the date the certificate of registration SR No. 5054 was published in the Official Gazette and issued to petitioner.

It was only on the date of publication and issuance of the registration certificate that private respondent may be considered "officially" put on notice that petitioner has appropriated or is using said mark, which, after all, is the function and purpose of registration in the supplemental register. 21 The record is bereft of evidence that private respondent was aware of petitioner's trademark before the date of said publication and issuance. Hence, when private respondent instituted cancellation proceedings on 18 September 1981, less than a year had passed.

Corollarily, private respondent could hardly be accused of inexcusable delay in filing its notice of opposition to petitioner's application for registration in the principal register since said application was published only on 20 February 1984. 22 From the time of publication to the time of filing the opposition on 27 July 1984 barely five (5) months had elapsed. To be barred from bringing suit on grounds of estoppel and laches, the delay must be lengthy. 23

More crucial is the issue of confusing similarity between the two trademarks. Petitioner vehemently contends that its trademark "STYLISTIC MR. LEE" is entirely different from and not confusingly similar to private respondent's "LEE" trademark.

Private respondent maintains otherwise. It asserts that petitioner's trademark tends to mislead and confuse the public and thus constitutes an infringement of its own mark, since the dominant feature therein is the word "LEE."

The pertinent provision of R.A. No. 166 (Trademark Law) states thus:

Sec. 22. Infringement, what constitutes. — Any person who shall use, without the consent of the registrant, any reproduction, counterfeit, copy or colorable imitation of any registered mark or trade-name in connection with the sale, offering for sale, or advertising of any goods, business or services on or in connection with which such use is likely to cause confusion or mistake or to deceive purchasers or others as to the source or origin of such goods or services, or identity of such business; or reproduce, counterfeit, copy or colorably imitable 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.

Practical application, however, of the aforesaid provision is easier said than done. In the history of trademark cases in the Philippines, particularly in ascertaining whether one trademark is confusingly similar to or is a colorable imitation of another, no set rules can be deduced. Each case must be decided on its own merits.

In Esso Standard Eastern, Inc. v. Court of Appeals, 24 we held:

. . . But likelihood of confusion is a relative concept; to be determined only according to the particular, and sometimes peculiar, circumstances of each case. It is unquestionably true that, as stated in Coburn vs. Puritan Mills, Inc.: "In trademark cases, even more than in other litigation, precedent must be studied in the light of the facts of the particular case."

xxx xxx xxx

Likewise, it has been observed that:

In determining whether a particular name or mark is a "colorable imitation" of another, no all-embracing rule seems possible in view of the great number of factors which must necessarily be considered in resolving this question of fact, such as the class of product or business to which the article belongs; the product's quality, quantity, or size, including its wrapper or container; the dominant color, style, size, form, meaning of letters, words, designs and emblems used; the nature of the package, wrapper or container; the character of the product's purchasers; location of the business; the likelihood of deception or the mark or name's tendency to confuse;etc. 25

Proceeding to the task at hand, the essential element of infringement is colorable imitation. This term has been defined as "such a close or ingenious imitation as to be calculated to deceive ordinary purchasers, or such resemblance of the infringing mark to the original as to deceive an ordinary purchaser giving such attention as a purchaser usually gives, and to cause him to purchase the one supposing it to be the other." 26

Colorable imitation does not mean such similitude as amounts to identity. Nor does it require that all the details be literally copied. Colorable imitation refers to such similarity in form, content, words, sound, meaning, special arrangement, or general appearance of the trademark or tradename with that of the other mark or tradename in their over-all presentation or in their essential, substantive and distinctive parts as would likely mislead or confuse persons in the ordinary course of purchasing the genuine article. 27

In determining whether colorable imitation exists, jurisprudence has developed two kinds of tests — the Dominancy Test applied in Asia Brewery, Inc. v. Court of Appeals 28 and other cases 29 and the Holistic Test developed in Del Monte Corporation v. Court of Appeals 30 and its proponent cases. 31

As its title implies, the test of dominancy focuses on the similarity of the prevalent features of the competing trademarks which might cause confusion or deception and thus constitutes infringement.

xxx xxx xxx

. . . If the competing trademark contains the main or essential or dominant features of another, and confusion and deception is likely to result, infringement takes place. Duplication or imitation is not necessary; nor it is necessary that the infringing label should suggest an effort to imitate. [C. Neilman Brewing Co. v. 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; . . .) 32

xxx xxx xxx

On the other side of the spectrum, the holistic test mandates that the entirety of the marks in question must be considered in determining confusing similarity.

48

xxx xxx xxx

In determining whether the trademarks are confusingly similar, a comparison of the words is not the only determinant 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. 33

xxx xxx xxx

Applying the foregoing tenets to the present controversy and taking into account the factual circumstances of this case, we considered the trademarks involved as a whole and rule that petitioner's "STYLISTIC MR. LEE" is not confusingly similar to private respondent's "LEE" trademark.

Petitioner's trademark is the whole "STYLISTIC MR. LEE." Although on its label the word "LEE" is prominent, the trademark should be considered as a whole and not piecemeal. The dissimilarities between the two marks become conspicuous, noticeable and substantial enough to matter especially in the light of the following variables that must be factored in.

First, the products involved in the case at bar are, in the main, various kinds of jeans. These are not your ordinary household items like catsup, soysauce or soap which are of minimal cost. Maong pants or jeans are not inexpensive. 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. In Del Monte Corporation v. Court of Appeals, 34 we noted that:

. . . 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. . . .

Second, like his beer, the average Filipino consumer generally buys his jeans by brand. He does not ask the sales clerk for generic jeans but for, say, a Levis, Guess, Wrangler or even an Armani. He is, therefore, more or less knowledgeable and familiar with his preference and will not easily be distracted.

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 35 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."

There is no cause for the Court of Appeal's apprehension that petitioner's products might be mistaken as "another variation or line of garments under private respondent's 'LEE' trademark". 36 As one would readily observe, private respondent's variation follows a standard format "LEERIDERS," "LEESURES" and "LEELEENS." It is, therefore, improbable that the public would immediately and naturally conclude that petitioner's "STYLISTIC MR. LEE" is but another variation under private respondent's "LEE" mark.

As we have previously intimated the issue of confusing similarity between trademarks is resolved by considering the distinct characteristics of each case. In the present controversy, taking into account these unique factors, we conclude that the similarities in the trademarks in question are not sufficient as to likely cause deception and confusion tantamount to infringement.

Another way of resolving the conflict is to consider the marks involved from the point of view of what marks are registrable pursuant to Sec. 4 of R.A. No. 166, particularly paragraph 4 (e):

CHAPTER II-A.— The Principal Register(Inserted by Sec. 2, Rep. Act No. 638.)

Sec. 4. Registration of trade-marks, trade-names and service-marks on the principal register. — There is hereby established a register of trade-marks, trade-names and service-marks which shall be known as the principal register. The owner of a trade-mark, trade-name or service-mark used to distinguish his goods, business or services from the goods, business or services of others shall have the right to register the same on the principal register, unless it:

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(e) Consists of a mark or trade-name which, when applied to or used in connection with the goods, business or services of the applicant is merely descriptive or deceptively misdescriptive of them, or when applied to or used in connection with the goods, business or services of the applicant is primarily geographically descriptive or deceptively misdescriptive of them, or is primarily merely a surname; (Emphasis ours.)

xxx xxx xxx

"LEE" is primarily a surname. Private respondent cannot, therefore, acquire exclusive ownership over and singular use of said term.

. . . It has been held that a personal name or surname may not be monopolized as a trademark or tradename as against others of the same name or surname. For in the absence of contract, fraud, or estoppel, any man may use his name or surname in all legitimate ways. Thus, "Wellington" is a surname, and its first user has no cause of action against the junior user of "Wellington" as it is incapable of exclusive appropriation. 37

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) which explicitly provides that:

CHAPTER II. Registration of Marks and Trade-names.

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Sec. 2. What are registrable. — Trade-marks, trade-names, and service marks owned by persons, corporations, partnerships or associations domiciled in the Philippines and by persons, corporations, partnerships, or associations domiciled in any foreign country may be registered in accordance with the provisions of this act: Provided, That said trade-marks, trade-names, or service marks are actually in use in commerce and services not less than two months in the Philippines before the time the applications for registration are filed: And Provided, further, That the country of which the applicant for registration is a citizen grants by law substantially similar privileges to citizens of the Philippines, and such fact is officially certified, with a certified true copy of the foreign law translated into the English language, by the government of the foreign country to the Government of the Republic of the Philippines. (As amended.) (Emphasis ours.)

Sec. 2-A. Ownership of trade-marks, trade-names and service-marks; how acquired. — Anyone who lawfully produces or deals in merchandise of any kind or who engages in lawful business, or who renders any lawful service in commerce, by actual use hereof in manufacture or trade, in business, and in the service rendered; may appropriate to his exclusive use a trade-mark, a trade-name, or a service-mark not so appropriated by another, to distinguish his merchandise, business or services from others. The ownership or possession of trade-mark, trade-name, service-mark, heretofore or hereafter appropriated, as in this section provided, shall be recognized and protected in the same manner and to the same extent as are other property rights to the law. (As amended.) (Emphasis ours.)

The provisions of the 1965 Paris Convention for the Protection of Industrial Property 38 relied upon by private respondent and Sec. 21-A of the Trademark Law (R.A. No. 166) 39 were sufficiently expounded upon and qualified in the recent case of Philip Morris, Inc. v. Court of Appeals: 40

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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 its trademark in commerce in the Philippines. Such a foreign corporation may have the personality to file a suit for infringement but it may not necessarily be entitled to protection due to absence of actual use of the emblem in the local market.

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Undisputably, private respondent is the senior registrant, having obtained several registration certificates for its various trademarks "LEE," "LEERIDERS," and "LEESURES" in both the supplemental and principal registers, as early as 1969

to 1973. 41 However, registration alone will not suffice. In Sterling Products International, Inc. v.Farbenfabriken Bayer Aktiengesellschaft, 42 we declared:

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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

It would seem quite clear that adoption alone of a trademark would not give exclusive right thereto. Such right "grows out of their actual use." Adoption is not use. One may make advertisements, issue circulars, give out price lists on certain goods; but these alone would not give exclusive right of use. For trademark is a creation of use. The underlying reason for all these is that purchasers have come to understand the mark as indicating the origin of the wares. Flowing from this is the trader's right to protection in the trade he has built up and the goodwill he has accumulated from use of the trademark. Registration of a trademark, of course, has value: it is an administrative act declaratory of a pre-existing right. Registration does not, however, perfect a trademark right. (Emphasis ours.)

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To augment its arguments that it was, not only the prior registrant, but also the prior user, private respondent invokes Sec. 20 of the Trademark Law, thus:

Sec. 20. Certificate of registration prima facie evidence of validity. — A certificate of registration of a mark or tradename shall be a prima facie evidence of the validity of the registration, the registrant's ownership of the mark or trade-name, and of the registrant's exclusive right to use the same in connection with the goods, business or services specified in the certificate, subject to any conditions and limitations stated therein.

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.

Moreover, the aforequoted provision applies only to registrations in the principal register. 43 Registrations in the supplemental register do not enjoy a similar privilege. A supplemental register was created precisely for the registration of marks which are not registrable on the principal register due to some defects. 44

The determination as to who is the prior user of the trademark is a question of fact and it is this Court's working principle not to disturb the findings of the Director of Patents on this issue in the absence of any showing of grave abuse of discretion. The findings of facts of the Director of Patents are conclusive upon the Supreme Court provided they are supported by substantial evidence. 45

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 46 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. 47 Similarly, we give little weight to the

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numerous vouchers representing various advertising expenses in the Philippines for "LEE" products. 48 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. 49

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. 50

Our rulings in Pagasa Industrial Corp. v. Court of Appeals 51 and Converse Rubber Corp. v. Universal Rubber Products, Inc., 52 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

The sales invoices provide the best proof that there were actual sales of petitioner's product in the country and that there was actual use for a protracted period of petitioner's trademark or part thereof through these sales.

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.

WHEREFORE, premises considered, the questioned decision and resolution are hereby REVERSED and SET ASIDE.

SO ORDERED.

Bellosillo and Hermosisima, Jr., JJ., concur.

G.R. No. L-20635 March 31, 1966

ETEPHA, A.G., petitioner, vs.DIRECTOR OF PATENTS and WESTMONT PHARMACEUTICALS, INC., respondents.

McClure, Salas and Gonzalez, for petitioner.Sycip, Salazar, Manalo, Luna and Associates, for respondent.

SANCHEZ, J.:

To the question: May trademark ATUSSIN be registered, given the fact that PERTUSSIN, another trademark, had been previously registered in the Patent Office? — the Director of Patents answered affirmatively. Hence this appeal.

On April 23, 1959, respondent Westmont Pharmaceuticals, Inc., a New York corporation, sought registration of trademark "Atussin" placed on its "medicinal preparation of expectorant antihistaminic, bronchodilator sedative, ascorbic acid (Vitamin C) used in the treatment of cough". The trademark is used exclusively in the Philippines since January 21, 1959.1

Petitioner, Etepha, A. G., a Liechtenstin (principality) corporation, objected. Petitioner claims that it will be damaged because Atussin is so confusedly similar to its Pertussin (Registration No. 6089, issued on September 25, 1957) used on a preparation for the treatment of coughs, that the buying public will be misled into believing that Westmont's product is that of petitioner's which allegedly enjoys goodwill.

1. The objects of a trademark are "to point out distinctly the origin or ownership of the articles to which it is affixed, to secure to him who has been instrumental in bringing into market a superior article or merchandise the fruit of his industry and skill, and to prevent fraud and imposition."2 Our over-all task then is to ascertain whether or not Atussin so resembles Pertussin "as to be likely, when applied to or used in connection with the goods ... of the applicant, to cause confusion or mistake or to deceive purchasers".3And, we are to be guided by the rule that the validity of a cause for infringement is predicated upon colorable imitation. The phrase "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, and to cause him to purchase the one supposing it to be the other."4

2. That the word "tussin" figures as a component of both trademarks is nothing to wonder at. The Director of Patents aptly observes that it is "the common practice in the drug and pharmaceutical industries to 'fabricate' marks by using syllables or words suggestive of the ailments for which they are intended and adding thereto distinctive prefixes or suffixes".5 And appropriately to be considered now is the fact that, concededly, the "tussin" (in Pertussin and Atussin) was derived from the Latin root-word "tussis" meaning cough.6

"Tussin" is merely descriptive; it is generic; it furnishes to the buyer no indication of the origin of the goods; it is open for appropriation by anyone. It is accordingly barred from registration as trademark. With jurisprudence holding the line, we feel safe in making the statement that any other conclusion would result in "appellant having practically a monopoly"7 of the word "tussin" in a trademark.8

While "tussin" by itself cannot thus be used exclusively to identify one's goods, it may properly become the subject of a trademark "by combination with another word or phrase".9 And this union of words is reflected in petitioner's Pertussin and respondent's Atussin, the first with prefix "Per" and the second with Prefix "A".1äwphï1.ñët

3. A practical approach to the problem of similarity or dissimilarity is to go into the whole of the two trademarks pictured in their manner of display. Inspection should be undertaken from the viewpoint of a prospective buyer. The trademark complained of should be compared and contrasted with the purchaser's memory (not in juxtaposition) of the trademark said to be infringed. 10 Some such factors as "sound; appearance; form, style, shape, size or format; color; ideas connoted by marks; the meaning, spelling, and pronunciation, of words used; and the setting in which the words appear" may be considered. 11 For, indeed, trademark infringement is a form of unfair competition. 12

We take a casual look at the two labels — without spelling out the details — bearing in mind the easy-to-remember earmarks thereof. Respondent's label underscores the trademark Atussin in bold, block letters horizontally written. In petitioner's, on the other hand, Pertussin is printed diagonally upwards and across in semiscript style with flourishes and with only the first letter "P" capitalized. Each label plainly shows the source of the medicine: petitioner's at the foot bears "Etepha Ltd. Schaan Fl", and on top, "Apothecary E. Taeschner's"; respondent's projects "Westmont Pharmaceuticals, Inc. New York, USA" at the bottoms, and on the lower left side the word "Westmont" upon a white diamond shaped enclosure and in red ink — a color

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different from that of the words above and below it. Printed prominently along the left, bottom and right edges of petitioner's label are indications of the use: "for bronchial catarrh — whopping-cough — coughs and asthma". Respondent's for its part briefly represents what its produce actually is - a "cough syrup". The two labels are entirely different in colors, contents, arrangement of words thereon, sizes, shapes and general appearance. The contrasts in pictorial effects and appeals to the eye is so pronounced that the label of one cannot be mistaken for that of the other, not even by persons unfamiliar with the two trademarks. 13

On this point the following culled from a recent decision of the United States Court of Customs and Patent Appeals (June 15, 1956) is persuasive: 14

Confusion is likely between trademarks, however, only if their over-all presentations in any of the particulars of sound, appearance, or meaning are such as would lead the purchasing public into believing that the products to which the marks are applied emanated from the same source. In testing this issue, fixed legal rules exist — if not in harmony, certainly in abundance — but, in the final analysis, the application of these rules in any given situation necessarily reflects a matter of individual judgment largely predicated on opinion. There is, however, and can be no disagreement with the rule that the purchaser is confused, if at all, by the marks as a whole.

4. We now consider exclusively the two words — Pertussin and Atussin — as they appear on the respective labels. As previously adverted to, these words are presented to the public in different styles of writing and methods of design. The horizontal plain, block letters of Atussin and the diagonally and artistically upward writing of Pertussin leave distinct visual impressions. One look is enough to denude the mind of that illuminating similarity so essential for a trademark infringement case to prosper.

5. As we take up Pertussin and Atussin once again, we cannot escape notice of the fact that the two words do not sound alike — when pronounced. There is not much phonetic similarity between the two. The Solicitor General well-observed that in Pertussin the pronunciation of the prefix "Per", whether correct or incorrect, includes a combination of three letters P, e and r; whereas, in Atussin the whole starts with the single letter A added to suffix "tussin". Appeals to the ear are disimilar. And this, because in a word combination, the part that comes first is the most pronounced. An expositor of the applicable rule here is the decision in the Syrocol-Cheracol controversy. 15 There, the ruling is that trademark Syrocol (a cough medicine preparation) is not confusedly similar to trademark Cheracol (also a cough medicine preparation). Reason: the two words "do not look or sound enough alike to justify a holding of trademark infringement", and the "only similarity is in the last syllable, and that is not uncommon in names given drug compounds".

6. In the solution of a trademark infringement problem, regard too should be given to the class of persons who buy the particular product and the circumstances ordinarily attendant to its acquisition. 16 The medicinal preparation clothed with the trademarks in question, are unlike articles of everyday use such as candies, ice cream, milk, soft drinks and the like which may be freely obtained by anyone, anytime, anywhere. Petitioner's and respondent's products are to be dispensed upon medical prescription. The respective labels say so. An intending buyer must have to go first to a licensed doctor of medicine; he receives instructions as to what to purchase; he reads the doctor's prescription; he knows what he is to buy. He is not of the incautious, unwary, unobservant or unsuspecting type; he examines the product sold to him; he checks to find out whether it conforms to the medical prescription. The common trade channel is the pharmacy or the drugstore. Similarly, the pharmacist or druggist verifies the medicine sold. The margin of error in the acquisition of one for the other is quite remote.

We concede the possibility that buyers might be able to obtain Pertussin or Attusin without prescription. When this happens, then the buyer must be one throughly familiar with what he intends to get, else he would not have the temerity to ask for a medicine — specifically needed to cure a given ailment. In which case, the more improbable it will be to palm off one for the other. For a person who purchases with open eyes is hardly the man to be deceived.

For the reasons given, the appealed decision of the respondent Director of Patents — giving due course to the application for the registration of trademark ATTUSIN is hereby affirmed. Costa against petitioner. So ordered.

Bengzon, C.J., Bautista Angelo, Concepcion, Reyes, J.B.L., Barrera, Regala, Makalintal, Bengzon, J. P., and Zaldivar, JJ., concur.Dizon, J., took no part.

ISTILLERIA WASHINGTON, INC. or WASHINGTON DISTILLERY, INC., petitioner, vs. THE HONORABLE COURT OF APPEALS and LA TONDEÑA DISTILLERS, INC., respondents.

D E C I S I O N

VITUG, J.:

The initiatory suit was instituted on 02 November 1987 with the trial court (docketed Civil Case No. 87-42639) for manual delivery with damages instituted by La Tondeña Distillers, Inc. (“LTDI”), against Distilleria Washington (“Washington”). LTDI, under a claim of ownership, sought to seize from Distilleria Washington 18, 157 empty “350 c.c. white flint bottles” bearing the blown-in marks of “La Tondeña Inc.” and “Ginebra San Miguel.” The court, on application of LTDI, issued an order of replevin on 05 November 1987 for the seizure of the empty gin bottles from Washington. These bottles, it was averred, were being used by Washington for its own “Gin Seven” products without the consent of LTDI.

LTDI asserted that, being the owner and registrant of the bottles, it was entitled to the protection so extended by Republic Act (“R.A.”) No. 623, as amended, notwithstanding its sale of the Ginebra San Miguel gin product contained in said bottles.

Washington countered that R.A. No. 623, invoked by LTDI, should not apply to gin, an alcoholic beverage which is unlike that of “soda water, mineral or aerated water, ciders, milks, cream, or other lawful beverages” mentioned in the law, and that, in any case, ownership of the bottles should, considering the attendant facts and circumstances, be held lawfully transferred to the buyers upon the sale of the gin and containers at a single price.

After hearing the parties, the trial court rendered its decision, dated 03 December 1991, holding against LTDI; viz:

“WHEREFORE, premises considered, the complainant is hereby DISMISSED and plaintiff is ordered:

“1. To return to defendant the 18,157 empty bottles seized by virtue of the writ for the Seizure of Personal Property issued by this Court on November 6, 1987;

“2. In the event of failure to return said empty bottles, plaintiff is ordered to indemnify defendant in the amount of P18,157.00 representing the value of the bottles.

“3. Costs against plaintiff.”[1]

LTDI appealed the decision to the Court of Appeals (CA-G.R. CV No. 36971). The appellate court reversed the court a quo and ruled against Washington; thus:

“WHEREFORE, the appealed decision is hereby REVERSED and SET ASIDE. The appellant, being the owner, is authorized to retain in its possession the 18,157 bottles registered in its name delivered to it by the sheriff following their seizure from the appellee pursuant to the writ of replevin issued by the trial court on November 6, 1987. Costs against the appellee.”[2]

Washington is now before this Court assailing the reversal of the trial court’s decision. In it’s petition, Washington points out that –

“4.00.a. Under the undisputed facts, petitioner is the lawful owner of the personal properties (18,157 empty bottles) involved in the petition. Respondent LTDI is precluded by law from claiming the same;

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“4.00.b. The decision and resolution appealed from violate equity and applicable canons in the interpretation and construction of statutes; and

“4.00.c. Liquour products are not covered by Republic Act No. 623. The holding of the Court in Cagayan Valley Enterprises, Inc. vs. Honorable Court of Appeals, 179 SCRA 218 [1989] should be reviewed and reconsidered in light of the Constitution and House Bill No. 20585.”[3]

It is a fact that R.A. No. 623 extends trademark protection in the use of containers duly registered with the Philippine Patent Office. The pertinent provisions of R.A. 623, as amended, so reads:

“SECTION 1. Persons engaged or licensed to engage in the manufacture, bottling, or selling of soda water, mineral or aerated waters, cider, milk, cream or other lawful beverages in bottles, boxes, casks, kegs, or barrels, and other similar containers, or in the manufacture, compressing or selling of gases such as oxygen, acetylene, nitrogen, carbon dioxide, ammonia, hydrogen, chloride, helium, sulphur dioxide, butane, propane, freon, methyl chloride or similar gases contained in steel cylinders, tanks, flasks, accumulators or similar containers, with their names or the names of their principals or products, or other marks of ownership stamped or marked thereon, may register with the Philippines Patent Office a description of the names or marks, and the purpose for which the containers so marked are used by them, under the same conditions, rules, and regulations, made applicable by law or regulation to the issuance of trademarks.

“SEC. 2. It shall be unlawful for any person, without the written consent of the manufacturer, bottler, or seller, who has successfully registered the marks of ownership in accordance with the provisions of the next preceding section, to fill such bottles, boxes, kegs, barrels, steel cylinders, tanks, flasks, accumulators, or other similar containers so marked or stamped, for the purpose of sale, or to sell, dispose of, buy or traffic in, or wantonly destroy the same, whether filled or not to use the same for drinking vessels or glasses or drain pipes, foundation pipes, for any other purpose than that registered by the manufacturer, bottler or seller. Any violation of this section shall be punished by a fine of not more than one thousand pesos or imprisonment of not more than one year or both.

“SEC. 3. The use by any person other than the registered manufacturer, bottler or seller, without written permission of the latter of any such bottle, cask, barrel, keg, box, steel cylinders, tanks, flasks, accumulators, or other similar containers, or the possession thereof without written permission of the manufacturer, by any junk dealer or dealer in casks, barrels, kegs, boxes, steel cylinders, tanks, flasks, accumulators or other similar containers, the same being duly marked or stamped and registered as herein provided, shall give rise to a prima facie presumption that such use or possession is unlawful.”[4]

At the outset, the Court must state that it sees no cogent reason for either departing from or changing the basic rule it laid down in Cagayan Valley Enterprises, Inc., vs. Court of Appeals.[5] The Court has there held:

“The above-quoted provisions grant protection to a qualified manufacturer who successfully registered with the Philippine Patent Office its duly stamped or marked bottles, boxes, casks and other similar containers. The mere use of registered bottles or containers without the written consent of the manufacturer is prohibited, the only exceptions being when they are used as containers for ‘sisi,’ ‘bagoong,’ ‘patis’ and similar native products.

“It is an admitted fact that herein petitioner Cagayan buys from junk dealers and retailers bottles which bear the marks or names ‘La Tondeña, Inc.’ and ‘Ginebra San Miguel’ and uses them as containers for its own liquor products. The contention of Cagayan that the aforementioned bottles without the words ‘property of’ indicated thereon are not the registered bottles of LTI, since they do not conform with the statement or description in the supporting affidavits attached to the original registration certificate and renewal, is untenable.

“Republic Act No. 623 which governs the registration of marked bottles and containers merely requires that the bottles, in order to be eligible for registration, must be stamped or marked with the names of the manufacturers or the names of their principals or products, or other marks of ownership. No drawings or labels are required but, instead, two photographs of the container, duly signed by the applicant, showing clearly and legibly the names and other marks of

ownership sought to be registered and a bottle showing the name or other mark or ownership, irremovably stamped or marked, shall be submitted.

“x x x x x x x x x

“The claim of petitioner that hard liquor is not included under the term ‘other lawful beverages’ as provided in Section 1 of Republic Act No. 623, as amended by Republic Act No. 5700, is without merit. The title of the law itself, which reads ‘An Act to Regulate the Use of Duly Stamped or Marked Bottles, Boxes, Casks, Kegs, Barrels and Other Similar Containers’ clearly shows the legislative intent to give protection to all marked bottles and containers of all lawful beverages regardless of the nature of their contents. The words ‘other lawful beverages’ is used in its general sense, referring to all beverages not prohibited by law. Beverage is defined as a liquor or liquid for drinking. Hard liquor, although regulated, is not prohibited by law, hence it is within the purview and coverage of Republic Act No. 623, as amended.”[6]

Given the nature of the action in Cagayan, as well as its factual milieu, the Court indeed hardly has had a choice but to sustain the registrant’s right to the injunctive writ against the unauthorized use of its containers. The case before us, however, goes beyond just seeking to have such use stopped but it so takes on even the ownership issue as well. Parenthetically, petitioner is not here being charged with a violation of Section 2 of R.A. No. 623 or of the Trademark Law. The instant suit is one for replevin (manual delivery) where the claimant must be able to show convincingly that he is either the owner or clearly entitled to the possession of the object sought to be recovered. Replevin is a possessory action the gist of which focuses on the right of possession that, in turn, is dependent on a legal basis that, not infrequently, looks to the ownership of the object sought to be replevied.

It is to be pointed out that a trademark refers to a word, name, symbol, emblem, sign or device or any combination thereof adopted and used by a merchant to identify, and distinguish from others, his goods of commerce. It is basically an intellectual creation that is susceptible to ownership [7] and, consistently therewith, gives rise to its own elements of jus posidendi, jus utendi, jus fruendi, jus disponendi, and jus abutendi, along with the applicable jus lex, comprising that ownership. The incorporeal right, however, is distinct from the property in the material object subject to it. Ownership in one does not necessarily vest ownership in the other. Thus, the transfer or assignment of the intellectual property will not necessarily constitute a conveyance of the thing it covers, nor would a conveyance of the latter imply the transfer or assignment of the intellectual right.[8]

R.A. No. 623 evidently does not disallow the sale or transfer of ownership of the marked bottles or containers. In fact, the contrary is implicit in the law; thus –

“Sec. 5. No action shall be brought under this Act against any person to whom the registered manufacturer, bottler or seller, has transferred by way of sale, any of the containers herein referred to, but the slae of the beverage contained in the said containers shall not include the sale of the containers unless specifically so provided.

“Sec. 6. The provisions of this Act shall not be interpreted as prohibiting the use of bottles as containers for ‘sisi,’ bagoong,’ ‘patis,’ and similar native products.”

Scarcely disputed are certain and specific industry practices in the sale of gin: The manufacturer sells the product in marked containers, through dealers, to the public in supermarkets, grocery shops, retail stores and other sales outlets. The buyer takes the item; he is neither required to return the bottle nor required to make a deposit to assure its return to the seller. He could return the bottle and get a refund. A number of bottles at times find their way to commercial users. It cannot be gainsaid that ownership of the containers does pass on to the consumer albeit subject to the statutory limitations on the use of the registered containers and to the trademark rights of the registrant. The statement in Section 5 of R.A. 623 to the effect that the “sale of beverage contained in the said containers shall not include the sale of the containers unless specifically so provided” is not a rule of proscription. It is a rule of construction that, in keeping with the spirit and intent of the law, establishes at best a presumption (of non-conveyance of the container) and which by no means can be taken to be either interdictive or conclusive in character. Upon the other hand, LTDI’s sales invoice, stipulating that the “sale does not include the bottles with the blow-in marks of ownership of La Tondeña Distillers,” cannot affect those who are not privies thereto.

While it may be unwarranted then for LTDI to simply seize the empty containers, this Court finds it to be legally absurd, however, to still allow petitioner to recover the possession thereof. The fact of the matter is that R.A. 623, as

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amended, in affording trademark protection to the registrant, has additionally expressed a prima facie presumption of illegal use by a possessor whenever such use or possession is without the written permission of the registered manufacturer, a provision that is neither arbitrary nor without appropriate rationale. Indeed, the appellate court itself has made a finding of such unauthorized use by petitioner. The Court sees no other logical purpose for petitioner’s insistence to keep the bottles, except for such continued use. The practical and feasible alternative is to merely require the payment of just compensation to petitioner for the bottles seized from it by LTDI. Conventional wisdom, along with equity and justice to both parties, dictates it.

WHEREFORE, the decision of the appellate court is MODIFIED by ordering LTDI to pay petitioner just compensation for the seized bottles. Instead, however, of remanding the case to the Court of Appeals to receive evidence on, and thereafter resolve, the assessment thereof, this Court accepts and accordingly adopts the quantification of P18,157.00 made by the trial court. No costs.

SO ORDERED.

Padilla, Bellosillo, Kapunan, and Hermosisima, Jr., JJ., concur.

DISTILLERIA WASHINGTON, INC. or WASHINGTON DISTILLERY, INC., petitioner vs LA TONDEÑA DISTILLERS, INC. and THE HONORABLE COURT OF APPEALS, respondents.

R E S O L U T I O N

KAPUNAN, J.:

On October 17, 1996, this court rendered a decision in the above-entitled case, the dispositive portion of which reads, as follows:

WHEREFORE, the decision of the appellate court is MODIFIED by ordering LTDI to pay petitioner just compensation for the seized bottles. Instead, however, of remanding the case to the Court of Appeals to receive evidence on, and thereafter resolve, the assessment thereof, this Court accepts and accordingly adopts the quantification of P18,157.00 made the the trial court. No costs.

With the deanial of the Motion for Reconsideration ,petitioner sought a second reconsideration with leave of court of our decision raising new issues, to wit:

1.01.d. The Supreme Court, in its Decision of October 17, 1996, modified the decision of the Court of Appeals. It held that ownership of the bottles has passed to the consumer, ultimately, to Washington Distillery, Inc., thereby upholding the finding of the Regional Trial Court and reversing the ruling or the Court of Appeals; nonetheless, while ruling that the ownership over the bottles had passed to Washington Distillery, Inc.,it held that Washington Distillery, Inc. may not use the bottles because of the ‘trademark protection to the registrant’ (La Tondeña Distillers, Inc.). Instead of directing the return to the bottles to Washington Distillery, Inc., the Court ordered La Tondeña Distillers, Inc. to pay Washington Distillery, Inc. the amount of P18,157.00.

2.00. The decision of the Supreme Court itself therefore raises new issues. As owner of the bottles, should not Washington Distillery, Inc. be given possession of the bottles? Would its use of the bottles violate the ‘trademark protection of the registrant,’ La Tondeña Distillers, Inc. afforded by R.A. 623, as amended?

3.00. The ‘Motion for Reconsideration’ of the petitioner Washington Distillery, Inc. is addressed to these new issues. They had not been previously addressed by the parties. They could not have been previously passed upon. It could hardly be said ‘that no substantial argument,’ not previously raised, is made in the ‘Motion for Reconsideration’ to warrant a modification of the Court’s decision.

On May 21, 1997, the Court resolved to set for hearing the motion for reconsideration on May 28, 1997 for its judicious disposition. Thereafter, the parties as required by the Court filed their simultaneous memoranda “to expound and lay particular emphasis on the provision of Section 5 of R.A. 623 which proscribes the filing of an action against any

person to whom registered manufacturer, bottler or seller has transferred by way of sale, any to the containers.” The parties complied.

A reexamination of the arguments raised by petitioner in its Second Motion for Reconsideration filed on February 13, 1997, in the hearing on May 28, 1997 and in the subsequent memorandum filed thereafter, convinces us the merits of its position.

To recall, La Tondeña Distillers, Inc. (La Tondeña, for short) filed before the Regional Trial Court for the recovery, under its claim of ownership, of possession or replevin against Distilleria Washington, Inc. or Washington Distillery, Inc. (Distilleria Washington) of 18,157 empty “350 c.c. white flint bottles” bearing the blown-in marks of “La Tondeña Inc.” and “Ginebra San Miguel,” averring that Distilleria Washington was using the bottles for its own “Gin Seven” products without the consent of Distilleria Washington in violation of Republic Act 623.

The trial court in its decision dismissed the complaint, upholding Distilleria Washington’s contention that a purchaser of liquor pays only a single price for the liquor and the bottle and is not required to return the bottle at any time.

The Court of Appeals reversed the trial court’s decision, ruling that under Republic Act 623, the use of marked bottles by any person other than the manufacturer, bottler or seller, without the latter’s written consent, is unlawful. It emphasized that the marks of La Tondeña ‘s ownership stamped or blown-in to the bottles are sufficient notice to the public that the bottles are La Tondeña’s property; hence, Distilleria Washington cannot be considered a purchaser on good faith.

While our decision of October 17, 1996 affirmed with modification the Court of Appeals’ decision, we at least implicitly acknowledge that there was a valid transfer of the bottles to Distilleria Washington, except that its possession of the bottles without the written consent of La Tondeña gives rise to a prima facie presumption of illegal use under R.A. 623.

In seeking reconsideration of the decision of this Court, petitioner advances, among others, the following arguments:

(1) If, as the Court found in its decision of October 17, 1996, Distilleria Washington had acquired ownership of the bottles, La Tondeña’s suit for replevin, where the sole issue is possession, should be denied.

(2) Since the right of ownership over the bottles gives rise, accordiing to the Court’s own language, to its own elements of jus posidendi, jus utendi , jus fruendi, jus disponendi, and jus abutendi, along with the applicable jus lex, to allow La Tondeña to keep the bottles is to deny Distilleria Washington, the very attributes or elements of its ownership.

(3) There is no showing--and it cannot be assumed--that if Distilleria Washington would have possession of the bottles, it will exercise the other attributes of ownership, along with the applicable jus lex, over the “marks of ownership stamped or marked” on the bottles.

(4) The provision in Sec. 3 of Republic Act 623 to the effect that the use by any person other than the registered manufacturer, bottler or seller without the written permission of the latter of any such bottle, etc. shall give rise to a prima facie presumption that such use or possession is unlawful, does not arise in the instant case because the Court has itself found Section 5 of the same law applicable.

Additionally, petitioner argues with persuasion the following points in its memorandum:

(5) It is absurd to hold the buyer such as Distilleria Washington, liable for the possession and use of its own bottles without the written consent of La Tondeña who is no longer the owner thereof and for which it has received payment in full.

(6) To hold the buyer liable under Sections 2 and 3 would grant La Tondeña the extraordinary right not only of possession and use of the bottles which it has sold and no longer owns, but also to sell said bottles ad infinitum, thus enriching itself unjustly.

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(7) It is manifestly unjust and unconscionable that millions of buyers of Ginebra San Miguel, who pay not only for gin but also for the bottles containing it should run the risk of criminal prosecution by the mere fact of possession of the empty bottles after consuming the liquor.

Distilleria Washington’s motion raises the novel issue that if, as we ruled in our decision of October 17, 1996, petitioner became the owner over the bottles seized from it by replevin, then it has the right to their possession and use as attributes of ownership, unless their use violates the trademark or incorporeal rights accorded private respondent by R.A 623 which has not really been established in this case.

As pointed out in our decision,

“Parenthetically, petitioner is not here being charged with violation of Sec. 2 of R.A. 623 or the Trademark Law. The instant case is one for replevin (manual delivery) where the claimant must be able to show convincingly that he is either the owner or clearly entitled to the possession of the object sought to be recovered. Replevin is a possessory action. The gist of which focuses on the right of possession that in turn, is dependent on a legal basis that, not infrequently, looks to the ownership of the object sought to be replevied.”

Since replevin as a possessory action is dependent upon ownership, it is relevant to ask: Did La Tondeña Distillers, Inc. transfer ownership of its marked bottles or containers when it sold its products in the market? Were the marked bottles or containers part of the products sold to the public?

In our decision sought to be reconsidered, we categorically answered the question in the affirmative in this wise:

R.A. No. 623 does not disallow the sale or transfer of ownership of the marked bottles or containers. In fact, the contrary is implicit in the law thus:

SEC. 5. x x x.

SEC. 6. x x x

Scarcely disputed are certain and specific industry practices in the sale of gin. The manufacturer sells the product in marked containers, through dealers, to the public in supermarkets, grocery shops, retail stores and other sales outlets. The buyer takes the item; he is neither required to return the bottle nor required to make a deposit to assure its return to the seller. He could return the bottle and get a refund. A number of bottles at times find their way to commercial users. It cannot be gainsaid that ownership of the containers does pass on the consumer albeit subject to the statutory limitations on the use of the registered containers and to the trademark rights of the registrant. The statement in Section 5 of R.A. 623 to the effect that the ‘sale of beverage contained the said containers shall not include the sale of the containers unless specifically so provided’ is not a rule of proscription. It is a rule of construction that, in keeping with the spirit and intent of the law, establishes at best a presumption (of non-conveyance of the container) and which by no means can be taken to be either interdictive or conclusive in character. Upon the other hand, LTDI’s sales invoice, stipulating that the ‘sale does not include the bottles with the blown-in marks of ownership of La Tondeña Distillers,’ cannot affect those who are not privies thereto.

In plain terms, therefore, La Tondeña not only sold its gin products but also the marked bottles or containers, as well. And when these products were transferred by way of sale, then ownership over the bottles and all its attributes ( jus utendi, jus abutendi, just fruendi, jus disponendi) passed to the buyer. It necessarily follows that the transferee has the right to possession of the bottles unless he uses them in violation of the original owner’s registered or incorporeal rights.

After practically saying that La Tondeña has surrendered ownership and consequently, possession of the marked bottles or container, it is incongrous and, certainly, it does not seem fair and just to still allow La Tondeña, citing the prima facie presumption of illegal use under Sec. 3 of R.A. 623., to retain possession of the seized bottles by simply requiring payment of just compensation to petitioner.

The pertinent provisions of R.A. 623 are as follows:

SEC. 2. It shall be unlawful for any person, without the written consent of the manufacturer, bottler, or seller (underscoring supplied) who has successfully registered the marks of ownership in accordance with the provisions of the next preceding section, to fill such bottles, boxes, kegs, barrels, steel cylinders, tanks, flasks, accumulators, or other similar containers so marked or stamped, for the purpose of sale, or to sell, dispose of, buy or traffic in, or wantonly destroy the same, whether filled or not to use the same for drinking vessels or glasses or drain pipes, foundation pipers, for any other purpose than that registered by the manufacturer, bottler or seller. Any violation of this section shall be punished by a fine of not more than one thousand pesos or imprisonment of not more than one year or both.

SEC. 3. The use by any person other than the registered manufacturer, bottler or seller, without written permission of the latter (underscoring supplied) of any such bottle, cask, barrel, keg, box, steel cylinders, tanks, flask, accumulators, or other similar containers, or the possession thereof without written permission of the manufacturer, by any junk dealer or dealer in casks, barrels, keg, boxes, steel cylinders, tanks, flask, accumulators or other similar containers, the same being duly marked or stamped and registered as herein provided, shall give rise to a prima facie presumption that such use or possession is unlawful.

x x x

SEC. 5. No action shall be brought under this Act (underscoring supplied) against any person to whom the registered manufacturer, bottler or seller, has transferred by way of sale, (underscoring supplied) any of the containers herein referred to, but the sale of the beverage contained in the said containers shall not include the sale of the containers unless specifically so provided.

In resolving that petitioner is the owner of the bottles, this Court applied Section 5 of R.A. 623; and in withholding possession of the bottles from the petitioner and in concluding that use or possession thereof without the written permission of the registered owner would constitute prima facie presumption of illegal use, this Court invoked Sections 2 and 3 of the same law.

A careful reading of Sections 2, 3 and 5 of R.A. 623 would lead to the conclusion that they contemplate situations separate and distinct from each other. Section 2 prohibits any person from using, selling or otherwise disposing of registered containers without the written consent of the registrant. Such rights belong exclusively to the registrant. Under Section 3, mere possession of such registered containers without the written consent of the registrant is prima facie presumed unlawful.

It appears - and this is the critical point - that Sections 2 and 3 apply only when the “filling” up of the bottle or the “use” of the bottle is “without the written permission” of the “registered manufacturer, bottler, or seller,” who has registered the marks of “ownership” of the bottles. It is thus implicit that Sections 2 and 3 apply only when the “registered manufacturer, bottler, or seller” retain ownership of the bottles.

Upon the other hand, when the bottles have been “transferred by way of sale,” Section 5 applies, thereby precluding the institution of any action “under this Act,” meaning to say, including any action under Sections 2 and 3.

The general rule on ownership, therefore, must apply and petitioner be allowed to enjoy all the rights of an owner in regard the bottles in question, to wit: the jus utendi or the right to receive from the thing what it produces; the jus abutendi or the right to consume the thing by its use; the jus disponendi or the power of the owner to alienate, encumber, transform and even destroy the thing owned; and the jus vindicandi or the right to exclude from the possession of the thing owned any other person to whom the owner has not transmitted such thing. What is proscribed is the use of the bottles in infringement of another’s trademark or incorporeal rights.

Since the Court has found that the bottles have been transferred by way of sale then, La Tondeña has relinquished all its proprietary rights over the bottles in favor of Distilleria Washington who has obtained them in due course. Now as owner, it can exercise all attributes of ownership over the bottles. This is the import of the decision that La Tondeña had transferred ownership over its marked bottles or containers when it sold its gin products to the public. While others may argue that Section 5 is applicable only to the immediate transferee of the marked bottles or container, this matter is best discussed where the applicability of Sec. 5, R.A. 623 is squarely raised. It must be recalled, however, that this is a case of replevin, not a violation of the "trademark protection of the registrant" under R.A. 623 or of the Trademark Law.

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A query may be posed: Would use of the bottles constitute a violation of the incorporeal rights of La Tondeña Distillers, Inc. over its “marks of ownership” embossed on the bottles? While apparently relevant, it would be improper and premature for this Court to rule on the point because:

First, because violation of the “marks of ownership” of La Tondeña Distillers, Inc, on the bottles has not been put in issue, the parties did not have the opportunity to ventilate their respective positions on the matter. Thus, a ruling would be violative of due process.

Second, the question calls for a factual investigation which this Court has generally not taken upon itself to undertake because it is not a trier of facts; and

Third, disregarding the above, the facts before this Court do not provide a sufficient basis for a fair and intelligent resolution of the question.

Moreover, our decision added that “the Court sees no other insistence to keep the bottles, except for such continued use.” This, to our mind, is rather speculative at this point; something which was never touched upon in the proceedings below.

We cannot also be oblivious of the fact that if La Tondeña’s thesis that every possession of the bottles without the requisite written consent is illegal, thousands upon thousands of buyers of Ginebra San Miguel would be exposed to criminal prosecution by the mere fact of possession of the empty bottles after consuming the content.

One last point. It may not be amiss to state that La Tondeña is a big and established distillery which already has captured a big share of the gin market, estimated to be 90%. Distilleria Washington, on the other hand, together with other small distillers - around 40 in number; admittedly concedes that it cannot fight this giant but only asks a share of the market. It cannot afford to manufacture its own bottles and just have to rely on recycled bottles to sell its products. To disallow the use of these recycled products would necessarily deprive it a share of the market which La Tondeña seeks to monopolize.

We recognize the role of large industry in the growth of our nascent economy. However, small industries likewise play a vital role in economic growth, playing a significant part in the success of such tiger economies as Korea, Taiwan and Thailand. Industries, big and small, should adopt symbiotic relationship, not the animosity of Goliath and David. Our holding today merely recognizes that in the country’s march toward economic development and independence, it is essential that a balance protecting small industries and large scale businesses be maintained.

IN VIEW OF THE FOREGOING, the Court RESOLVED to RECONSIDER its Decision promulgated on October 17, 1996 and render another judgment REVERSING in toto the Decision of the Court of Appeals promulgated on January 11, 1995 and its Resolution of June 23, 1995. The decision of the Regional Trial Court of December 3, 1991 is REINSTATED.

SO ORDERED.

[G.R. No. 123248. October 16, 1997]

TWIN ACE HOLDINGS CORPORATION, petitioner, vs. COURT OF APPEALS and LORENZANA FOOD CORPORATION, respondents.

D E C I S I O N

BELLOSILLO, J.:

TWIN ACE HOLDINGS CORPORATION (TWIN ACE) is a manufacturer, distiller and bottler of distillery products, e.g., rhum, gin, brandy, whiskey, vodka, liquor and cordial under the name and style of Tanduay Distillers, Inc.

(TANDUAY). Lorenzana Food Corporation (LORENZANA), on the other hand, manufactures and exports processed foods and other related products, e.g., patis, toyo, bagoong, vinegar and other food seasonings. On 16 January 1992 TWIN ACE filed a complaint for replevin [1] to recover three hundred eighty thousand (380,000) bottles of 350 ml., 375 ml. and 750 ml. allegedly owned by it but detained and used by LORENZANA as containers for native products without its express permission, in violation of RA No. 623. [2] This law prohibits the use of registered bottles and other containers for any purpose other than that for which they were registered without the express permission of the owner.

LORENZANA moved to dismiss the complaint on the ground that RA No. 623 could not be invoked by TWIN ACE because the law contemplated containers of non-alcoholic beverages only. But, assuming arguendo that the law applied in TWIN ACE's favor, the right of LORENZANA to use the bottles as containers for its patis and other native products was expressly sanctioned by Sec. 6[3] of the same law and upheld by this Court in Cagayan Valley Enterprises, Inc. v. Court of Appeals.[4]

On 16 March 1992 the Regional Trial Court of Manila dismissed the complaint. [5] TWIN ACE appealed to respondent Court of Appeals which affirmed the action of the trial court. In its Decision dated 22 December 1995[6] respondent court ruled that while bottles and containers of alcoholic beverages were indeed covered within the protective mantle of RA No. 623, as correctly argued by TWIN ACE, nevertheless the Supreme Court in Cagayan Valley Enterprises, Inc. v. Court of Appealsexpressly recognized the exception granted in Sec. 6 thereof to those who used the bottles as containers for sisi, bagoong, patis and other native products. Hence, no injunctive relief and damages could be obtained against LORENZANA for exercising what was precisely allowed by the law.

Petitioner TWIN ACE contends that Sec. 6 notwithstanding, respondent LORENZANA is obliged to pay just compensation for the use of the subject bottles because Sec. 6 exempts the user from criminal sanction only but does not shield him from civil liability arising from the use of the registered bottles without the express consent of the registered owner. Such civil liability arises from the fact that Sec. 5 of RA No 623 expressly reserves for the registered owner the ownership of the containers notwithstanding the sale of the beverage contained therein. Private respondent, on the other hand, contends that petitioner's bottles used as containers for hard liquor are not protected by RA No. 623. But even assuming the applicability of the law, LORENZANA invokes the exemption granted in Sec. 6 thereof.

We deny the petition. The question of whether registered containers of hard liquor such as rhum, gin, brandy and the like are protected by RA No. 623 has already been settled in Cagayan Valley Enterprises, Inc. v. Court of Appeals.[7] In that case, the Court dealt squarely with the issue and ruled in the affirmative reasoning that hard liquor, although regulated, is not prohibited by law, hence, still within the purview of the phrase "other lawful beverages" protected by RA No. 623, as amended. Consequently petitioner therein Cagayan Valley Enterprises, Inc. was enjoined from using the 350 ml. white flint bottles of La Tondeña, Inc., with the marks of ownership "La Tondeña, Inc." and "Ginebra San Miguel" for its own liquor products.

But while we adopt the foregoing precedent and rule in accordance therewith, we will not decide this case in favor of petitioner because it is quite clear that respondent falls within the exemption granted in Sec. 6 which states: "The provisions of this Act shall not be interpreted as prohibiting the use of bottles as containers for "sisi," "bagoong," "patis," and similar native products."

Petitioner itself alleges that respondent LORENZANA uses the subject 350 ml., 375 ml. and 750 ml. bottles as containers for processed foods and other related products such as patis, toyo, bagoong, vinegar and other food seasonings. Hence, Sec. 6 squarely applies in private respondent's favor. Obviously, the contention of TWIN ACE that the exemption refers only to criminal liability but not to civil liability is without merit. It is inconceivable that an act specifically allowed by law, in other words legal, can be the subject of injunctive relief and damages. Besides, the interpretation offered by petitioner defeats the very purpose for which the exemption was provided.

Republic Act No. 623, "An Act to Regulate the Use of Duly Stamped or Marked Bottles, Boxes, Casks, Kegs, Barrels and Other Similar Containers," as amended by RA No. 5700,[8] was meant to protect the intellectual property rights of the registrants of the containers and prevent unfair trade practices and fraud on the public. [9] However, the exemption granted in Sec. 6 thereof was deemed extremely necessary to provide assistance and incentive to the backyard, cottage and small-scale manufacturers of indigenous native products such as patis, sisi and toyo who do not have the capital to buy brand new bottles as containers nor afford to pass the added cost to the majority of poor Filipinos who use the products as their daily condiments or viands.[10] If the contention of petitioner is accepted, i.e., to construe the exemption as to apply to criminal liability only but not to civil liability, the very purpose for which the exemption was granted will be defeated. None of the small-scale manufacturers of the indigenous native products protected would possibly wish to use the registered bottles if they are vulnerable to civil suits. The effect is a virtual elimination of the

56

clear and unqualified exemption embodied in Sec. 6. It is worthy to note that House Bill No. 20585[11] was completely rejected because it sought to expressly and directly eliminate that which petitioner indirectly proposes to do with this petition.

Petitioner cannot seek refuge in Sec. 5[12] of RA No. 623 to support its claim of continuing ownership over the subject bottles. In United States v. Manuel[13] we held that since the purchaser at his discretion could either retain or return the bottles, the transaction must be regarded as a sale of the bottles when the purchaser actually exercised that discretion and decided not to return them to the vendor. We also take judicial notice of the standard practice today that the cost of the container is included in the selling price of the product [14] such that the buyer of liquor or any such product from any store is not required to return the bottle nor is the liquor placed in a plastic container that possession of the bottle is retained by the store.[15]

WHEREFORE, the questioned decision and resolution of the Court of Appeals are AFFIRMED. Costs against petitioner.

SO ORDERED.

Davide, Jr., (Chairman), Kapunan, and Hermosisima, Jr., JJ., concur.

[G.R. No. 139300. March 14, 2001]

AMIGO MANUFACTURING, Inc., petitioner, vs. CLUETT PEABODY CO., INC., respondent.

D E C I S I O N

PANGANIBAN, J.:

The findings of the Bureau of Patents that two trademarks are confusingly and deceptively similar to each other are binding upon the courts, absent any sufficient evidence to the contrary. In the present case, the Bureau considered the totality of the similarities between the two sets of marks and found that they were of such degree, number and quality as to give the overall impression that the two products are confusingly if not deceptively the same.

Statement of the Case

Petitioner Amigo Manufacturing Inc. challenges, under Rule 45 of the Rules of Court, the January 14, 1999 Resolution[1] of the Court of Appeals (CA) in CA-GR SP No. 22792, which reversed, on reconsideration, its own September 29, 1998 Decision.[2] The dispositive portion of the assailed Resolution reads as follows:

“WHEREFORE, the Motion for Reconsideration is GRANTED, and the Decision dated September 29, 1998 REVERSED. Consequently, the decision rendered by the Director of Patents dated September 3, 1990 is hereby AFFIRMED.”

The Decision of the Director of Patents, referred to by the CA, disposed as follows:

“WHEREFORE, the Petition is GRANTED. Consequently, Certificate of Registration No. SR-2206 issued to Respondent-Registrant [herein petitioner] is hereby cancelled.

“Let the records of this case be remanded to the Patent/Trademark Registry and EDP Division for appropriate action in accordance with this Decision.”

Petitioner also seeks the reversal of the June 30, 1999 CA Resolution[3] denying its own Motion for Reconsideration.

The Facts

The facts, which are undisputed, are summarized by the Court of Appeals in its original Decision, as follows:

“The source of the controversy that precipitated the filing by [herein Respondent] Cluett Peabody Co., Inc. (a New York corporation) of the present case against [herein Petitioner] Amigo Manufacturing Inc. (a Philippine corporation) for cancellation of trademark is [respondent’s] claim of exclusive ownership (as successor in interest of Great American Knitting Mills, Inc.) of the following trademark and devices, as used on men’s socks:

a) GOLD TOE, under Certificate of Registration No. 6797 dated September 22, 1958;

b) DEVICE, representation of a sock and magnifying glass on the toe of a sock, under Certificate of Registration No. 13465 dated January 25, 1968;

c) DEVICE, consisting of a ‘plurality of gold colored lines arranged in parallel relation within a triangular area of toe of the stocking and spread from each other by lines of contrasting color of the major part of the stocking’ under Certificate of Registration No. 13887 dated May 9, 1968; and

d) LINENIZED, under Certificate of Registration No. 15440 dated April 13, 1970.

On the other hand, [petitioner’s] trademark and device ‘GOLD TOP, Linenized for Extra Wear’ has the dominant color ‘white’ at the center and a ‘blackish brown’ background with a magnified design of the sock’s garter, and is labeled ‘Amigo Manufacturing Inc., Mandaluyong, Metro Manila, Made in the Philippines’.

In the Patent Office, this case was heard by no less than six Hearing Officers: Attys. Rodolfo Gilbang, Rustico Casia, M. Yadao, Fabian Rufina, Neptali Bulilan and Pausi Sapak. The last named officer drafted the decision under appeal which was in due court signed and issued by the Director of Patents (who never presided over any hearing) adversely against the respondent Amigo Manufacturing, Inc. as heretofore mentioned (supra, p.1).

The decision pivots on two point: the application of the rule of idem sonans and the existence of a confusing similarity in appearance between two trademarks (Rollo, p. 33).”[4]

Ruling of the Court of Appeals

In its assailed Resolution, the CA held as follows:

”After a careful consideration of [respondent’s] arguments and a re-appreciation of the records of this case. [w]e find [respondent’s] motion for reconsideration meritorious. As shown by the records, and as correctly held by the Director of Patents, there is hardly any variance in the appearance of the marks ‘GOLD TOP’ and ‘GOLD TOE’ since both show a representation of a man’s foot wearing a sock, and the marks are printed in identical lettering. Section 4(d) of R.A. No. 166 declares to be unregistrable, ‘a mark which consists o[r] comprises a mark or trademark which so resembles a mark or tradename registered in the Philippines of tradename previously used in the Philippines by another and not

57

abandoned, as to be likely, when applied to or used in connection with the goods, business or services of the applicant, to cause confusion or mistake or to deceive the purchasers. [Petitioner]’s mark is a combination of the different registered marks owned by [respondent]. As held in Del Monte Corporation v. Court of Appeals, 181 SCRA 410 (1990), the question is not whether the two articles are distinguishable by their label when set aside but whether the general confusion made by the article upon the eye of the casual purchaser who is unsuspicious and off his guard, is such as to likely result in confounding it with the original. As held by the Court in the same decision[,] ‘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.’ Furthermore, [petitioner]’s mark is only registered with the Supplemental Registry which gives no right of exclusivity to the owner and cannot overturn the presumption of validity and exclusiv[ity] given to a registered mark.

“Finally, the Philippines and the United States are parties to the Union Convention for the Protection of Industrial Property adopted in Paris on March 20, 1883, otherwise known as the Paris Convention. (Puma Sportschuhfabriken Rudolf Dassler K.G. v. Intermediate Appellate Court, 158 SCRA 233). [Respondent] is domiciled in the United States of America and is the lawful owner of several trademark registrations in the United States for the mark ‘GOLD TOE’.

x x x x x x x x x’

By virtue of the Philippines’ membership to the Paris Union, trademark rights in favor of the [respondent] were created. The object of the Convention is to accord a national of a member nation extensive protection against infringement and other types of unfair competition. (Puma Sportschuhfabriken Rudolf Dassler K.G. v. Intermediate Appellate Court, 158 SCRA 233; La Chemise Lacoste, S.A. v. Fernandez, 129 SCRA 373)”[5]

Hence, this Petition.[6]

Issues

In its Memorandum,[7] petitioner raises the following issues for the consideration of this Court:

“I

Whether or not the Court of Appeals overlooked that petitioner’s trademark was used in commerce in the Philippines earlier than respondent’s actual use of its trademarks, hence the Court of Appeals erred in affirming the Decision of the Director of Patents dated September 3, 1990.

II

Since the petitioner’s actual use of its trademark was ahead of the respondent, whether or not the Court of Appeals erred in canceling the registration of petitioner’s trademark instead of canceling the trademark of the respondent.

III

Whether or not the Court of Appeals erred in affirming the findings of the Director of Patents that petitioner’s trademark [was] confusingly similar to respondent’s trademarks.

IV

Whether or not the Court of Appeals erred in applying the Paris Convention in holding that respondent ha[d] an exclusive right to the trademark ‘gold toe’ without taking into consideration the absence of actual use in the Philippines.”[8]

In the main, the Court will resolve three issues: (1) the date of actual use of the two trademarks; (2) their confusing similarities, and (3) the applicability of the Paris Convention.

The Court’s Ruling

The Petition has no merit.

First Issue:

Dates of First Use of Trademark and Devices

Petitioner claims that it started the actual use of the trademark “Gold Top and Device” in September 1956, while respondent began using the trademark “Gold Toe” only on May 15, 1962. It contends that the claim of respondent that it had been using the “Gold Toe” trademark at an earlier date was not substantiated. The latter’s witnesses supposedly contradicted themselves as to the date of first actual use of their trademark, coming up with different dates such as 1952, 1947 and 1938.

We do not agree. Based on the evidence presented, this Court concurs in the findings of the Bureau of Patents that respondent had actually used the trademark and the devices in question prior to petitioner’s use of its own. During the hearing at the Bureau of Patents, respondent presented Bureau registrations indicating the dates of first use in the Philippines of the trademark and the devices as follows: a) March 16, 1954, Gold Toe; b) February 1, 1952, the Representation of a Sock and a Magnifying Glass; c) January 30, 1932, the Gold Toe Representation; and d) February 28, 1952, “Linenized.”

The registration of the above marks in favor of respondent constitutes prima facie evidence, which petitioner failed to overturn satisfactorily, of respondent’s ownership of those marks, the dates of appropriation and the validity of other pertinent facts stated therein. Indeed, Section 20 of Republic Act 166 provides as follows:

“Sec. 20. Certificate of registration prima facie evidence of validity. - A certificate of registration of a mark or trade-name shall be prima facie evidence of the validity of the registration, the registrant's ownership of the mark or trade-name, and of the registrant's exclusive right to use the same in connection with the goods, business or services specified in the certificate, subject to any conditions and limitations stated therein.”[9]

Moreover, the validity of the Certificates of Registration was not questioned. Neither did petitioner present any evidence to indicate that they were fraudulently issued. Consequently, the claimed dates of respondent’s first use of the marks are presumed valid. Clearly, they were ahead of petitioner’s claimed date of first use of “Gold Top and Device” in 1958.

Section 5-A of Republic Act No. 166[10] states that an applicant for a trademark or trade name shall, among others, state the date of first use. The fact that the marks were indeed registered by respondent shows that it did use them on the date indicated in the Certificate of Registration.

On the other hand, petitioner failed to present proof of the date of alleged first use of the trademark “Gold Top and Device”. Thus, even assuming that respondent started using it only on May 15, 1962, we can make no finding that petitioner had started using it ahead of respondent.

Furthermore, petitioner registered its trademark only with the supplemental register. In La Chemise Lacoste v. Fernandez,[11] the Court held that registration with the supplemental register gives no presumption of ownership of the trademark. Said the Court:

”The registration of a mark upon the supplemental register is not, as in the case of the principal register, prima facie evidence of (1) the validity of registration; (2) registrant’s ownership of the mark; and (3) registrant’s exclusive right to

58

use the mark. It is not subject to opposition, although it may be cancelled after its issuance. Neither may it be the subject of interference proceedings. Registration [i]n the supplemental register is not constructive notice of registrant’s claim of ownership. A supplemental register is provided for the registration because of some defects (conversely, defects which make a mark unregistrable on the principal register, yet do not bar them from the supplemental register.)’ (Agbayani, II Commercial Laws of the Philippines, 1978, p. 514, citing Uy Hong Mo v. Titay & Co., et al., Dec. No. 254 of Director of Patents, Apr. 30, 1968.”

As to the actual date of first use by respondent of the four marks it registered, the seeming confusion may have stemmed from the fact that the marks have different dates of first use. Clearly, however, these dates are indicated in the Certificates of Registration.

In any case, absent any clear showing to the contrary, this Court accepts the finding of the Bureau of Patents that it was respondent which had prior use of its trademark, as shown in the various Certificates of Registration issued in its favor. Verily, administrative agencies’ findings of fact in matters falling under their jurisdiction are generally accorded great respect, if not finality. Thus, the Court has held:

“x x x. By reason of the special knowledge and expertise of said administrative agencies over matters falling under their jurisdiction, they 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. The findings of fact of an administrative agency must be respected 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 an 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 of sufficiency of evidence.”[12]

Second Issue:

Similarity of Trademarks

Citing various differences between the two sets of marks, petitioner assails the finding of the director of patents that its trademark is confusingly similar to that of respondent. Petitioner points out that the director of patents erred in its application of the idem sonans rule, claiming that the two trademarks “Gold Toe” and “Gold Top” do not sound alike and are pronounced differently. It avers that since the words gold and toe are generic, respondent has no right to their exclusive use.

The arguments of petitioner are incorrect. True, it would not be guilty of infringement on the basis alone of the similarity in the sound of petitioner’s “Gold Top” with that of respondent’s “Gold Toe.” Admittedly, the pronunciations of the two do not, by themselves, create confusion.

The Bureau of Patents, however, did not rely on the idem sonans test alone in arriving at its conclusion. This fact is shown in the following portion of its Decision:

“As shown by the drawings and labels on file, the mark registered by Respondent-Registrant under Registration No. SR-2206 is a combination of the abovementioned trademarks registered separately by the petitioner in the Philippines and the United States.

“With respect to the issue of confusing similarity between the marks of the petitioner and that of the respondent-registrant applying the tests of idem sonans, the mark ‘GOLD TOP & DEVICE’ is confusingly similar with the mark ‘GOLD TOE’. The difference in sound occurs only in the final letter at the end of the marks. For the same reason, hardly is there any variance in their appearance. ‘GOLD TOE’ and ‘GOLD TOP’ are printed in identical lettering. Both show [a] representation of a man’s foot wearing a sock. ‘GOLD TOP’ blatantly incorporates petitioner’s ‘LINENIZED’ which by itself is a registered mark.“[13]

The Bureau considered the drawings and the labels, the appearance of the labels, the lettering, and the representation of a man’s foot wearing a sock. Obviously, its conclusion is based on the totality of the similarities between the parties’ trademarks and not on their sounds alone.

In Emerald Garment Manufacturing Corporation v. Court of Appeals,[14] this Court stated that in determining whether trademarks are confusingly similar, jurisprudence has developed two kinds of tests, the Dominancy Test[15] and the Holistic Test.[16] In its words:

“In determining whether colorable imitation exists, jurisprudence has developed two kinds of tests – the Dominancy Test applied in Asia Brewery, Inc. v. Court of Appeals and other cases and the Holistic Test developed in Del Monte Corporation v. Court of Appeals and its proponent cases.

As its title implies, the test of dominancy focuses on the similarity of the prevalent features of the competing trademarks which might cause confusion or deception and thus constitutes infringement.

x x x x x x x x x

. . . . 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. [C. Neilman Brewing Co. v. 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. Hanover Rubber Co., 107 F. 2d 588; x x x.)

x x x x x x x x x

On the other side of the spectrum, the holistic test mandates that the entirety of the marks in question must be considered in determining confusing similarity.”

In the present case, a resort to either the Dominancy Test or the Holistic Test shows that colorable imitation exists between respondent’s “Gold Toe” and petitioner’s “Gold Top.” A glance at petitioner’s mark shows that it definitely has a lot of similarities and in fact looks like a combination of the trademark and devices that respondent has already registered; namely, “Gold Toe,” the representation of a sock with a magnifying glass, the “Gold Toe” representation and “linenized.”

Admittedly, there are some minor differences between the two sets of marks. The similarities, however, are of such degree, number and quality that the overall impression given is that the two brands of socks are deceptively the same, or at least very similar to each another. An examination of the products in question shows that their dominant features are gold checkered lines against a predominantly black background and a representation of a sock with a magnifying glass. In addition, both products use the same type of lettering. Both also include a representation of a man’s foot wearing a sock and the word “linenized” with arrows printed on the label. Lastly, the names of the brands are similar -- “Gold Top” and “Gold Toe.” Moreover, it must also be considered that petitioner and respondent are engaged in the same line of business.

Petitioner cannot therefore ignore the fact that, when compared, most of the features of its trademark are strikingly similar to those of respondent. In addition, these representations are at the same location, either in the sock itself or on the label. Petitioner presents no explanation why it chose those representations, considering that these were the exact symbols used in respondent’s marks. Thus, the overall impression created is that the two products are deceptively and confusingly similar to each other. Clearly, petitioner violated the applicable trademark provisions during that time.

Let it be remembered that duly registered trademarks are protected by law as intellectual properties and cannot be appropriated by others without violating the due process clause. An infringement of intellectual rights is no less vicious and condemnable as theft of material property, whether personal or real.

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Third Issue:

The Paris Convention

Petitioner claims that the Court of Appeals erred in applying the Paris Convention. Although respondent registered its trademark ahead, petitioner argues that the actual use of the said mark is necessary in order to be entitled to the protection of the rights acquired through registration.

As already discussed, respondent registered its trademarks under the principal register, which means that the requirement of prior use had already been fulfilled. To emphasize, Section 5-A of Republic Act 166 requires the date of first use to be specified in the application for registration. Since the trademark was successfully registered, there exists a prima facie presumption of the correctness of the contents thereof, including the date of first use. Petitioner has failed to rebut this presumption.

Thus, applicable is the Union Convention for the Protection of Industrial Property adopted in Paris on March 20, 1883, otherwise known as the Paris Convention, of which the Philippines and the United States are members. Respondent is domiciled in the United States and is the registered owner of the “Gold Toe” trademark. Hence, it is entitled to the protection of the Convention. A foreign-based trademark owner, whose country of domicile is a party to an international convention relating to protection of trademarks, [17] is accorded protection against infringement or any unfair competition as provided in Section 37 of Republic Act 166, the Trademark Law which was the law in force at the time this case was instituted.

In sum, petitioner has failed to show any reversible error on the part of the Court of Appeals. Hence, its Petition must fail.

WHEREFORE, the Petition is hereby DENIED and the assailed Resolution AFFIRMED. Costs against petitioner.

SO ORDERED.

Melo (Chairman), Vitug, Gonzaga-Reyes, and Sandoval-Gutierrez JJ., concur.

G.R. No. 112012 April 4, 2001

SOCIETE DES PRODUITS NESTLE, S.A. and NESTLE PHILIPPINES, INC., petitioners, vs.COURT OF APPEALS and CFC CORPORATION., respondents.

YNARES-SANTIAGO, J.:

This is a petition for review assailing the Decision of the Court of Appeals in CA-G.R. SP No. 24101,1 reversing and setting aside the decision of the Bureau of Patents, Trademarks and Technology Transfer (BPTTT),2 which denied private respondent’s application for registration of the trade-mark, FLAVOR MASTER.

On January 18, 1984, private respondent CFC Corporation filed with the BPTTT an application for the registration of the trademark "FLAVOR MASTER" for instant coffee, under Serial No. 52994. The application, as a matter of due course, was published in the July 18, 1988 issue of the BPTTT’s Official Gazette.

Petitioner Societe Des Produits Nestle, S.A., a Swiss company registered under Swiss laws and domiciled in Switzerland, filed an unverified Notice of Opposition,3 claiming that the trademark of private respondent’s product is "confusingly similar to its trademarks for coffee and coffee extracts, to wit: MASTER ROAST and MASTER BLEND."

Likewise, a verified Notice of Opposition was filed by Nestle Philippines, Inc., a Philippine corporation and a licensee of Societe Des Produits Nestle S.A., against CFC’s application for registration of the trademark FLAVOR MASTER.4 Nestle claimed that the use, if any, by CFC of the trademark FLAVOR MASTER and its registration would likely cause confusion in the trade; or deceive purchasers and would falsely suggest to the purchasing public a connection in the

business of Nestle, as the dominant word present in the three (3) trademarks is "MASTER"; or that the goods of CFC might be mistaken as having originated from the latter.

In answer to the two oppositions, CFC argued that its trademark, FLAVOR MASTER, is not confusingly similar with the former’s trademarks, MASTER ROAST and MASTER BLEND, alleging that, "except for the word MASTER (which cannot be exclusively appropriated by any person for being a descriptive or generic name), the other words that are used respectively with said word in the three trademarks are very different from each other – in meaning, spelling, pronunciation, and sound". CFC further argued that its trademark, FLAVOR MASTER, "is clearly very different from any of Nestle’s alleged trademarks MASTER ROAST and MASTER BLEND, especially when the marks are viewed in their entirety, by considering their pictorial representations, color schemes and the letters of their respective labels."

In its Decision No. 90-47 dated December 27, 1990, the BPTTT denied CFC’s application for registration.5 CFC elevated the matter to the Court of Appeals, where it was docketed as CA-G.R. SP No. 24101.

The Court of Appeals defined the issue thus: "Does appellant CFC’s trade dress bear a striking resemblance with appellee’s trademarks as to create in the purchasing public’s mind the mistaken impression that both coffee products come from one and the same source?"

As stated above, the Court of Appeals, in the assailed decision dated September 23, 1993, reversed Decision No. 90-47 of the BPTTT and ordered the Director of Patents to approve CFC’s application. The Court of Appeals ruled:

Were We to take even a lackadaisical glance at the overall appearance of the contending marks, the physical discrepancies between appellant CFC’s and appellee’s respective logos are so ostensible that the casual purchaser cannot likely mistake one for the other. Appellant CFC’s label (Exhibit "4") is predominantly a blend of dark and lighter shade of orange where the words "FLAVOR MASTER", "FLAVOR" appearing on top of "MASTER", shaded in mocha with thin white inner and outer sidings per letter and identically lettered except for the slightly protruding bottom curve of the letter "S" adjoining the bottom tip of the letter "A" in the word "MASTER", are printed across the top of a simmering red coffee cup. Underneath "FLAVOR MASTER" appears "Premium Instant Coffee" printed in white, slim and slanted letters. Appellees’ "MASTER ROAST" label (Exhibit "7"), however, is almost double the width of appellant CFC’s. At the top is printed in brown color the word "NESCAFE" against a white backdrop. Occupying the center is a square-shaped configuration shaded with dark brown and picturing a heap of coffee beans, where the word "MASTER" is inscribed in the middle. "MASTER" in appellees’ label is printed in taller capital letters, with the letter "M" further capitalized. The letters are shaded with red and bounded with thin gold-colored inner and outer sidings. Just above the word "MASTER" is a red window like portrait of what appears to be a coffee shrub clad in gold. Below the "MASTER" appears the word "ROAST" impressed in smaller, white print. And further below are the inscriptions in white: "A selection of prime Arabica and Robusta coffee." With regard to appellees’ "MASTER BLEND" label (Exhibit "6") of which only a xeroxed copy is submitted, the letters are bolder and taller as compared to appellant CFC’s and the word "MASTER" appears on top of the word "BLEND" and below it are the words "100% pure instant coffee" printed in small letters.

From the foregoing description, while the contending marks depict the same product, the glaring dissimilarities in their presentation far outweigh and dispel any aspect of similitude. To borrow the words of the Supreme Court in American Cyanamid Co. v. Director of Patents (76 SCRA 568), appellant CFC’s and appellees’ labels are entirely different in size, background, colors, contents and pictorial arrangement; in short, the general appearances of the labels bearing the respective trademarks are so distinct from each other that appellees cannot assert that the dominant features, if any, of its trademarks were used or appropriated in appellant CFC’s own. The distinctions are so well-defined so as to foreclose any probability or likelihood of confusion or deception on the part of the normally intelligent buyer when he or she encounters both coffee products at the grocery shelf. The answer therefore to the query is a clear-cut NO.6

Petitioners are now before this Court on the following assignment of errors:

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1. RESPONDENT COURT GRAVELY ERRED IN REVERSING AND SETTING ASIDE THE DECISION (NO. 90-47) OF THE DIRECTOR OF THE BUREAU OF PATENTS, TRADEMARKS AND TECHNOLOGY TRANSFER (BPTTT) DATED DECEMBER 27, 1990.

2. RESPONDENT COURT ERRED IN FINDING THAT APPELLANT CFC’S TRADE DRESS IS BEYOND THE SCOPE OF THE PROSCRIPTION LAID DOWN BY JURISPRUDENCE AND THE TRADEMARK LAW.

3. RESPONDENT COURT ERRED IN HOLDING THAT THE TOTALITY RULE, RATHER THAN THE TEST OF DOMINANCY, APPLIES TO THE CASE.

4. RESPONDENT COURT ERRED IN INVOKING THE TOTALITY RULE APPLIED IN THE CASES OF BRISTOL MYERS V. DIRECTOR OF PATENTS, ET AL. (17 SCRA 128), MEAD JOHNSON & CO. V. NVJ VAN DORF LTD., (7 SCRA 768) AND AMERICAN CYANAMID CO. V. DIRECTOR OF PATENTS (76 SCRA 568).

The petition is impressed with merit.

A trademark has been generally defined as "any word, name, symbol or device adopted and used by a manufacturer or merchant to identify his goods and distinguish them from those manufactured and sold by others."7

A manufacturer’s trademark is entitled to protection. As Mr. Justice Frankfurter observed in the case ofMishawaka Mfg. Co. v. Kresge Co.:8

The protection of trade-marks is the law’s recognition of the psychological function of symbols. If it is true that we live by symbols, it is no less true that we purchase goods by them. A trade-mark is a merchandising short-cut which induces a purchaser to select what he wants, or what he has been led to believe he wants. The owner of a mark exploits this human propensity by making every effort to impregnate the atmosphere of the market with the drawing power of a congenial symbol. Whatever the means employed, the aim is the same --- to convey through the mark, in the minds of potential customers, the desirability of the commodity upon which it appears. Once this is attained, the trade-mark owner has something of value. If another poaches upon the commercial magnetism of the symbol he has created, the owner can obtain legal redress.

Section 4 (d) of Republic Act No. 166 or the Trademark Law, as amended, which was in force at the time, provides thus:

Registration of trade-marks, trade-names and service-marks on the principal register. - There is hereby established a register of trade-marks, trade-names and service marks which shall be known as the principal register. The owner of a trade-mark, trade-name or service-mark used to distinguish his goods, business or services from the goods, business or services of others shall have the right to register the same on the principal register, unless it:

x x x x x x x x x

(d) Consists of or comprises a mark or trade-name which so resembles a mark or trade-name registered in the Philippines or a mark or trade-name previously used in the Philippines by another and not abandoned, as to be likely, when applied to or used in connection with the goods, business or services of the applicant, to cause confusion or mistake or to deceive purchasers;

x x x x x x x x x

(Emphasis supplied)

The law prescribes a more stringent standard in that there should not only be confusing similarity but that it should not likely cause confusion or mistake or deceive purchasers.

Hence, the question in this case is whether there is a likelihood that the trademark FLAVOR MASTER may cause confusion or mistake or may deceive purchasers that said product is the same or is manufactured by the same company. In other words, the issue is whether the trademark FLAVOR MASTER is a colorable imitation of the trademarks MASTER ROAST and MASTER BLEND.

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.9 In determining if colorable imitation exists, jurisprudence has developed two kinds of tests - the Dominancy Test and the Holistic Test.10The test of dominancy focuses on the similarity of the prevalent features of the competing trademarks which might cause confusion or deception and thus constitute infringement. On the other side of the spectrum, the holistic test mandates that the entirety of the marks in question must be considered in determining confusing similarity.11

In the case at bar, the Court of Appeals held that:

The determination of whether two trademarks are indeed confusingly similar must be taken from the viewpoint of the ordinary purchasers who are, in general, undiscerningly rash in buying the more common and less expensive household products like coffee, and are therefore less inclined to closely examine specific details of similarities and dissimilarities between competing products. The Supreme Court in Del Monte Corporation v. CA, 181 SCRA 410, held that:

"The question is not whether the two articles are distinguishable by their labels when set side by side but whether the general confusion made by the article upon the eye of the casual purchaser who is unsuspicious and off his guard, is such as to likely result in his confounding it with the original. As observed in several cases, the general impression of the ordinary purchaser, buying under the normally prevalent conditions in trade and giving the attention such purchasers usually give in buying that class of goods, is the touchstone."

From this perspective, the test of similarity is to consider the two marks in their entirety, as they appear in the respective labels, in relation to the goods to which they are attached (Bristol Myers Company v. Director of Patents, et al., 17 SCRA 128, citing Mead Johnson & Co. v. NVJ Van Dorp, Ltd., et al., 7 SCRA 768). The mark must be considered as a whole and not as dissected. If the buyer is deceived, it is attributable to the marks as a totality, not usually to any part of it (Del Monte Corp. v. CA, supra), as what appellees would want it to be when they essentially argue that much of the confusion springs from appellant CFC’s use of the word "MASTER" which appellees claim to be the dominant feature of their own trademarks that captivates the prospective consumers. Be it further emphasized that 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 (Mead Johnson & Co. v. NVJ Van Dorp, Ltd., supra).12

The Court of Appeals applied some judicial precedents which are not on all fours with this case. It must be emphasized that in infringement or trademark cases in the Philippines, particularly in ascertaining whether one trademark is confusingly similar to or is a colorable imitation of another, no set rules can be deduced. Each case must be decided on its own merits.13 In Esso Standard, Inc. v. Court of Appeals,14 we ruled that the likelihood of confusion is a relative concept; to be determined only according to the particular, and sometimes peculiar, circumstances of each case. In trademark cases, even more than in any other litigation, precedent must be studied in light of the facts of the particular case. The wisdom of the likelihood of confusion test lies in its recognition that each trademark infringement case presents its own unique set of facts. Indeed, the complexities attendant to an accurate assessment of likelihood of confusion require that the entire panoply of elements constituting the relevant factual landscape be comprehensively examined.15

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The Court of Appeals’ application of the case of Del Monte Corporation v. Court of Appeals16 is, therefore, misplaced. In Del Monte, the issue was about the alleged similarity of Del Monte’s logo with that of Sunshine Sauce Manufacturing Industries. Both corporations market the catsup product which is an inexpensive and common household item.

Since Del Monte alleged that Sunshine’s logo was confusingly similar to or was a colorable imitation of the former’s logo, there was a need to go into the details of the two logos as well as the shapes of the labels or marks, the brands printed on the labels, the words or lettering on the labels or marks and the shapes and colors of the labels or marks. The same criteria, however, cannot be applied in the instant petition as the facts and circumstances herein are peculiarly different from those in the Del Monte case.

In the same manner, the Court of Appeals erred in applying the totality rule as defined in the cases of Bristol Myers v. Director of Patents;17 Mead Johnson & Co. v. NVJ Van Dorf Ltd.;18 and American Cyanamid Co. v. Director of Patents.19 The totality rule states that "the test is not simply to take their words and compare the spelling and pronunciation of said words. In determining whether two trademarks are confusingly similar, the two marks in their entirety as they appear in the respective labels must be considered in relation to the goods to which they are attached; the discerning eye of the observer must focus not only on the predominant words but also on the other features appearing on both labels."20

As this Court has often declared, each case must be studied according to the peculiar circumstances of each 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 above cases cited by the Court of Appeals to justify the application of the totality or holistic test to this instant case, the factual circumstances are substantially different. In the Bristol Myers case, this Court held that although both BIOFERIN and BUFFERIN are primarily used for the relief of pains such as headaches and colds, and their names are practically the same in spelling and pronunciation, both labels have strikingly different backgrounds and surroundings. In addition, one is dispensable only upon doctor’s prescription, while the other may be purchased over-the-counter.

In the Mead Johnson case, the differences between ALACTA and ALASKA are glaring and striking to the eye. Also, ALACTA refers to "Pharmaceutical Preparations which Supply Nutritional Needs," falling under Class 6 of the official classification of Medicines and Pharmaceutical Preparations to be used as prescribed by physicians. On the other hand, ALASKA refers to "Foods and Ingredients of Foods" falling under Class 47, and does not require medical prescription.

In the American Cyanamid case, the word SULMET is distinguishable from the word SULMETINE, as the former is derived from a combination of the syllables "SUL" which is derived from sulfa and "MET" from methyl, both of which are chemical compounds present in the article manufactured by the contending parties. This Court held that the addition of the syllable "INE" in respondent’s label is sufficient to distinguish respondent’s product or trademark from that of petitioner. Also, both products are for medicinal veterinary use and the buyer will be more wary of the nature of the product he is buying. In any case, both products are not identical as SULMET’s label indicates that it is used in a drinking water solution while that of SULMETINE indicates that they are tablets.

It cannot also be said that the products in the above cases can be bought off the shelf except, perhaps, for ALASKA. The said products are not the usual "common and inexpensive" household items which an "undiscerningly rash" buyer would unthinkingly buy.In the case at bar, other than the fact that both Nestle’s and CFC’s products are inexpensive and common household items, the similarity ends there. What is being questioned here is the use by CFC of the trademark MASTER. In view of the difficulty of applying jurisprudential precedents to trademark cases due to the peculiarity of each case, judicial fora should not readily apply a certain test or standard just because of seeming similarities. As this Court has pointed above, there could be more telling differences than similarities as to make a jurisprudential precedent inapplicable.

Nestle points out that the dominancy test should have been applied to determine whether there is a confusing similarity between CFC’s FLAVOR MASTER and Nestle’s MASTER ROAST and MASTER BLEND.

We agree.

As the Court of Appeals itself has stated, "[t]he determination of whether two trademarks are indeed confusingly similar must be taken from the viewpoint of the ordinary purchasers who are, in general, undiscerningly rash in buying the more common and less expensive household products like coffee, and are therefore less inclined to closely examine specific details of similarities and dissimilarities between competing products."21

The basis for the Court of Appeals’ application of the totality or holistic test is the "ordinary purchaser" buying the product under "normally prevalent conditions in trade" and the attention such products normally elicit from said ordinary purchaser. An ordinary purchaser or buyer does not usually make such scrutiny nor does he usually have the time to do so. The average shopper is usually in a hurry and does not inspect every product on the shelf as if he were browsing in a library.22

The Court of Appeals held that the test to be applied should be the totality or holistic test reasoning, since what is of paramount consideration is the ordinary purchaser who is, in general, undiscerningly rash in buying the more common and less expensive household products like coffee, and is therefore less inclined to closely examine specific details of similarities and dissimilarities between competing products.

This Court cannot agree with the above reasoning. If the ordinary purchaser is "undiscerningly rash" in buying such common and inexpensive household products as instant coffee, and would therefore be "less inclined to closely examine specific details of similarities and dissimilarities" between the two competing products, then it would be less likely for the ordinary purchaser to notice that CFC’s trademark FLAVOR MASTER carries the colors orange and mocha while that of Nestle’s uses red and brown. The application of the totality or holistic test is improper since the ordinary purchaser would not be inclined to notice the specific features, similarities or dissimilarities, considering that the product is an inexpensive and common household item.

It must be emphasized that the products bearing the trademarks in question are "inexpensive and common" household items bought off the shelf by "undiscerningly rash" purchasers. As such, if the ordinary purchaser is "undiscerningly rash", then he would not have the time nor the inclination to make a keen and perceptive examination of the physical discrepancies in the trademarks of the products in order to exercise his choice.

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.23 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. This can be gleaned from the fact that Robert Jaworski and Atty. Ric Puno Jr.., the personalities engaged to promote the product, are given the titles Master of the Game and Master of the Talk Show, respectively. 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.

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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. x x x.24

In addition, the word "MASTER" is neither a generic nor a descriptive term. As such, said term can not be invalidated as a trademark and, therefore, may be legally protected. Generic terms25 are those which constitute "the common descriptive name of an article or substance," or comprise the "genus of which the particular product is a species," or are "commonly used as the name or description of a kind of goods," or "imply reference to every member of a genus and the exclusion of individuating characters," or "refer to the basic nature of the wares or services provided rather than to the more idiosyncratic characteristics of a particular product," and are not legally protectable. On the other hand, a term is descriptive26 and therefore invalid as a trademark if, as understood in its normal and natural sense, it "forthwith conveys the characteristics, functions, qualities or ingredients of a product to one who has never seen it and does not know what it is," or "if it forthwith conveys an immediate idea of the ingredients, qualities or characteristics of the goods," or if it clearly denotes what goods or services are provided in such a way that the consumer does not have to exercise powers of perception or imagination.

Rather, the term "MASTER" is a suggestive term brought about by the advertising scheme of Nestle. Suggestive terms27 are those which, in the phraseology of one court, require "imagination, thought and perception to reach a conclusion as to the nature of the goods." Such terms, "which subtly connote something about the product," are eligible for protection in the absence of secondary meaning. While suggestive marks are capable of shedding "some light" upon certain characteristics of the goods or services in dispute, they nevertheless involve "an element of incongruity," "figurativeness," or " imaginative effort on the part of the observer."

This is evident from the advertising scheme adopted by Nestle in promoting its coffee products. In this case, Nestle has, over time, promoted its products as "coffee perfection worthy of masters like Robert Jaworski and Ric Puno Jr."

In associating its coffee products with the term "MASTER" and thereby impressing them with the attributes of said term, Nestle advertised its products thus:

Robert Jaworski. Living Legend. A true hard court hero. Fast on his feet. Sure in every shot he makes. A master strategist. In one word, unmatched.

MASTER ROAST. Equally unmatched. Rich and deeply satisfying. Made from a unique combination of the best coffee beans - Arabica for superior taste and aroma, Robusta for strength and body. A masterpiece only NESCAFE, the world’s coffee masters, can create.

MASTER ROAST. Coffee perfection worthy of masters like Robert Jaworski.28

In the art of conversation, Ric Puno Jr. is master. Witty. Well-informed. Confident.

In the art of coffee-making, nothing equals Master Roast, the coffee masterpiece from Nescafe, the world’s coffee masters. A unique combination of the best coffee beans - Arabica for superior taste and aroma, Robusta for strength and body. Truly distinctive and rich in flavor.

Master Roast. Coffee perfection worthy of masters like Ric Puno Jr.29

The term "MASTER", therefore, has acquired a certain connotation to mean the coffee products MASTER ROAST and MASTER BLEND produced by Nestle. As such, the use by CFC of the term "MASTER" in the trademark for its coffee product FLAVOR MASTER is likely to cause confusion or mistake or even to deceive the ordinary purchasers.

In closing, it may not be amiss to quote the case of American Chicle Co. v. Topps Chewing Gum, Inc.,30 to wit:

Why it should have chosen a mark that had long been employed by [plaintiff] and had become known to the trade instead of adopting some other means of identifying its goods is hard to see unless there was a deliberate purpose to obtain some advantage from the trade that [plaintiff] had built up. Indeed, it is generally true that, as soon as we see that a second comer in a market has, for no reason that he can assign, plagiarized the "make-up" of an earlier comer, we need no more; . . . [W]e feel bound to compel him to exercise his ingenuity in quarters further afield.

WHEREFORE, in view of the foregoing, the decision of the Court of Appeals in CA-G.R. SP No. 24101 is REVERSED and SET ASIDE and the decision of the Bureau of Patents, Trademarks and Technology Transfer in Inter Partes Cases Nos. 3200 and 3202 is REINSTATED.

SO ORDERED.

Davide, Jr., C.J. (Chairman), Kapunan, and Pardo, JJ., concur.Puno J., on official leave.

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

CONVERSE RUBBER CORPORATION and EDWARDSON MANUFACTURING CORPORATION,plaintiffs-appellants, vs.JACINTO RUBBER & PLASTICS CO., INC., and ACE RUBBER & PLASTICS CORPORATION, defendants-appellants.

Sycip, Salazar, Luna & Associates plaintiff-appellants.

Juan R. David for defendants-appellants.

BARREDO, J.:

Direct appeal in G.R. No. L-27425 by both plaintiffs and defendants from the decision of the Court of First Instance of Rizal in its Civil Case No. 9380, a case alleged unfair competition, the dispositive part of which reads:

Upon the foregoing, judgment is hereby rendered:

1. Permanently restraining the defendants, their agents, employees and other persons acting in their behalf from manufacturing and selling in the Philippines rubber shoes having the same or confusingly similar appearance as plaintiff Converse Rubber's Converse Chuck Taylor All Star' rubber shoes, particularly from manufacturing and selling in the Philippines rubber Shoes with (a) ankle patch with a five-pointed blue star against a white background, (b) red and blue bands, (c) white toe patch with raised diamond shaped areas, and (d) brown sole of the same or similar design as the sole of "Converse Chuck Taylor All Star" rubber-soled canvas footwear;

2. Ordering defendant Jacinto Rubber & Plastics Company, Inc. to change the design and appearance of "Custombuilt" shoes in accordance with the sketch submitted by defendant Jacinto Rubber to plaintiff Converse Rubber on October 3, 1964 and to desist from using a star both as a symbol and as a word;

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3. Ordering defendant Jacinto Rubber & Plastics Company, Inc. to pay plaintiffs the sum of P160,000.00 as compensatory damages for the years 1962 to 1965 plus 5% of the gross sales of "Custombuilt" shoes from 1966 until defendant Jacinto Rubber & Plastics Company, Inc. stop selling "Custombuilt" shoes of the present design and appearance;

4. Ordering defendants jointly and severally to pay plaintiffs P10,000.00 as attorney's fees.

SO ORDERED. (Pages 228-229, Record on Appeal.)

plaintiffs praying for a bigger amount of damages and defendants asking that the decision be declared null and void for lack of jurisdiction, or, alternatively, that the same be reversed completely by dismissing the complaint; and another direct appeal, in G. R. No. L-30505 by above defendant Jacinto Rubber & Plastics Co., Inc. and, a new party, Philippine Marketing and Management Corporation from the same trial court's order in the same main civil case finding them in contempt of court "in disregarding the permanent injunction" contained in the appealed decision.

RE G. R. NO L-27425

Being comprehensive and well prepared, We consider it sufficient to quote the following portions of the impugned decision as basis for the resolution of the conflicting appeals aforementioned:

This is an action for unfair competition. Plaintiff Converse Rubber Corporation, (is) an American Corporation, manufacturer (of) canvas rubber shoes under the trade name "Converse Chuck Taylor All Star"; in the Philippines, it has an exclusive licensee, plaintiff Edwardson Manufacturing Corporation, for the manufacture and sale in the Philippines of its product. Plaintiff Converse is the owner of trademarks and patent, registered with United States Patent Office, covering the words. "All Star", the representation and design of a five-pointed star, and the design of the sole. The trademark "Chuck Taylor" was registered by plaintiff Converse with the Philippines Patent Office on March 3, 1966. Since 1946, "Chuck Taylor" is being sold in the Philippines. It has been used exclusively by Philippine basketball teams competing in international competitions. It is also popular among players in various basketball leagues, like the MICAA and the NCAA, because of its high quality and attractive style. "Chuck Taylor" currently retails at P46.00 per pair.

Defendant Jacinto Rubber & Plastics Company, Inc., a local corporation, likewise, manufactures and sells canvas rubber shoes. It sells its product under the trade names "Custombuilt Viscount", "Custombuilt Challenger", and "Custombuilt Jayson's". Its trademark "Custombuilt Jayson's" was registered by the Philippines Patent Office on November 29, 1957. The gross sales from 1962 to 1965 of "Custombuilt" shoes total P16,474,103.76."Custombuilt" is retailed at P11.00.

In 1963, plaintiff Converse and defendant Jacinto entered into protracted negotiations for a licensing agreement whereby defendant Jacinto would be the exclusive license of plaintiff Converse in the Philippines for the manufacture and sale of "Chuck Taylor" shoes but with the right to continue manufacturing and selling its own products. One of the points taken up by parties was the design and general appearance of "Custombuilt" shoes. Plaintiff Converse insisted on the condition that defendant Jacinto change the design of "Custombuilt" shoes so as to give "Custombuilt" a general appearance different from "Chuck Taylor." After an extensive discussion, defendant Jacinto gave into to the demand of plaintiff Converse; it submitted to plaintiff Converse for the latter's approval a sketch of a new design for "Custombuilt". This design was accepted by plaintiff Converse. Defendant Jacinto Rubber then proposed that the licensing agreement be made in favor of its affiliates, defendant Ace Rubber. On January 22, 1965, defendant Ace Rubber signed the licensing agreement while defendant Jacinto Rubber and Arturo Jacinto signed the guarantee agreement to secure the performance by defendant Ace Rubber of its obligations under the licensing agreement. Both documents, it should be noted, contained the following covenants:

9. (a) Ace acknowledges that Converse is the exclusive owner of the said Converse - names and design, as used in connection with the manufacture, advertising and sale of footwear: that Converse has the exclusive right to use said Converse names in such connection throughout the world. subject to the terms of this Agreement; and that neither Ace nor any person acting by, through or under Ace will, at anytime, question or dispute said ownership or the exclusive rights of Converse with respect thereto

(b) Nothing herein shall be deemed to constitute a warranty by Converse as to the non-existence of infringements of Converse-names in the Republic of the Philippines. The term "infringement"as used in this Agreement shall include practices which give rise to a cause of action for damages or to injunctive relief under Sections 23 and 29 of R. A. No. 166 of the Republic of the Philippines or any other applicable law of said Republic. During the term thereof, Ace at its expense shall diligently investigate all infringements of the use of said Converse-names, whether or not such infringements violate laws pertaining to the registration of trademarks or trade names, and shall notify Converse promptly as to any infringements of said Converse names within said territory, and shall at its expense use its best efforts to prevent such infringements by an reasonable means, including the prosecution of litigation where necessary or advisable. Any award for damages which Ace may recover in such litigation shall accrue to the benefit of, and shall be owned and retained by Ace.

14. Ace shall not,during the term hereof, manufacture or sell footwear which would, by reason of its appearance and/or design, be likely, or tend, to be confused by the public with any of the Converse-named products to be manufactured and sold hereunder, or shall in any manner, infringe Converse designs. If at any time and from time to time the manufacture of footwear under Converse-names for sale hereunder does not fully utilize Ace's production capacity, Ace shalt on Converse's order, within the limits of such surplus capacity, manufacture footwear of kinds and in amounts specified by Converse, at a price no higher than the lowest price at which similar footwear has been sold to customer of Ace during the period of one (1) year immediately preceding the date of such order, and upon no less favorable discounts and terms of sale than similar footwear is customarily offered by Ace to its most favored customer, payable in United States funds, if the earned royalty hereunder is then so payable, otherwise in Republic of the Philippines funds.

20. It being the mutual intention of the parties that Converse's exclusive property interests in the Converse-names shall at all times be protected to the full extent of the law, Ace agrees that it will execute all amendments to this Agreement which may be proposed from time to time by Converse for the purpose of fully protecting said interests.

However, the licensing agreement did not materialize, because Hermogenes Jacinto refused to sign the guarantee.

Plaintiff Converse and plaintiff Edwardson then executed licensing agreement, making plaintiff Edwardson the exclusive Philippine licensee for the manufacture and sale of "Chuck Taylor." On June 18, 1966, plaintiffs sent a written demand to defendants to stop manufacturing and selling "Custombuilt" shoes of Identical appearance as "Chuck Taylor". Defendants did not reply to plaintiffs' letter. Hence, this suit.

Plaintiffs contend that "Custombuilt" shoes are Identical in design and General appearance to "Chuck Taylor" and, claiming prior Identification of "Chuck Taylor" in the mind of the buying public

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in the Philippines, they contend that defendants are guilty of unfair competition by selling "Custombuilt" of the design and with the general appearance of "Chuck Taylor". The design and appearance of both products, as shown by the samples and photographs of both products, are not disputed. Defendants insist that (a) there is no similarity in design and general appearance between "Custombuilt" and "Chuck Taylor", pointing out that "Custombuilt" is readily Identifiable by the tradename "Custombuilt" appearing on the ankle patch, the heel patch, and on the sole. It is also vigorously contended by defendants that the registration of defendant Jacinto Rubber's trademark "Custombuilt" being prior to the registration in the Philippines of plaintiff Converse Rubber's trademark "Chuck Taylor", plaintiffs have no cause of action. It appears that defendant started to manufacture and sell "Custombuilt" of its present design and with its present appearance in 1962. On the other hand, as earlier mentioned, "Chuck Taylor" started to be sold in the Philippines in 1946 and has been enjoying a reputation for quality among basketball players in the Philippines.

The Court sees no difficulty in finding that the competing products are Identical in appearance except for the trade names. The respective designs, the shapes and the color of the ankle patch, the bands, the toe patch and the sole of the two products are exactly the same. At a distance of a few meters, it is impossible to distinguish Custombuilt' from "Chuck Taylor". The casual buyer is thus liable to mistake one for the other. Only by a close-examination and by paying attention to the trade names will the ordinary buyer be able to tell that the product is either "Custombuilt" or "Chuck Taylor", as the case may be. Even so, he will most likely think that the competing products, because they are strikingly Identical in design and appearance are manufactured by one and the same manufacturer. Clearly, this case satisfied the test of unfair competition. Priority in registration in the Philippines of a trademark is not material in an action for unfair competition as distinguished from an action for infringement of trademark. The basis of an action for unfair competition is confusing and misleading similarity in general appearance, not similarity of trademarks.

The Court is not impressed by defendants' good faith in claiming that they have the right to continue manufacturing "Custombuilt" of Identical design and appearance as "Chuck Taylor". While it is true that the licensing agreement between plaintiff Converse and defendant did not materialize, the execution of the documents by the defendants constitute an admission on the part of plaintiff Converse Rubber's property right in design and appearance of "Chuck Taylor". The covenants, quoted above, show that defendants acknowledged that plaintiff Converse Rubber "is the exclusive owner of the said Converse-names and design." Defendants further covenanted not to "manufacture or sell footwear which would by reason of its appearance and/or design, be likely, or tend, to be confused by the public with any of the Converse-named products ... or shall, in any manner, infringe Converse designs". That defendants are fully aware that "Custombuilt" is Identical in design and appearance to "Chuck Taylor" has conclusively been admitted by them in their correspondence with plaintiff Converse leading to the submission by defendants to plaintiff Converse of a sketch of a new design that should give "Custombuilt" an appearance different from that of "Chuck Taylor".

Aside from the written admission of defendants, the facts clearly indicate that defendants copied the design of "Chuck Taylor" with intent to gain "Chuck Taylor", as has been noted earlier, was ahead ot Custombuilt' in the Philippines market and has been enjoining a high reputation for quality and style. Even defendants' own exhibits leave no room for doubt that defendants copied the design and appearance of "Chuck Taylor" for the purpose of cashing in on the reputation of "Chuck Taylor". The samples of defendants' product show, indeed, as announced by defendants' counsel the "metamorphosis" of defendants' product. In the beginning, the design of defendants' product was entirely different from its present design and the design of "Chuck Taylor". It was only in 1962, or 16 years after "Chuck Taylor" has been in the market, that defendants adopted the present design of "Custombuilt". It is also noteworthy that "Custombuilt" sells at P35 less than "Chuck Taylor"; thus the casual buyer is led to believe that he is buying the same product at a lower price. Not surprisingly, the volume of sales of "Custombuilt" increased from 35% to 75% of defendants' total sales after they incorporated in their product the design and appearance of "Chuck Taylor".

It is thus clear that defendants are guilty of unfair competition by giving "Custombuilt" the same general appearance as "Chuck Taylor". It is equally clear that defendants in so doing are guilty of bad faith. There remains for the Court to consider the damages that defendants should be liable for to plaintiffs. Plaintiffs claim compensatory damages equivalent to 30% of the gross sales of "Custombuilt" and attorney's fees in the amount of P25,000.00. By defendants' own evidence, the gross sales of "Custombuilt" from 1962, the year defendants adopted the present design of their product, to 1965 total P16,474,103.76. If the Court should grant plaintiffs' prayer for compensatory damages equivalent to 30% of defendants' gross sales, the compensatory damages would amount to P4,942,231.13. Considering the amount of gross sales of "Custombuilt", an award to plaintiffs for 30% of defendants' annual gross sales would seriously ripple, if not bankrupt, defendant companies. The Court is aware that defendants' investment is substantial and that defendants support a substantial number of employees and laborers. This being so, the Court is of the opinion that plaintiffs are entitled to only one (1) per cent of annual gross sales of "Custombuilt" shoes of current design. As for attorney s fees, the Court is of the opinion that, P10,000.00 is reasonable. (Pages 217-228, Record on Appeal.)

Defendants-appellants have assigned the following alleged errors:

I

THE COURT A QUO ERRED IN ASSUMING JURISDICTION OVER THE COMPLAINT OF PLAINTIFFS-APPELLEES.

II

THE COURT A QUO ERRED IN ARRIVING AT THE CONCLUSION THAT THE DEFENDANTS ARE GUILTY OF UNFAIR COMPETITION WHEN DEFENDANT JACINTO RUBBER & PLASTICS CO., INC., MANUFACTURED AND SOLD RUBBER-SOLED CANVASS SHOES UNDER ITS REGISTERED TRADE MARK "CUSTOMBUILT".

III

THE COURT A QUO ERRED IN ADJUDICATING IN FAVOR OF THE PLAINTIFF THE SUM OF P160,000.00 AS COMPENSATORY DAMAGES AND P10,000.00 AS ATTORNEY'S FEES. (Pp. A & B, Brief for Defendants-Appellants.)

We have carefully gone over the records and reviewed the evidence to satisfy Ourselves of the similarity of the shoes manufactured and sold by plaintiffs with those sold by defendants, and We find the conclusions of the trial court to be correct in all respects. In fact, in their brief, defendants do not contest at all the findings of the trial court insofar as material Identity between the two kinds of shoes in question is concerned. We have Ourselves examined the exhibits in detail, particularly, the comparative pictures and other representations if the shoes in question, and We do not hesitate in holding that he plaintiffs complaint of unfair competition is amply justified.

From said examination, We find the shoes manufactured by defendants to contain, as found by the trial court, practically all the features of those of the plaintiff Converse Rubber Corporation and manufactured, sold or marketed by plaintiff Edwardson Manufacturing Corporation, except for heir respective brands, of course. We fully agree with the trial court that "the respective designs, shapes, the colors of the ankle patches, the bands, the toe patch and the soles of the two products are exactly the same ... (such that) at a distance of a few meters, it is impossible to distinguish "Custombuilt" from "Chuck Taylor". These elements are more than sufficient to serve as basis for a charge of unfair competition. Even if not all the details just mentioned were Identical, with the general appearances alone of the two products, any ordinary, or even perhaps even a not too perceptive and discriminating customer could be deceived, and, therefore, Custombuilt could easily be passed off for Chuck Taylor. Jurisprudence supports the view that under such circumstances, the imitator must be held liable. In R. F. & J. Alexander & Co. Ltd. et al. vs. Ang et al., 97 Phil. 157, at p. 160, this Court held:

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By "purchasers" and "public" likely to be deceived by the appearance of the goods, the statute means the "ordinary purchaser". And although this Court apparently shifted its position a bit in Dy Buncio vs. Tan Tiao Bok, 42 Phil. 190, by referring to simulations likely to mislead "the ordinarily intelligent buyer", it turned to the general accepted doctrine in E. Spinner & Co. vs. Neuss Hesslein,54 Phil. 224, where it spoke of "the casual purchasers" "who knows the goods only by name."

It stands to reason that when the law speaks of purchasers' it generally refers to ordinary or average purchasers.

... in cases of unfair competition, while the requisite degree of resemblance or similarity between the names, brands, or other indicia is not capable of exact definition, it may be stated generally that the similarity must be such, but need only be such, as is likely to mislead purchasers of ordinary caution and prudence; or in other words, the ordinary buyer, into the belief that the goods or wares are those, or that the name or business is that, of another producer or tradesman. It is not necessary in either case that the resemblance be sufficient to deceive experts, dealers, or other persons specially familiar with the trademark or goods involved. Nor is it material that a critical inspection and comparison would disclose differences, or that persons seeing the trademarks or articles side by side would not be deceived (52 Am. Jur. pp. 600-601). (Brief for Plaintiffs as Appellees, pp. 28-29, p. 71, Record.)

Indeed, the very text of the law on unfair competition in this country is clear enough. It is found in Chapter VI of Republic Act 166 reading thus:

SEC. 29. Unfair competition, rights and remedies. - A person who has Identified in the mind of the public the goods he manufactures or deals in, his business or services from those of others, whether or not a mark or trade name is employed, has a property right in the goodwill of the said goods, business or services so Identified, which will be protected in the same manner as other property rights. Such a person shall have the remedies provided in section twenty-three, Chapter V hereof.

Any person who shall employ deception or any other means contrary to good faith by which he shall pass off the goods manufactured by him or in which he deals, or his business, or services of those of the one having established such goodwill, or who shall commit any acts calculated to produce said result, shall be guilty of unfair competition, and shall be subject to an action therefor.

In particular, and without in any way limiting the scope of unfair competition, the following shall be deemed guilty of unfair competition:

(a) Any person, who in selling his goods shall give them the general appearance of goods of another manufacturer or dealer, either as to the goods themselves or in the wrapping of the packages in which they are contained, or the devices or words thereon, or in any other feature of their appearance, which would be likely to influence purchasers to believe that the goods offered are those of a manufacturer or dealer other than the actual manufacturer or dealer, or who otherwise clothes the goods with such appearance as shall deceive the public and defraud another of his legitimate trade, or any subsequent vendor of such goods or any agent of any vendor engaged in selling such goods with a like purpose;

(b) Any person who by any artifice, or device, or who employs any other means calculated to induce the false belief that such person is offering the services of another who has Identified such services in the mind of the public; or

(c) Any person who shall make any false statement in the course of trade or who shall commit any other act contrary to good faith of a nature calculated to discredit the goods, business or services of another.

It is the theory of defendants-appellants, however, that plaintiffs-appellees have failed to establish a case of unfair competition because "inasmuch as the former (Converse Chuck Taylor) was not sold in the local markets from 1949 to 1967, no competition, fair or unfair, could have been offered to it by the latter product (Custombuilt Challenger) during the said period." While the argument, it may be conceded, makes sense as a proposition in practical logic, as indeed, it served as a legal defense in jurisprudence in the past, the modern view, as contended by plaintiffs "represents a tendency to mold, and even to expand; legal remedies in this field to conform to ethical practices." (Brief of Plaintiffs as Appellees, pp. 16-17.) As a matter of fact, in Ang vs. Toribio, 74 Phil. 129, this Court aptly pointed out:

... As trade has developed and commercial changes have come about, the law of unfair competition has expanded to keep pace with the times and the elements of strict competition in itself has ceased to be the determining factor. The owner of a trademark or trade-name has property right in which he is entitled to protection, since there is damage to him from confusion of reputation or goodwill in the mind of the public as well as from confusion of goods. The modern trend is to give emphasis to the unfairness of the acts and to classify and treat the issue as fraud.

Additionally, We quote with approval counsel's contention thus:

In no uncertain terms, the statute on unfair competition extends protection to the goodwill of a manufacturer or dealer. It attaches no fetish to the word "competition". In plain language it declares that a "person who has Identified in the public the goods he manufactures or deals in, his business or services from those of others, whether or not a right in the goodwill of the said goods, business or services so Identified, which will be protected in the same manner as other property rights." It denominates as "unfair competition" "any acts" calculated to result in the passing off of other goods "for those of the one having established such goodwill." Singularly absent is a requirement that the goodwill sought to be protected in an action for unfair competition must have been established in an actual competitive situation. Nor does the law require that the deception or other means contrary to good faith or any acts calculated to pass off other goods for those of one who has established a goodwill must have been committed in an actual competitive situation.

To read such conditions, as defendants-appellants seek to do, in the plain prescription of the law is to re-construct it. Indeed, good-will established in other than a competitive milieu is no less a property right that deserves protection from unjust appropriation or injury. This, to us, is precisely the clear sense of the law when it declares without equivocation that a "person who has Identified in the mind of the public the goods he manufactures or deals in, his business or services from those of others, has a property right in the goodwill of the said goods, business or services so Identified, which will be protected in the same manner as other property rights."

Plaintiffs-appellees have a established goodwill. This goodwill, the trial court found, defendants-appellants have pirated in clear bad faith to their unjust enrichment. It is strange that defendants-appellants now say that they should be spared from the penalty of the law, because they were not really in competition with plaintiffs-appellees. (Pp. 21-22, Id.)

In a desperate attempt to escape liability, in their first assigned error, defendants-appellants assail the jurisdiction of the trial court, contending that inasmuch as Converse Rubber Corporation is a non-resident corporation, it has no legal right to sue in the courts of the Philippines, citing Marshall-Wells Co. vs. Elser & C �., 46 Phil. 70 and Commissioner of Internal

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Revenue vs. United States Lines Co., G. R. No. L-16850, May 30, 1962 (5 SCRA 175) and, furthermore, that plaintiff Edwardson Manufacturing Corporation, although "a domestic corporation, is nothing but a licensee of Converse Rubber Corporation in the local manufacturing, advertisement, sale and distribution of the rubber-soled footwear", hence, it is equally without such personality. (p. 18, Brief of Defendants-Appellants).

We are not impressed. The easy and, We hold to be correct, refutation of defendants' position is stated adequately and understandably in plaintiffs' brief as appellees as follows:

The disability under Section 69 of the Corporation Law of an unlicensed foreign corporation refers to transacting business in the Philippines and maintaining a "suit for the recovery of any debt, claim, or demand whatever" arising from its transacting business in the Philippines. In Marshall-Wells, this Court precisely rejected a reading of Section 69 of the Corporation Law as "would give it a literal meaning", i.e., "No foreign corporation shall be permitted by itself or assignee any suit for the recovery of any deed, claim, or demand unless it shall have the license prescribed by Section 68 of the Law." "The effect of the statute," declared this Court, "preventing foreign corporations from doing business and from bringing actions in the local courts, except on compliance with elaborate requirements, must not be unduly extended or improperly applied (at page 75). In Commissioner of Internal Revenue v. United States Lines Company, this Court did not hold that an unlicensed foreign corporation may not sue in the Philippines. The Court simply held that a foreign shipping company, represented by a local agent, is doing business in the Philippines so as to subject it to the "operation of our revenue and tax."

Western Equipment and Supply Co. v. Reyes, 51 Phil. 115, made clear that the disability of a foreign corporation from suing in the Philippines is limited to suits "to enforce any legal or contract rights arising from, or growing out, of any business which it has transacted in thePhilippine Islands." ... On the other hand, where the purpose of a suit is "to protect its reputation, its corporate name, its goodwill, whenever that reputation, corporate name or goodwill have, through the natural development of its trade, established themselves," an unlicensed foreign corporation may sue in the Philippines (at page 128). So interpreted by the Supreme Court, it is clear that Section 69 of the Corporation Law does not disqualify plaintiff-appellee Converse Rubber, which does not have a branch office in any part of the Philippines and is not "doing business" in the Philippines (Record on Appeal, pp. 190-191), from filing and prosecuting this action for unfair competition.

The futility of the error assigned by defendants-appellants becomes more evident in light of the explicit provision of Section 21 (a) of Republic Act No. 166, as amended, that a foreign corporation, whether or not licensed to transact business in the Philippines may bring an action for unfair competition provided the country of which it "is a citizen, or in which it is domiciled, by treaty, convention or law, grants a similar privilege to juristic persons in the Philippines." The Convention of Paris for the Protection of Industrial Property, to which the Philippines adheres, provides, on a reciprocal basis that citizens of a union member may file an action for unfair competition and infringement of trademarks, patents, etc. (610. G. 8010) in and of the union members. The United States of America, of which Converse Rubber is a citizen, is also a signatory to this Convention. Section 1126 (b) and (h) of Public Law 489 of the United States of America allows corporations organized under the laws of the Philippines to file an action for unfair competition in the United States of America, whether or not it is licensed to do business in the United States. (Annex "H" of Partial Stipulation of Facts, Record on Appeal, p. 192).

As regards the other plaintiff-appellee, Edwardson Manufacturing Corporation, it is indisputable that it has a direct interest in the success of this action: as exclusive licensee of Converse Rubber in the manufacture and sale of "Chuck Taylor" shoes in the Philippines, naturally it would be directly affected by the continued manufacture and sale by defendants-appellants of shoes that are confusingly Identical in appearance and design with "Chuck Taylor." (Brief of Plaintiffs as Appellees, pp. 11-14.)

As can be seen, what is actually the only controversial matter in this case is that which refers to the assessment ot damages by the trial court, which both plaintiffs and defendants consider erroneous, defendants maintaining, of course, that it is excessive, even baseless, while, on the other hand, plaintiffs posit that it is far short from what the law and the relevant circumstances require.

Under Section 29 of the Republic Act 166, aforequoted, it will be observed that the first paragraph thereof refers to the property rights in goodwill of a "person who has Identified in the mind of the public goods he manufactures or deals in, his business or offices from those of others, whether or not a mark or trade name is employed", while the second paragraph speaks of "any person who shall employ deception or any other means contrary to good faith by which he shall pass off the goods manufactured by him ... for those of the one having established such goodwill." This second paragraph, which may be read together with the first paragraph, makes the deceiver or imitator "guilty of unfair competition and shall be subjected to an action therefore", meaning what the first paragraph refers to as the "remedies provided in Section twenty-three, Chapter V" of the Act. It is implicit in the decision of the trial court and the briefs of the parties that everyone here concerned has acted on the basis of the assumptions just stated.

Now, Section 23 reads:

Actions, and damages and injunction for infringement. - Any person entitled to the exclusive use of a registered mark or trade name may recover damages in a civil action from any person who infringes his rights, and the measure of the damages suffered shall be either the reasonable profit which the complaining party would have made, had the defendant not infringed his said rights, or the profit which the defendant actually made out of the infringement, or in the event such measure of damages cannot be readily ascertained with reasonable certainty, then the court may award as damages a reasonable percentage based upon the amount of gross sales of the defendant of the value of the services in connection with which the mark or trade name was used in the infringement of the rights of the complaining party. In cases where actual intent to mislead the public or to defraud the complaining party shall be shown, in the discretion of the court, the damages may be doubled.

The complaining party, upon proper showing, may also be granted injunction.

In the light of the foregoing provision, We find difficulty in seeing the basis of the trial court for reducing the 30%, claimed by plaintiffs, of the gross earnings of defendants from the sale of Custombuilt from 1962 to merely 1% as the measure of compensatory damages to which plaintiffs are entitled for that period. Perhaps, as His Honor pessimistically argued, defendants would suffer crippling of their business. But it is quite clear from the circumstances surrounding their act of deliberately passing off the rubber shoes produced by them for those over which plaintiffs had priorly established goodwill, that defendants had tremendously increased their volume of business and profits in the imitated shoes and have precisely incurred, strictly speaking, the liability of the damages to be paid by them be doubled, per the last sentence of Section 23.

We are of the considered opinion that the trial court was overly liberal to the defendants-appellants. The P160,000.00 awarded by His Honor as compensatory damages for the years 1962 to 1965 are utterly inadequate. Even the 5% of the gross sales of "Custombuilt" shoes from 1966 until its injunction is fully obeyed are short of what the law contemplates in cases of this nature. We hold that considering that the gross sales of defendants-appellants increased to P16,474,103.76, (as admitted in defendants-appellants' own brief, p. 2), only 75% of which, plaintiffs-appellants generously assert corresponded to Custombuilt sales, it would be but fair and just to award plaintiffs-appellants 15% of such 75% as compensatory damages from 1962 up to the finality of this decision. In other words, 75% of P16,474,103.76 would be P12,355,577.82 and 15% of this last amount would be P1,853,336.67, which should be awarded to plaintiffs-appellants for the whole period already stated, without any interest, without prejudice to plaintiffs-appellants seeking by motion in the trial court in this same case any further damage should defendants-appellants continue to disobey the injunction herein affirmed after the finality of this decision.

We feel that this award is reasonable. It is not farfetched to assume that the net profit of the imitator which, after all is what the law contemplates as basis for damages if it were only actually ascertainable, in the manufacture of rubber

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shoes should not be less than 20 to 25% of the gross sales. Regrettably, neither of the parties presented positive evidence in this respect, and the Court is left to use as basis its own projection in the light of usual business practices. We could, to be sure, return this case to the lower court for further evidence on this point, but, inasmuch as this litigation started way back about fourteen years ago and it would take more years before any final disposition is made hereof should take the course, We are convinced that the above straight computation, without any penalty of interest, is in accordance with the spirit of the law governing this case.

In re G. R. No. L-30505

The subject matter of this appeal is the order of the trial court, incident to its main decision We have just reviewed above, dismissing "for lack 6f jurisdiction the contempt charge filed by plaintiffs against defendant Jacinto Rubber & Plastics Co. Inc., Ace Rubber & Plastics Corporation; Philippine & Management Corporation and their respective corporate officers.

Importantly, it is necessary to immediately clear up the minds of appellees in regard to some aspects of the argument on double jeopardy discussed by their distinguished counsel in his preliminary argument in his brief (pp. 9-13). It is contended therein that inasmuch as the denial orders of August 23, 1967, December 29, 1967 and January 24, 1968 have the character of acquittals, contempt proceedings being criminal in nature, this appeal subjects appellees to double jeopardy. Such contention misses, however, the important consideration that the said denial orders, were, as explained by His Honor himself in his last two orders, based on the assumption that he had lost jurisdiction over the incident by virtue of the earlier perfection of the appeals of both parties from the decision on the merits.

It is thus the effect of this assumption, revealed later by the trial judge, on the first order of August 23, 1967 that needs clarificatory disquisition, considering that the said first order was exclusively based on "the interests of justice" and "lack of merit" and made no reference at all to jurisdiction. If indeed the trial court had lost jurisdiction, it would be clear that said order could have no legal standing, and the argument of double jeopardy would have no basis.

But after mature deliberation, and in the light of Cia General de Tabacos de Filipinas vs. Alhambra Cigar & Cigarette Manufacturing Co., 33 Phil. 503, cited by appellant's counsel in his brief, We are convinced that the trial court in the case at bar had jurisdiction to entertain and decide the motion for contempt in question. Indeed, the enforcement of either final or preliminary-made-final injunctions in decisions of trial courts are immediately executory. The reason for this rule lies in the nature itself of the remedy. If a preliminary injunction, especially one issued after a hearing is enforceable immediately to protect the rights of the one asking for it, independently of the pendency of the main action, there is no reason why when that preliminary injunction is made final after further and fuller hearing the merits of the plaintiff's cause of action, its enforceability should lesser, force. The same must be true with stronger basis in the case of a permanent injunction issued as part ot the judgment. The aim is to stop the act complained of immediately because the court has found it necessary to serve the interests of justice involved in the litigation already resolve by it after hearing and reception of the evidence of both parties.

As a matter ot fact, it is quite obvious that an action for unfair competition with prayer for an injunction partakes of the nature of an action for injunction within the contemplation of Section 4 of Rule 39, and this cited provision states explicitly that "unless otherwise ordered by the court, a judgment in an action for injunction - shall not be stayed after its rendition and before an appeal is taken or during the pendency of an appeal." In the above-mentioned case of Cia. General de Tabacos, the Court held:

The applicant contends here: First, that the injunction is indefinite and uncertain to such an extent that a person of ordinary intelligence would be unable to comply with it and still protect his acknowledged rights; second, that the injunction is void for the reason that the judgment of the court on which it 's based is not responsive to the pleadings or to the evidence in the case and has nothing in the record to support it; third, that the court erred in assuming jurisdiction and fining defendant after an appeal had been taken from the judgment of the court and the perpetual injunction issued thereon. There are other objections that need no particular discussion.

Discussing these questions generally it may be admitted, as we stated in our decision in the main case (G. R No. 10251, ante p. 485) that, while the complaint set forth an action on a trade-name

and for unfair competition, accepting the plaintiff's interpretation of it, the trial court based its judgment on the violation of a trade-mark, although the complaint contained no allegation with respect to a trade-mark and no issue was joined on that subject by the pleadings and no evidence was introduced on the trial with respect thereto. There Aas however, some evidence in the case with respect to the plaintiff's ownership of the trade-name "Isabela," for the violation of which the plaintiff was suing, and there was some evidence which might support an action of unfair competition, if such an action could be sustained under the statute. Therefore, although the judgment of the trial court was based on the violation of a trade-mark, there was some evidence to sustain the judgment if it had been founded on a violation of the trade-name or on unfair competition. The judgment, as we have already found in the main case, was erroneous and was reversed for that reason; but having some evidence to sustain it, it was not void and the injunction issued in that action was one which the court had power to issue. Although the judgment was clearly erroneous and without basis in law, it was, nevertheless a judgment of a court of competent jurisdiction which had authority to render that particular judgment and to issue a permanent injunction thereon.

xxx xxx xxx

... The question is not was the judgment correct on the law and the facts, but was it a valid judgment? If so, and if the injunction issued thereon was definite and certain and was within the subject matter of the judgment, the defendant was bound to obey it, however erroneous it may have been. (Pp. 505-506, 506, 33 Phil.)

It is interesting to note that while the trial court was of the opinion that it had lost jurisdiction over the motion for contempt, upon insistence of the plaintiffs, in its order of January 24, 1968, it made the following findings of fact:

It is not controverted on December 14, 1966, the Philippine Marketing and Management sold to Virginia Ventures 12 pairs of "Custombuilt" rubber shoes bearing an Identical design and general appearance as that prohibited in the injunction. It is likewise not controverted that subsequent to December 14, 1966 the sale of the said rubber shoes was advertised by Philippine Marketing and Management Corporation in several metropolitan newspapers even during the pendency of the contempt proceedings.

The only issue of fact is whether or not in selling and advertising the sale of the prescribed shoes the Philippine Marketing and Management Corporation conspired with the defendants, particularly defendant Jacinto Rubber, or acted as its agent, employee or in any other capacity with knowledge of the issuance of the said permanent injunction. On this point, the evidence of the plaintiffs shows that Hermogenes Jacinto, Arturo Jacinto, Fernando Jacinto and Milagros J. Jose constitute the majority of the board of directors of the Philippine Marketing and Management Corporation; that Hermogenes Jacinto is the president, Arturo Jacinto is the vice-president, and Fernando Jacinto and Milagros J. Jose are directors, of defendant Jacinto Rubber; that Milagros J. Jose is the treasurer of the Philippine Marketing and Management Corporation; and that Ramon V. Tupas, corporate secretary of the Philippine Marketing and Management Corporation, actively assisted by Atty. Juan T. David, counsel of record of the defendants, in defending the defendants in this case. It also appears from the different advertisements published in the metropolitan papers that Philippine Marketing and Management Corporation is the exclusive distributor of the questioned "Custombuilt" rubber shoes. Moreover, during the trial of this case on the merits the defendants admitted that the Philippine Marketing and Management Corporation is a sister corporation of defendant Jacinto Rubber, both corporations having Identical stockholders, and Hermogenes Jacinto and Fernando Jacinto are stockholders and incorporators of the Philippine Marketing and Management Corporation.

On the other hand, the defendants, particularly defendant Jacinto Rubber, presented no evidence to disprove its intra-corporate relationship with the Philippine Marketing and Management Corporation. Instead it presented, over the objection of the plaintiffs, the affidavit of its executive

68

vice-president, Geronimo Jacinto, who affirmed that defendant Jacinto Rubber had no knowledge of, or participation in, the acts complained of in the motion to declare them in contempt of Court and that it has not in any way violated any order of this Court. On its part, the Philippine Marketing and Management Corporation presented as a witness its general manager, Aniceto Tan, who testified that the Philippine Marketing and Management Corporation is not an agent or sister corporation of defendant Jacinto Rubber; that he came to know of the pendency of this case and the issuance of the permanent injunction only on December 19, 1966 when served with a copy of plaintiffs' motion; and that the Philippine Marketing and Management Corporation buys the "Custombuilt Rubber" shoes from defendant Jacinto Rubber which it resells to the general public. It is noteworthy, however, that this particular witness made several admissions in the course of his testimony which shed light on the question at issue. Thus, he admitted that prior to the formal organization of the Philippine Marketing and Management Corporation in January 1966 he was the sales manager of defendant Jacinto Rubber; that after the organization of the said corporation, he was informed that defendant Jacinto Rubber would discontinue its sales operations and instead give the exclusive distribution of the shoes to the Philippine Marketing and Management Corporation; and that he was then offered the position of sales manager of Philippine Marketing and Management because of his extensive experience in the distribution of "Custombuilt" rubber shoes. Also, he testified that the subscribed capital stock of the Philippine Marketing and Management Corporation is only P100,000.00 out of which P25,000.00 has been paid whereas its average monthly purchases of "Custombuilt" rubber shoes is between P300,000.00 to P400,000.00 or between P4,000,000.00 to P5,000,000.00 annually. Such huge purchases Philippine Marketing and Management Corporation is able to make, in spite of its meager capital, because defendant Jacinto Rubber allows it to buy on credit.

Considering the substantial Identity of the responsible corporate officers of the defendant Jacinto Rubber and the Philippine Marketing and Management Corporation, the huge volume of alleged purchases of "Custombuilt" shoes by the Philippine Marketing and Management Corporation compared to its paid in capital, and the cessation of the sales operations of defendant Jacinto Rubber after the organization of the former, the Court is convinced beyond reasonable doubt that the Philippine Marketing and Management Corporation is the selling arm or branch of defendant Jacinto Rubber and that both corporations are controlled by substantially the same persons, the Jacinto family. The contention of the Philippine Marketing and Management Corporation that it sold the 12 pairs of "Custombuilt" shoes on December 14, 1966 without knowledge of the issuance of the injunction is belied by its conduct of continuing the sale and the advertisement of said shoes even during the pendency of the contempt proceedings. This conduct clearly reveals the wilfulness and contumacy with which it had disregarded the injunction. Besides, it is inherently improbable that defendant Jacinto Rubber and Atty. Ramon B. Tupas did not inform the Philippine Marketing and Management Corporation of the issuance of the injunction, a fact which undoubtedly has a material adverse effect on its business.

Upon the foregoing, the Court is convinced that defendants and Philippine Marketing and Management Corporation are guilty of contempt of court in disregarding the permanent injunction issued by this Court in its decision on the merits of the main case. However, for the reasons stated in the Order of December 29, 1967, the Court maintains that it has lost jurisdiction over the case. (Pp. 115-120, Record on Appeal.)

Stated differently, since the trial court had jurisdiction to take cognizance of the motion, its findings of facts should as a rule bind the parties, and, in this connection, appellees do not seriously challenge said findings. And since We are holding that the trial court had jurisdiction, the above findings may be determinative of the factual issues among the parties herein. We are thus faced with the following situations:

The first order of dismissal of August 23, 1967, albeit issued with jurisdiction, was incomplete because it contained no statements of facts and law on which it was based in violation of the pertinent constitutional precept. It could not stand as it was.

The second of December 29, 1967 was still incomplete, with the added flaw that his Honor declared himself therein as having lost jurisdiction.

On other hand, while the third order of January 24, 1968 filled the ommissions of the first two orders, it, however, the reiterated the erroneous ruling of the second order regarding lost of jurisdiction of the court over the incident.

Combining the three orders, it can be seen that the result is that the trial court found from the evidence that its injunction had been violated, but it erroneously considered itself devoid of authority to impose the appropriate penalty, for want of jurisdiction. Upon these premises, We hold that the factual findings of the trial court in its third order may well stand as basis tor the imposition of the proper penalty.

To be sure, appellees are almost in the right track in contending that the first denial order of the trial court found them not guilty. What they have overlooked however is that such a finding cannot be equated with an acquittal in a criminal case that bars a subsequent jeopardy. True it is that generally, contempt proceedings are characterized as criminal in nature, but the more accurate juridical concept is that contempt proceedings may actually be either civil or criminal, even if the distinction between one and the other may be so thin as to be almost imperceptible. But it does exist in law. It is criminal when the purpose is to vindicate the authority of the court and protect its outraged dignity. It is civil when there is failure to do something ordered by a court to be done for the benefit of a party. (3 Moran, Rules of Court, pp. 343-344, 1970 ed; see also Perkins vs. Director of Prisons, 58 Phil. 272; Harden vs. Director of Prisons, 81 Phil. 741.) And with this distinction in mind, the fact that the injunction in the instant case is manifestly for the benefit of plaintiffs makes of the contempt herein involved civil, not criminal. Accordingly, the conclusion is inevitable that appellees have been virtually found by the trial court guilty of civil contempt, not criminal contempt, hence the rule on double jeopardy may not be invoked.

WHEREFORE, judgment is hereby rendered - in G. R. No. L-27425 - affirming the decision of the trial court with the modification of the amount of the damages awarded to plaintiffs in the manner hereinabove indicated; and in G.R. No. L-30505 - the three orders of dismissal of the trial court of the contempt charges against appellees are all hereby reversed, and on the basis of the factual findings made by said court in its last order of January 24, 1968, appellees are hereby declared in contempt of court and the records of the contempt proceedings (G. R. No. L-30505) are ordered returned to the trial court for further proceedings in line with the above opinion, namely for the imposition of the proper penalty, its decision being incomplete in that respect. Costs against appellees in G. R. No. L-27425, no costs in G. R. No. L-30505. These decisions may be executed separately.

Concepcion Jr., Guerrero and De Castro, JJ., concur.

Antonio, J., is on leave.

Aquino, J., concur in the result.

UNIVERSAL RUBBER PRODUCTS, INC.,

Petitioner,

G. R. No. L-30266

June 29, 1984 -versus-

HON. COURT OF APPEALS,

CONVERSE RUBBER CORPORATION,

EDWARDSON MANUFACTURING CO., INC.chanrobles virtual law library

and HON. PEDRO C. NAVARRO,

69

Respondents.

R E S O L U T I O N

GUERRERO, J.:

This Petition for Review concerns a "subpoena duces tecum" which was issued by the trial court against the Treasurer of

the herein petitioner, the propriety of which was upheld by the defunct Court of Appeals [now Intermediate Appellate

Court].

The facts of this case as stated in the decision of the then Court of Appeals are as follows:

Records disclose that the two respondent corporations herein sued the present petitioner before the Court of First

Instance of Rizal for unfair competition with damages and attorney's fees. In due time, herein petitioner, who was the

defendant in that court suit, answered the complaint and joined issues with the plaintiffs therein, forthwith respondent

Judge, to whom that lawsuit was assigned, proceeded with the trial thereof. After they have presented about nine

witnesses and various pieces of documentary evidence, herein private respondents made a request to the respondent

Judge to issue a subpoena duces tecum against the treasurer of herein petitioner. Acting favorably on that request, said

respondent Judge issued a subpoena duces tecum on February 13, 1968, directing the treasurer of the present

petitioner to bring with him to the lower court on February 26, 1968 and March 8, 1968 at 2:30 p.m. ", all sales invoices,

sales books and ledgers wherein are recorded the sales of Plymouth Star Player rubber shoes from the time the

corporation started manufacturing and selling said shoes up to the present.cralaw

On March 4, 1968, petitioner filed a motion in the court below praying that the subpoena duces tecum dated February

13, 1968 be quashed on the grounds that: [1] the said subpoena is both unreasonable and oppressive as the books and

documents called for are numerous and voluminous; [2] there is no good cause shown for the issuance thereof; and [3]

the books and documents are not relevant to the case pending below. The private respondents herein opposed that

motion of the petitioner. Acting on the said motion and on the opposition thereto, respondent Judge issued the first

controverted order on May 6, 1968, denying the motion to quash thesubpoena duces tecum.

On May 15, 1968, herein petitioner filed in the court a quo a motion for reconsideration seeking the said court to

reconsider its order denying the motion to quash the subpoena duces tecum. This, too, was opposed by the private

respondents. Acting on this motion, as well as on the opposition thereto, respondent Judge issued the second

controverted order on June 28, 1968, denying the motion for reconsideration. Consequently, on August 6, 1968,

petitioner Universal Rubber Products, Inc. filed its present petition for certiorari with preliminary injunction, alleging that in

so denying its motion to quash the subpoena duces tecum and its subsequent motion for reconsideration, respondent

Judge acted with grave abuse of discretion amounting to an excess of jurisdiction. [1]

Pending the resolution of the appealed case, the Court of Appeals issued on September 25, 1968 a temporary

restraining order directing the respondent Judge of the trial court to refrain from implementing his order dated May 6,

1968 in Civil Case No. 9686. [2]

On November 12, 1968, the respondent Court rendered its Decision denying the petition for certiorari filed by petitioner

for lack of merit. The dispositive portion of the said Decision reads: [3]

WHEREFORE, for lack of merit, the present petition for certiorari with preliminary injunction is hereby denied and the

temporary restraining order issued by this Court on September 25, 1968 is now lifted, with costs against the petitioner.

SO ORDERED.

Petitioner argues three errors to support his Petition, to wit: [4]

I.chanrobles virtual law library

The respondent Court erred when it found the fact of the petition and its annexes as not demonstrating clear

abuse of discretion by respondent Judge.chanrobles virtual law library

II.chanrobles virtual law library

The respondent Court erred when it refused to sustain the contention of petitioner that the issuance by the

respondent judge of the subpoena duces tecum was an arbitrary exercise of judicial power.chanrobles virtual

law library

III.chanrobles virtual law library

The respondent Court erred when it did not consider the subpoena duces tecum issued by the respondent

Judge as a fishing bill when it refused to order its quashal.chanrobles virtual law library

The issues summarized, We are called upon to answer whether the issuance of the "subpoena duces tecum" is proper in

a suit for unfair competition.cralaw

Private respondent claims the affirmative because [1] the subpoena duces tecum in question specifically designates the

books and documents that should be produced in court and they are 4 sales invoices, sales books and ledgers where

are recorded the sales of Plymouth Star Player Rubber Shoes from the time the corporation started manufacturing and

selling shoes [that is from April 1, 1963] up to the present; and [2] the relevancy of the books subject to the

controverted subpoena duces tecum cannot be seriously denied because if and when herein respondent corporations

are ultimately adjudged to be entitled to recover compensatory damages from the petitioner, there would be no factual

basis for the amount of such damages unless those books and documents are laid open for the court's scrutiny.cralaw

On the other hand, petitioner submits a contrary opinion and insists that the question of liability of petitioner should be

determined first before discovery by means of a subpoena duces tecum is allowed; that respondent Converse is a

foreign corporation not licensed to do business in the Philippines and that Edwardson is merely its licensee; that

respondent Converse has no goodwill to speak of and that it has no registrable right over its own names; that the

questioned subpoena duces tecum issued by respondent judge was merely a "Fishing Bill."

In the meantime, while this present petition remains pending before this Court, petitioner manifested on April 2,

1977 [5] that their establishment was totally burned together with all the records which is sought to be produced in court

by the questioned "subpoena duces tecum" on May 3, 1970. In effect, it renders the present petition moot and academic.

However, the legal principles arising from the issues deserve Our discussion and resolution.cralaw

As a general rule, on obtaining an injunction for infringement of a trademark, complainant is entitled to an accounting and

recovery of defendant's profits on the goods sold under that mark, as incident to, and a part of, his property right, and

this rule applies in cases of unfair competition. In such case, the infringer or unfair trader is required in equity to account

for and yield up his gains on a principle analogous to that which charges as trustee with the profits acquired by the

wrongful use of the property of the cestui que trust, and defendant's profits are regarded as an equitable measure of the

compensation plaintiff should receive for the past harm suffered by him. [6]

Well-settled is Our jurisprudence that, in order to entitle a party to the issuance of a "subpoena duces tecum ", it must

appear, by clear and unequivocal proof, that the book or document sought to be produced contains evidence relevant

and material to the issue before the court, and that the precise book, paper or document containing such evidence has

70

been so designated or described that it may be identified. [7] A "subpoena duces tecum" once issued by the court, may

be quashed upon motion if the issuance thereof is unreasonable and oppressive or the relevancy of the books,

documents or things does not appear, or if the persons in whose behalf the subpoena is issued fails to advance the

reasonable cost of production thereof. [8]

In the instant case, in determining whether the books subject to thesubpoena duces tecum are relevant and reasonable

in relation to the complaint of private respondent for unfair competition, We have to examine Republic Act No. 166, which

provides:

Chapter V. Rights and Remedies

xxx xxx xxx

Sec. 23. Actions, and damages and injunction for infringement. - Any person entitled to the exclusive use of a registered

mark or trade name may recover damages in a civil action from any person who infringes his rights and the measure of

the damages suffered shall be either the reasonable profit which the complaining party would have made, had the

defendant not infringed his said rights, or the profit which the defendant actually made out of the infringment

management, or in the event such measure of damages cannot be readily ascertained with reasonable certainty, then

the court may award as damages a reasonable percentage based upon the amount of gross sales of the defendant of

the value of the services in connection with which the mark or trade name was used in the infringement of the rights of

the complaining party. In cases where actual intent to mislead the public or to defraud the complaining party shall be

shown in the discretion of the court, the damages may be doubled.

The complaining party, upon proper showing may also be granted injunction.

In recovering the loss suffered by the aggrieved party due to unfair competition," Sec. 23 of R. A. 166 [9] grants the

complainant three options within which to ascertain the amount of damages recoverable, either [1] the reasonable profit

which the complaining party would have made, had the defendant not infringed his said rights; or [2] the profit which the

defendant actually made out of the infringement; or [3] the court may award as damages a reasonable percentage based

upon the amount of gross sales of the defendant or the value of the services in connection with which the mark or

tradename was issued in the infringement of the rights of the complaining party.

In giving life to this remedial statute, We must uphold the order of the courta quo denying the motion of the petitioner to

quash the "subpoena duces tecum" previously issued against the petitioner. In a suit for unfair competition, it is only

through the issuance of the questioned "subpoena duces tecum" that the complaining party is afforded his full rights of

redress.cralaw

The argument that the petitioner should first be found guilty unfair competition before an accounting for purposes of

ascertaining the amount of damages recoverable can proceed, stands without meritThe complaint for unfair competition

is basically a suit for "injunction and damages." [10]Injunction, for the purpose of enjoining the unlawful competitor from

proceeding further with the unlawful competition, and damages, in order to allow the aggrieved party to recover the

damage he has suffered by virtue of the said unlawful competition. Hence, the election of the complainant [private

respondent herein] for the accounting of petitioner's [defendant below] gross sales as damages per R. A. 166, appears

most relevant. For Us, to determine the amount of damages allowable after the final determination of the unfair

competition case would not only render nugatory the rights of complainant under Sec. 23 of R. A. 166, but would be a

repetitious process causing only unnecessary delay.cralaw

The sufficiency in the description of the books sought to be produced in court by the questioned "subpoena duces

tecum" is not disputed in this case, hence, We hold that the same has passed the test of sufficient description.cralaw

Petitioner also assails that private respondent is a foreign corporation not licensed to do business in the Philippines and

that respondent Edwardson is merely its licensee; that respondent Converse has no goodwill to speak of and that it has

no registrable right over its own name. We have already answered this issue squarely in Our decision of the case of

Converse Rubber Corporation vs. Jacinto Rubber & Plastic Co., Inc., [11] where We explained:

The disability of a foreign corporation from suing in the Philippines is limited to suits to enforce any legal of contract

rights arising from, or growing out, of any business which it has transacted in the Philippine Islands. On the other hand,

where the purpose of the suit is "to protect its reputation, its corporate name, its goodwill, whenever that reputation,

corporate name or goodwill have, through the natural development of its trade, established themselves", an unlicensed

foreign corporation may sue in the Philippines. So interpreted by the Supreme Court, it is clear that Section 29 of the

Corporation Law does not disqualify plaintiff-appellee Converse Rubber, which does not have a branch office in any part

of the Philippines and is not "doing business" in the Philippines, from filing and prosecuting this action for unfair

competition.

As We said earlier, the establishment of the petitioner burned down together with all the records sought to be produced

by the questioned "subpoena duces tecum," hence, this case has become moot and academic. We have no recourse

but to dismiss the same.

WHEREFORE, the instant petition is dismissed for becoming moot and academic. No costs.cralaw

SO ORDERED.cralaw

Makasiar, Concepcion, Jr., Abad Santos, Escolin, and Cuevas, JJ., concur.

Aquino, J., concurs in the result.cralaw

[G.R. No. 118192. October 23, 1997]

PRO LINE SPORTS CENTER, INC., and QUESTOR CORPORATION, petitioners, vs. COURT OF APPEALS, UNIVERSAL ATHLETICS INDUSTRIAL PRODUCTS, INC., and MONICO SEHWANI, respondents.

D E C I S I O N

BELLOSILLO, J.:

This case calls for a revisit of the demesne of malicious prosecution and its implications.

This petition stemmed from a criminal case for unfair competition filed by Pro Line Sports Center, Inc. (PRO LINE) and Questor Corporation (QUESTOR) against Monico Sehwani, president of Universal Athletics and Industrial Products, Inc. (UNIVERSAL). In that case Sehwani was exonerated. As a retaliatory move, Sehwani and UNIVERSAL filed a civil case for damages against PRO LINE and QUESTOR for what they perceived as the wrongful and malicious filing of the criminal action for unfair competition against them.

But first, the dramatis personae. By virtue of its merger with A.G. Spalding Bros., Inc., on 31 December 1971,[1] petitioner QUESTOR, a US-based corporation, became the owner of the trademark "Spalding" appearing in sporting

71

goods, implements and apparatuses. Co-petitioner PRO LINE, a domestic corporation, is the exclusive distributor of "Spalding" sports products in the Philippines.[2] Respondent UNIVERSAL, on the other hand, is a domestic corporation engaged in the sale and manufacture of sporting goods while co-respondent Monico Sehwani is impleaded in his capacity as president of the corporation.

On 11 February 1981, or sixteen years ago, Edwin Dy Buncio, General Manager of PRO LINE, sent a letter-complaint to the National Bureau of Investigation (NBI) regarding the alleged manufacture of fake "Spalding" balls by UNIVERSAL. On 23 February 1981 the NBI applied for a search warrant with the then Court of First Instance, Br. 23, Pasig, Rizal, then presided over by Judge Rizalina Bonifacio Vera. On that same day Judge Vera issued Search Warrant No. 2-81 authorizing the search of the premises of UNIVERSAL in Pasig. In the course of the search, some 1,200 basketballs and volleyballs marked "Spalding" were seized and confiscated by the NBI. Three (3) days later, on motion of the NBI, Judge Vera issued another order, this time to seal and padlock the molds, rubber mixer, boiler and other instruments at UNIVERSAL's factory. All these were used to manufacture the fake "Spalding" products, but were simply too heavy to be removed from the premises and brought under the actual physical custody of the court. However, on 28 April 1981, on motion of UNIVERSAL, Judge Vera ordered the lifting of the seal and padlock on the machineries, prompting the People of the Philippines, the NBI, together with PRO LINE and QUESTOR, to file with the Court of Appeals a joint petition for certiorari and prohibition with preliminary injunction (CA G.R. No. 12413) seeking the annulment of the order of 28 April 1981. On 18 May 1981, the appellate court issued a temporary restraining order enjoining Judge Vera from implementing her latest order.

Meanwhile, on 26 February 1981, PRO LINE and QUESTOR filed a criminal complaint for unfair competition against respondent Monico Sehwani together with Robert, Kisnu, Arjan and Sawtri, all surnamed Sehwani, and Arcadio del los Reyes before the Provincial Fiscal of Rizal (I. S. No. 81-2040). The complaint was dropped on 24 June 1981 for the reason that it was doubtful whether QUESTOR had indeed acquired the registration rights over the mark "Spalding" from A. G. Spalding Bros., Inc., and complainants failed to adduce an actual receipt for the sale of "Spalding" balls by UNIVERSAL.[3]

On 9 July 1981 a petition for review seeking reversal of the dismissal of the complaint was filed with the Ministry of Justice. While this was pending, the Court of Appeals rendered judgment on 4 August 1981 in CA G.R. No. 12413 affirming the order of Judge Vera which lifted the seal and padlock on the machineries of UNIVERSAL. The People, NBI, PRO LINE and QUESTOR challenged the decision of the appellate court before this Court in G.R. No. 57814. On 31 August 1981 we issued a temporary restraining order against the Court of Appeals vis-a-vis the aforesaid decision.

In connection with the criminal complaint for unfair competition, the Minister of Justice issued on 10 September 1981 a Resolution overturning the earlier dismissal of the complaint and ordered the Provincial Fiscal of Rizal to file an Information for unfair competition against Monico Sehwani. The Information was accordingly filed on 29 December 1981 with then Court of First Instance of Rizal, docketed as Crim. Case No. 45284, and raffled to Br. 21 presided over by Judge Gregorio Pineda.

Sehwani pleaded not guilty to the charge. But, while he admitted to having manufactured "Spalding" basketballs and volleyballs, he nevertheless stressed that this was only for the purpose of complying with the requirement of trademark registration with the Philippine Patent Office. He cited Chapter 1, Rule 43, of the Rules of Practice on Trademark Cases, which requires that the mark applied for be used on applicant's goods for at least sixty (60) days prior to the filing of the trademark application and that the applicant must show substantial investment in the use of the mark. He also disclosed that UNIVERSAL applied for registration with the Patent Office on 20 February 1981.

After the prosecution rested its case, Sehwani filed a demurrer to evidence arguing that the act of selling the manufactured goods was an essential and constitutive element of the crime of unfair competition under Art. 189 of the Revised Penal Code, and the prosecution was not able to prove that he sold the products. In its Order of 12 January 1981 the trial court granted the demurrer and dismissed the charge against Sehwani.

PRO LINE and QUESTOR impugned before us in G.R. No. 63055 the dismissal of the criminal case. In our Resolution of 2 March 1983 we consolidated G.R. No. 63055 with G.R. No. 57814 earlier filed. On 20 April 1983 we dismissed the petition in G.R. No. 63055 finding that the dismissal by the trial court of Crim. Case No. 45284 was based on the merits of the case which amounted to an acquittal of Sehwani. Considering that the issue raised in G.R. No. 58714 had already been rendered moot and academic by the dismissal of Crim. Case No. 45284 and the fact that the petition in G.R. No. 63055 seeking a review of such dismissal had also been denied, the Court likewise dismissed the petition in G.R. No. 58714. The dismissal became final and executory with the entry of judgment made on 10 August 1983.

Thereafter, UNIVERSAL and Sehwani filed a civil case for damages with the Regional Trial Court of Pasig[4] charging that PRO LINE and QUESTOR maliciously and without legal basis committed the following acts to their damage and prejudice: (a) procuring the issuance by the Pasig trial court of Search Warrant No. 2-81 authorizing the NBI to raid the premises of UNIVERSAL; (b) procuring an order from the same court authorizing the sealing and padlocking of UNIVERSAL's machineries and equipment resulting in the paralyzation and virtual closure of its operations; (c) securing a temporary restraining order from the Court of Appeals to prevent the implementation of the trial court's order of 28 April 1981 which authorized the lifting of the seal and padlock on the subject machineries and equipment to allow UNIVERSAL to resume operations; (d) securing a temporary restraining order from the High Tribunal against the Court of Appeals and charging the latter with grave abuse of discretion for holding that the order of 28 April 1981 was judiciously issued, thus prolonging the continued closure of UNIVERSAL's business; (e) initiating the criminal prosecution of Monico Sehwani for unfair competition under Art. 189 of the Penal Code; and, (g) appealing the order of acquittal in Crim. Case No. 45284 directly to the Supreme Court with no other purpose than to delay the proceedings of the case and prolong the wrongful invasion of UNIVERSAL's rights and interests.

Defendants PRO LINE and QUESTOR denied all the allegations in the complaint and filed a counterclaim for damages based mainly on the unauthorized and illegal manufacture by UNIVERSAL of athletic balls bearing the trademark "Spalding."

The trial court granted the claim of UNIVERSAL declaring that the series of acts complained of were "instituted with improper, malicious, capricious motives and without sufficient justification." It ordered PRO LINE and QUESTOR jointly and severally to pay UNIVERSAL and Sehwani P676,000.00 as actual and compensatory damages, P250,000.00 as moral damages, P250,000.00 as exemplary damages.[5] and P50,000.00 as attorney's fees. The trial court at the same time dismissed the counterclaim of PRO LINE and QUESTOR.

The Court of Appeals affirmed the decision of the lower court but reduced the amount of moral damages to P150,000.00 and exemplary damages to P100,000.00.

Two (2) issues are raised before us: (a) whether private respondents Sehwani and UNIVERSAL are entitled to recover damages for the alleged wrongful recourse to court proceedings by petitioners PRO LINE and QUESTOR; and, (b) whether petitioners' counterclaim should be sustained.

PRO LINE and QUESTOR cannot be adjudged liable for damages for the alleged unfounded suit. The complainants were unable to prove two (2) essential elements of the crime of malicious prosecution, namely, absence of probable cause and legal malice on the part of petitioners.

UNIVERSAL failed to show that the filing of Crim. Case No. 45284 was bereft of probable cause. Probable cause is the existence of such facts and circumstances as would excite the belief in a reasonable mind, acting on the facts within the knowledge of the prosecutor, that the person charged was guilty of the crime for which he was prosecuted. [6] In the case before us, then Minister of Justice Ricardo C. Puno found probable cause when he reversed the Provincial Fiscal who initially dismissed the complaint and directed him instead to file the corresponding Information for unfair competition against private respondents herein.[7] The relevant portions of the directive are quoted hereunder:

The intent on the part of Universal Sports to deceive the public and to defraud a competitor by the use of the trademark "Spalding" on basketballs and volleyballs seems apparent. As President of Universal and as Vice President of the Association of Sporting Goods Manufacturers, Monico Sehwani should have known of the prior registration of the trademark "Spalding" on basketballs and volleyballs when he filed the application for registration of the same trademark on February 20, 1981, in behalf of Universal, with the Philippine Patent Office. He was even notified by the Patent Office through counsel on March 9, 1981, that "Spalding" was duly registered with said office in connection with sporting goods, implements and apparatus by A.G. Spalding & Bros., Inc. of the U.S.A.

That Universal has been selling these allegedly misbranded "Spalding" balls has been controverted by the firms allegedly selling the goods. However, there is sufficient proof that Universal manufactured balls with the trademark "Spalding" as admitted by Monico himself and as shown by the goods confiscated by virtue of the search warrant.

Jurisprudence abounds to the effect that either a seller or a manufacturer of imitation goods may be liable for violation of Section 29 of Rep. Act No. 166 (Alexander v. Sy Bok, 97 Phil. 57). This is substantially the same rule obtaining in statutes and judicial construction since 1903 when Act No. 666 was approved (Finlay Fleming vs. Ong Tan Chuan, 26 Phil. 579) x x x x[8]

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The existence of probable cause for unfair competition by UNIVERSAL is derivable from the facts and circumstances of the case. The affidavit of Graciano Lacanaria, a former employee of UNIVERSAL, attesting to the illegal sale and manufacture of "Spalding" balls and seized "Spalding" products and instruments from UNIVERSAL's factory was sufficient prima facie evidence to warrant the prosecution of private respondents. That a corporation other than the certified owner of the trademark is engaged in the unauthorized manufacture of products bearing the same trademark engenders a reasonable belief that a criminal offense for unfair competition is being committed.

Petitioners PRO LINE and QUESTOR could not have been moved by legal malice in instituting the criminal complaint for unfair competition which led to the filing of the Information against Sehwani. Malice is an inexcusable intent to injure, oppress, vex, annoy or humiliate. We cannot conclude that petitioners were impelled solely by a desire to inflict needless and unjustified vexation and injury on UNIVERSAL's business interests. A resort to judicial processes is not per se evidence of ill will upon which a claim for damages may be based. A contrary rule would discourage peaceful recourse to the courts of justice and induce resort to methods less than legal, and perhaps even violent.[9]

We are more disposed, under the circumstances, to hold that PRO LINE as the authorized agent of QUESTOR exercised sound judgment in taking the necessary legal steps to safeguard the interest of its principal with respect to the trademark in question. If the process resulted in the closure and padlocking of UNIVERSAL's factory and the cessation of its business operations, these were unavoidable consequences of petitioners' valid and lawful exercise of their right. One who makes use of his own legal right does no injury. Qui jure suo utitur nullum damnum facit. If damage results from a person's exercising his legal rights, it is damnum absque injuria.[10]

Admittedly, UNIVERSAL incurred expenses and other costs in defending itself from the accusation. But, as Chief Justice Fernando would put it, "the expenses and annoyance of litigation form part of the social burden of living in a society which seeks to attain social control through law." [11] Thus we see no cogent reason for the award of damages, exorbitant as it may seem, in favor of UNIVERSAL. To do so would be to arbitrarily impose a penalty on petitioners' right to litigate.

The criminal complaint for unfair competition, including all other legal remedies incidental thereto, was initiated by petitioners in their honest belief that the charge was meritorious. For indeed it was. The law brands business practices which are unfair, unjust or deceitful not only as contrary to public policy but also as inimical to private interests. In the instant case, we find quite aberrant Sehwani's reason for the manufacture of 1,200 "Spalding" balls, i.e., the pending application for trademark registration of UNIVERSAL with the Patent Office, when viewed in the light of his admission that the application for registration with the Patent Office was filed on 20 February 1981, a good nine (9) days after the goods were confiscated by the NBI. This apparently was an afterthought but nonetheless too late a remedy. Be that as it may, what is essential for registrability is proof of actual use in commerce for at least sixty (60) days and not the capability to manufacture and distribute samples of the product to clients.

Arguably, respondents' act may constitute unfair competition even if the element of selling has not been proved. To hold that the act of selling is an indispensable element of the crime of unfair competition is illogical because if the law punishes the seller of imitation goods, then with more reason should the law penalize the manufacturer. In U. S. v. Manuel,[12] the Court ruled that the test of unfair competition is whether certain goods have been intentionally clothed with an appearance which is likely to deceive the ordinary purchasers exercising ordinary care. In this case, it was observed by the Minister of Justice that the manufacture of the "Spalding" balls was obviously done to deceive would-be buyers. The projected sale would have pushed through were it not for the timely seizure of the goods made by the NBI. That there was intent to sell or distribute the product to the public cannot also be disputed given the number of goods manufactured and the nature of the machinery and other equipment installed in the factory.

We nonetheless affirm the dismissal of petitioners' counterclaim for damages. A counterclaim partakes of the nature of a complaint and/or a cause of action against the plaintiffs. [13] It is in itself a distinct and independent cause of action, so that when properly stated as such, the defendant becomes, in respect to the matter stated by him, an actor, and there are two simultaneous actions pending between the same parties, where each is at the same time both a plaintiff and defendant.[14]A counterclaim stands on the same footing and is to be tested by the same rules, as if it were an independent action.[15]

Petitioners' counterclaim for damages based on the illegal and unauthorized manufacture of "Spalding" balls certainly constitutes an independent cause of action which can be the subject of a separate complaint for damages against UNIVERSAL. However, this separate civil action cannot anymore be pursued as it is already barred by res judicata, the judgment in the criminal case (against Sehwani) involving both the criminal and civil aspects of the case for unfair competition.[16] To recall, petitioners PRO LINE and QUESTOR, upon whose initiative the criminal action for unfair competition against respondent UNIVERSAL was filed, did not institute a separate civil action for damages nor reserve

their right to do so. Thus the civil aspect for damages was deemed instituted in the criminal case. No better manifestation of the intent of petitioners to recover damages in the criminal case can be expressed than their active participation in the prosecution of the civil aspect of the criminal case through the intervention of their private prosecutor. Obviously, such intervention could only be for the purpose of recovering damages or indemnity because the offended party is not entitled to represent the People of the Philippines in the prosecution of a public offense. [17] Section 16, Rule 110, of the Rules of Court requires that the intervention of the offended party in the criminal action can be made only if he has not waived the civil action nor expressly reserved his right to institute it separately. [18] In an acquittal on the ground that an essential element of the crime was not proved, it is fundamental that the accused cannot be held criminally nor civilly liable for the offense. Although Art. 28 of the New Civil Code[19] authorizes the filing of a civil action separate and distinct from the criminal proceedings, the right of petitioners to institute the same is not unfettered. Civil liability arising from the crime is deemed instituted and determined in the criminal proceedings where the offended party did not waive nor reserve his right to institute it separately.[20] This is why we now hold that the final judgment rendered therein constitutes a bar to the present counterclaim for damages based upon the same cause.[21]

WHEREFORE, the petition is partly GRANTED. The decision of respondent Court of Appeals is MODIFIED by deleting the award in favor of private respondents UNIVERSAL and Monico Sehwani of actual, moral and exemplary damages as well as attorney's fees.

The dismissal of petitioners' counterclaim is AFFIRMED. No pronouncement as to costs.

SO ORDERED.

Davide, Jr., (Chairman), Vitug, and Kapunan, JJ., concur.

[G.R. No. 144309. November 23, 2001]

SOLID TRIANGLE SALES CORPORATION and ROBERT SITCHON, petitioners, vs. THE SHERIFF OF RTC QC, Branch 93; SANLY CORPORATION, ERA RADIO AND ELECTRICAL SUPPLY, LWT CO., INCORPORATED; ROD CASTRO, VICTOR TUPAZ and the PEOPLE OF THE PHILIPPINES, respondents.

D E C I S I O N

KAPUNAN, J.:

The petition at bar stems from two cases, Search Warrant Case No. Q-3324 (99) before Branch 93 of the Quezon City Regional Trial Court (RTC), and Civil Case No. Q-93-37206 for damages and injunctions before Branch 91 of the same court.

The facts are set forth in the Decision of the Court of Appeals dated July 6, 1999:

x x x on January 28, 1999, Judge Apolinario D. Bruselas, Jr., Presiding Judge of RTC, Branch 93, Quezon City, upon application of the Economic Intelligence and Investigation Bureau (EIIB), issued Search Warrant No. 3324 (99) against Sanly Corporation (Sanly), respondent, for violation of Section 168 of R.A. No. 8293 (unfair competition).

By virtue of Search Warrant No. 3324 (99), EIIB agents seized 451 boxes of Mitsubishi photographic color paper from respondent Sanly. xxx

Forthwith, Solid Triangle, through Robert Sitchon, its Marketing and Communication Manager, filed with the Office of the City Prosecutor, Quezon City, an affidavit complaint for unfair competition against the members of the Board of Sanly and LWT Co., Inc. (LWT), docketed as I.S. No. 1-99-2870.

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Sitchon alleged that ERA Radio and Electrical Supply (ERA), owned and operated by LWT, is in conspiracy with Sanly in selling and/or distributing Mitsubishi brand photo paper to the damage and prejudice of Solid Triangle, [which claims to be the sole and exclusive distributor thereof, pursuant to an agreement with the Mitsubishi Corporation].

On February 4, 1999, petitioner Solid Triangle filed with Judge Bruselas’ sala an urgent ex parte motion for the transfer of custody of the seized Mitsubishi photo color paper stored in the office of EIIB.

On February 8, 1999, respondents Sanly, LWT and ERA moved to quash the search warrant which was denied by Judge Bruselas in an order dated March 5, 1999.

The said respondents filed a motion for reconsideration which was granted by Judge Bruselas in the first assailed order of March 18, 1999. Respondent Judge held that there is doubt whether the act complained of (unfair competition) is criminal in nature.

Petitioner Solid Triangle filed a motion for reconsideration contending that the quashal of the search warrant is not proper considering the pendency of the preliminary investigation in I.S. No. 1-99-2870 for unfair competition wherein the seized items will be used as evidence.

On March 26, 1999, Judge Bruselas issued the second assailed order denying Solid Triangle’s motion for reconsideration.

On March 29, 1999, petitioner Solid Triangle filed with Branch 91 of the same Court, presided by Judge Lita S. Tolentino-Genilo, Civil Case No. Q-99-37206 for damages and injunction with prayer for writs of preliminary injunction and attachment. Impleaded as defendants were Sanly, LWT and ERA.

On March 30, 1999, the defendants filed their opposition to the application for the issuance of writs of injunction and attachment.

On March 31, 1999, Judge Genilo denied petitioner’s application for a preliminary attachment on the ground that the application is not supported with an affidavit by the applicant, through its authorized officer, who personally knows the facts.

Meanwhile, on April 20, 1999, Judge Bruselas issued the third assailed order, the dispositive portion of which reads:

WHEREFORE, the foregoing premises considered, the court directs –

1) EIIB, Mr. Robert Sitchon and Solid Triangle Sales Corporation to divulge and report to the court the exact location of the warehouse where the goods subject of this proceeding are presently kept within seventy-two hours from receipt hereof;

2) Mr. Rober Sitchon and Solid Triangle Sales Corporation to appear and show cause why they should not be held in contempt of court for failure to obey a lawful order of the court at a hearing for the purpose on 12 May 1999 at 8:30 o’clock in the morning;

3) The Deputy Sheriff of this Court to take custody of the seized goods and cause their delivery to the person from whom the goods were seized without further lost [sic] of time;

Let a copy of this order be served by personal service upon Mr. Robert Sitchon and Solid Triangle Sales Corporation. Serve copies also to EIIB and the respondents Rod Castro and Sanly Corporation.

SO ORDERED.[1]

Alleging grave abuse of discretion, petitioners questioned before the Court of Appeals the orders of Branch 93 of the Quezon City RTC granting private respondents’ motion for reconsideration and denying that of petitioners’, as well as the order dated April 20, 1999 directing petitioners to, among other things, show cause why they should not be held in contempt. Petitioners also assailed the order of the Quezon City RTC, Branch 91 denying their application for a writ of attachment. Upon the filing of the petition on April 26, 1999, the Court of Appeals issued a temporary restraining order to prevent Judge Bruselas from implementing the Order dated April 20, 1999.

On July 6, 1999, the Court of Appeals rendered judgment initially granting certiorari. It held that the quashing of the warrant deprived the prosecution of vital evidence to determine probable cause.

Admittedly, the City Prosecutor of Quezon City has filed a complaint for unfair competition against private respondents and that the undergoing preliminary investigation is in progress. In the said proceedings, the prosecution inevitably will present the seized items to establish a prima facie case of unfair competition against private respondents.

Considering that Judge Bruselas quashed the search warrant, he practically deprived the prosecution of its evidence so vital in establishing the existence of probable cause.

Petitioners’ reliance on Vlasons Enterprises Corporation vs. Court of Appeals [155 SCRA 186 (1987).] is in order. Thus:

The proceeding for the seizure of property in virtue of a search warrant does not end with the actual taking of the property by the proper officers and its delivery, usually constructive, to the court. The order for the issuance of the warrant is not a final one and cannot constitute res judicata (Cruz vs. Dinglasan, 83 Phil. 333). Such an order does not ascertain and adjudicate the permanent status or character of the seized property. By its very nature, it is provisional, interlocutory (Marcelo vs. de Guzman, 114 SCRA 657). It is merely the first step in the process to determine the character and title of the property. That determination is done in the criminal action involving the crime or crimes in connection with which the search warrant was issued. Hence, such a criminal action should be prosecuted, or commenced if not yet instituted, and prosecuted. The outcome of the criminal action will dictate the disposition of the seized property.[2]

The appellate court further ruled that the affidavit of merits is not necessary for the order of preliminary attachment to issue considering that the petition itself is under oath:

The denial was based on the ground that the application is not supported by an affidavit of the applicant corporation, through its authorized officer, who personally knows the facts.

We cannot go along with respondent judge’s theory. In Consul vs. Consul [17 SCRA 667 (1996)], the Supreme Court held:

Affidavit of merits has a known purpose: Courts and parties should not require the machinery of justice to grind anew, if the prospects of a different conclusion cannot be reasonably reached should relief from judgment be granted. We look back at the facts here. The petition for relief is verified by petitioner himself. The merits of petitioner’s case are apparent in the recitals of the petition. Said petition is under oath. That oath, we believe, elevates the petition to the same category as a separate affidavit. To require defendant to append an affidavit of merits to his verified petition, to the circumstances, is to compel him to do the unnecessary. Therefore, the defect pointed by the court below is one of forms, not of substance. Result: Absence of a separate affidavit is of de minimis importance.[3]

Upon motion by respondents, however, the Court of Appeals reversed itself. In its “Amendatory Decision,” the appellate court held that there was no probable cause for the issuance of the search warrant. Accordingly, the evidence obtained by virtue of said warrant was inadmissible in the preliminary investigation.

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x x x Under Sections 168 and 170 of R.A. 8293 (the Intellectual Property Code), there is unfair competition if the alleged offender has given to his goods the general appearance of the goods of another manufacturer or dealer and sells or passes them off as goods of that manufacturer or dealer in order to deceive or defraud the general public or the legitimate trader. Also, if he makes false statements in the course of trade to discredit the goods, business, or services of another.

Undisputedly, the seized goods from Sanly are genuine and not mere imitations. This is admitted by petitioners in their application for a search warrant and supporting affidavits, Annexes “A” to “D”, inclusive, in their April 27, 1999 Submission of Annexes to this Court. It bears stressing that there is no showing or allegation that Sanly has presented, sold, or passed off its photographic paper as goods which come from Solid Triangle. There is no attempt on its part to deceive.

Both Sanly and Solid Triangle sell genuine Mitsubishi products. Solid Triangle acquires its goods from Japan on the basis of its exclusive distributorship with Mitsubishi Corporation. While Sanly buys its goods from Hongkong, claiming it is a parallel importer, not an unfair competitor. As defined, a parallel importer is one which imports, distributes, and sells genuine products in the market, independently of an exclusive distributorship or agency agreement with the manufacturer. And, this is precisely what Sanly states as its commercial status.

Records show that Sanly sold its photographic paper purchased from Hongkong without altering its appearance. It is distributed in the same Mitsubishi box with its logo and distinguishing marks as marketed in Japan. The same brown paper with the Mitsubishi seal is wrapped around its products. Copies of the importation documents and the certification on imports issued by the Philippine government recognized Societe’ Generale’ d’ Surveillance (SGS) were appended to the motion to quash search warrant.

Thus, on factual basis, the real dispute is actually between Solid Triangle and the manufacturer Mitsubishi. If Solid Triangle feels aggrieved, it should sue Mitsubishi for damages, if at all for breach of its distributorship. But that is between them.

Certainly, there is here no probable cause to justify the issuance of a search warrant based on a criminal action for “unfair competition.”

Therefore, since there is no probable cause for unfair competition in this case, then the quashal of the search warrant by respondent Judge Bruselas is valid. This being the case, there is merit in the motion for reconsideration.

In ascertaining the legality of a search warrant and the validity of the search and seizure conducted by the EIIB agents by virtue of the warrant, it is essential that a crime has been committed or is being committed and that the things seized are fruits of the crime or the means by which it is committed.

The validity of a search and seizure is of constitutional dimensions. The right to privacy and the sanctity of a person’s house, papers and effects against unreasonable searches and seizures are not only ancient. They are also zealously protected.

x x x

Solid Triangle contends that the quashal of the search warrant deprived it of its right to prove a prima facie case of unfair competition in the preliminary investigation. We initially agreed with it.

While Solid Triangle has the right to present every single piece of evidence it can gather and muster, however, it has no right to prove its case through the use of illegally seized evidence secured in derogation of a constitutionally guaranteed right.

The constitutional provision that any evidence obtained in violation of the provision against unreasonable searches and seizures “shall be inadmissible for any purpose in any proceeding” finds application here. The goods seized without probable cause are fruits of the poisonous tree and cannot be used for the purpose of proving unfair competition during preliminary investigation proceedings.

The case of Vlasons Enterprises Corporation vs. Court of Appeals does not apply since it involved a different set of facts and issues.

On the contrary, it is the case of People vs. Court of Appeals [216 SCRA 101 (1992)] that governs, where the Supreme Court ruled that with the quashal of the search warrant, the seized goods could not be used as evidence for any purpose, in any proceeding.[4]

As regards the preliminary attachment, the appellate court found that there was no ground for the issuance of the writ because:

x x x Sanly does not deny that it sells Mitsubishi photographic color paper. But there is no showing that it attempts to depart from country, defraud Solid Triangle or the buying public, conceal or dispose of unjustly detained personal property, or commit any of the acts provided in Rule 57 of the 1997 Rules of Civil Procedure as grounds for the issuance of a writ of preliminary attachment.[5]

Petitioners moved for reconsideration but the same was denied by the Court of Appeals in its Resolution dated August 4, 2000.

In assailing the Amendatory Decision of the Court of Appeals, petitioners argue that:

I.

THE JUDGE WHO ISSUED A SEARCH WARRANT THAT HAS ALREADY BEEN IMPLEMENTED CANNOT QUASH THE WARRANT ANYMORE, AT LEAST WITHOUT WAITING FOR THE FINDINGS OF THE CITY PROSECUTOR WHO HAS THE EXCLUSIVE JURISDICTION TO DETERMINE PROBABLE CAUSE.

II.

IN THE PARALLEL IMPORTATION EFFECTED BY THE RESPONDENTS WITH DECEIT AND BAD FAITH, THERE EXISTS PROBABLE CAUSE THAT THE CRIME OF UNFAIR COMPETITION UNDER THE INTELLECTUAL PROPERTY CODE HAS BEEN COMMITTED BY THE RESPONDENTS.

III.

PETITIONERS’ APPLICATION FOR A WRIT OF ATTACHMENT CANNOT BE DENIED ON THE GROUND THAT AN AFFIDAVIT OF MERITS IS NOT APPENDED TO THE COMPLAINT, AS THE COURT OF APPEALS HAS ALREADY RULED, AND ON THE GROUND THAT THERE IS NO JUSTIFICATION FOR IT BECAUSE THE QUESTIONS PERTINENT THERETO ARE NOT BEFORE THE COURT OF APPEALS BUT BEFORE THE TRIAL COURT.

IV.

PETITIONERS CANNOT BE HELD LIABLE FOR CONTEMPT IN NOT RETURNING THE GOODS SUBJECT OF THE SEARCH WARRANT NOTWITHSTANDING THE REFUSAL OF THE COURT OF APPEALS TO RULE ON THIS POINT FURTHER WHICH IS A GRIEVOUS ERROR TO THE PREJUDICE OF THE PETITIONERS. [6]

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Petitioners contend that the Constitution does not authorize the judge to reverse himself and quash the warrant, “especially after goods had been seized pursuant to the search warrant, and the prosecution is poised to push forward with the goods as evidence.”[7] In finding that doubt exists that a crime has been committed, it is argued that the judge “trench[ed] upon the prerogative and duty of the city prosecutor.”[8]

The contention has no merit.

It is undisputed that only judges have the power to issue search warrants. [9] This function is exclusively judicial. Article III of the Constitution unequivocally states:

Sec. 2. The right of the people to be secure in their persons, houses, papers, and effects against unreasonable searches and seizures of whatever nature and for any purpose shall be inviolable, and no search warrant or warrant of arrest 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 persons or things to be seized. [Emphasis supplied.]

Inherent in the courts’ power to issue search warrants is the power to quash warrants already issued. In this connection, this Court has ruled that the motion to quash should be filed in the court that issued the warrant unless a criminal case has already been instituted in another court, in which case, the motion should be filed with the latter. [10] The ruling has since been incorporated in Rule 126 of the Revised Rules of Criminal Procedure:

Sec. 14. Motion to quash a search warrant or to suppress evidence; where to file. – A motion to quash a search warrant and/or to suppress evidence obtained thereby may be filed in and acted upon only by the court where the action has been instituted. If no criminal action has been instituted, the motion may be filed in and resolved by the court that issued the search warrant. However, if such court failed to resolve the motion and a criminal case is subsequently filed in another court, the motion shall be resolved by the latter court.

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. Prior to the revision of December 1, 2000, Rule 126 of the Rules of Court provided:

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. [Emphasis supplied.][11]

Note that probable cause is defined as:

xxx the existence of such facts and circumstances which could lead a reasonably discreet and prudent man to believe that an offense has been committed and that the item(s), article(s) or object(s) sought in connection with said offense or subject to seizure and destruction by law is in the place to be searched.[12]

In Kenneth Roy Savage/K Angelin Export Trading vs. Taypin,[13] the Court was confronted with a search warrant that was issued purportedly in connection with unfair competition involving design patents. The Court held that the alleged crime is not punishable under Article 189 of the Revised Penal Code, and accordingly, quashed the search warrant issued for the non-existent crime.

In the issuance of search warrants, the Rules of Court requires a finding of probable cause in connection with one specific offense to be determined personally by the judge after examination of the complainant and the witnesses he may produce, and particularly describing the place to be searched and the things to be seized. Hence, since there is no crime to speak of, the search warrant does not even begin to fulfill these stringent requirements and is therefore defective on its face. x x x.

A preliminary investigation, by definition, also requires a finding by the authorized officer of the commission of a crime. Previous to the 2000 revision, Section 1 of Rule 112 of the Rules of Court defined a preliminary investigation as “an inquiry or proceeding to determine whether there is sufficient ground to engender a well-founded belief that a crime cognizable by the Regional Trial Court has been committed and the respondent is probably guilty thereof, and should be held for trial.”[14]

Section 2 of the same Rule enumerates who may conduct preliminary investigations:

Sec. 2. Officers authorized to conduct preliminary investigations. – The following may conduct preliminary investigations:

(a) Provincial or city fiscals and their assistants;(b) Judges of the Municipal Trial Courts and Municipal Circuit Trial Courts;(c) National and Regional state prosecutors; and

(d) Such other officers as may be authorized by law.

Their authority to conduct preliminary investigations shall include all crimes cognizable by the proper court in their respective territorial jurisdictions.[15]

The determination of probable cause during a preliminary investigation has been described as an executive function.[16]

The proceedings for the issuance/quashal of a search warrant before a court on the one hand, and the preliminary investigation before an authorized officer on the other, are proceedings entirely independent of each other. One is not bound by the other’s finding as regards the existence of a crime. The purpose of each proceeding differs from the other. The first is to determine whether a warrant should issue or be quashed, and the second, whether an information should be filed in court.

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 purposes of issuing or quashing the warrant. This does not, as petitioners would like to believe, constitute a usurpation of the executive function. Indeed, to shirk from this duty would amount to an abdication of a constitutional obligation.

The effect of the quashal of the warrant on the ground that no offense has been committed is to render the evidence obtained by virtue of the warrant “inadmissible for any purpose in any proceeding,” including the preliminary investigation. Article III of the Constitution provides:

Sec. 3. (1) x x x.

(2) Any evidence obtained in violation of this or the preceding section [Section 2] shall be inadmissible for any purpose in any proceeding.

It may be true that, as a result of the quashal of the warrant, the private complainant is deprived of vital evidence to establish his case, but such is the inevitable consequence.

Nevertheless, the inadmissibility of the evidence obtained through an illegal warrant does not necessarily render the preliminary investigation academic. The preliminary investigation and the filing of the information may still proceed if, because of other (admissible) evidence, there exists “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.” The finding by the court that no crime exists does not preclude the authorized officer conducting the preliminary investigation from making his own determination that a crime has been committed and that probable cause exists for purposes of filing the information.

Petitioners also argue that Section 14, Rule 126 of the Revised Rules of Criminal Procedure, supra, while intended “to resolve conflicts of responsibility between courts,” “does not expressly cover the situation where the criminal complaint is pending with the prosecutor.” In such a case, petitioners submit, the public prosecutor should be allowed to resolve the question of whether or not probable cause exists.[17]

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The Court finds this interpretation too contrived. Section 14, Rule 126 precisely covers situations like the one at bar. Section 14 expressly provides that a motion to quash a search warrant and/or to suppress evidence obtained thereby may be filed in and acted upon only by the court where the action has been instituted. Under the same section, the court which issued the search warrant may be prevented from resolving a motion to quash or suppress evidence only when a criminal case is subsequently filed in another court, in which case, the motion is to be resolved by the latter court. It is therefore puerile to argue that the court that issued the warrant cannot entertain motions to suppress evidence while a preliminary investigation is ongoing. Such erroneous interpretation would place a person whose property has been seized by virtue of an invalid warrant without a remedy while the goods procured by virtue thereof are subject of a preliminary investigation.

We now turn to the question of whether the facts, as presented before the trial court, constitute an offense.

Private respondents are alleged to have committed unfair competition in violation of Section 168 of the Intellectual Property Code, which states:

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

168.2 Any person who shall employ deception or any other means contrary to good faith by which he shall pass off the goods manufactured by him or in which he deals, or his business, or services for those of the one having established such goodwill, or who shall commit any acts calculated to produce said result, shall be guilty of unfair competition, and shall be subject to an action therefor.

168.3 In particular, and without in any way limiting the scope of protection against unfair competition, the following shall be deemed guilty of unfair competition:

(a) Any person, who is selling his goods and gives them the general appearance of goods of another manufacturer or dealer, either as to the goods themselves or in the wrapping of the packages in which they are contained, or the devices or words thereon, or in any other feature of their appearance, which would be likely to influence purchasers to believe that the goods offered are those of a manufacturer or dealer, other than the actual manufacturer or dealer, or who otherwise clothes the goods with such appearance as shall deceive the public and defraud another of his legitimate trade, or any subsequent vendor of such goods or any agent of any vendor engaged in selling such goods with a lie 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 service of another who has identified such services in the mind of the public; or

(c) Any person who shall make any false statement in the course of trade or who shall commit any other act contrary to good faith of a nature calculated to discredit the goods, business or services of another.

168.4 The remedies provided by Sections 156, 157 and 161 shall apply mutatis mutandis.

The same law, in Section 170, provides the penalty for violation of Section 168:

SEC. 170. Penalties. – Independent of the civil and administrative sanctions imposed by law, a criminal penalty of imprisonment from two (2) years to five (5) years and a fine ranging from Fifty thousand pesos (50,000) to Two hundred thousand pesos (200,000), shall be imposed on any person who is found guilty of committing any of the acts mentioned in Section 155, Section 168 and Subsection 169.1.

Petitioners submit that “the importation of even genuine goods can constitute a crime under the Intellectual Property Code so long as fraud or deceit is present.” The intent to deceive in this case, according to petitioners, is “patent” “from the following undisputed facts”:

(a) Before marketing its product, the respondents totally obliterated and erased the Emulsion Number and Type that was printed on the box/carton of the product because of which the source of the goods can no longer be traced.

(b) Respondents even covered the boxes with newspapers to conceal true identity.

(c) Being also engaged in the sale of photo equipments [sic] and having had the occasion of participating in the same exhibit with petitioner Solid Triangle several times already, respondents certainly knew that petitioner Solid Triangle is the sole and exclusive importer and distributor of Mitsubishi Photo Paper.

(d) Two agents of the EIIB were also able to confirm from a salesgirl of respondents that substantial quantity of stocks of Mitsubishi Photo Paper are available at respondents’ store and that the products are genuine, as they are duly authorized to sell and distribute it to interested customers.

(e) No better proof of unfair competition is the seizure of the goods, 451 boxes of Mitsubishi photographic color paper.[18]

Petitioners further expound:

47. We may categorize the acts of the respondents as “underground sales and marketing” of genuine goods, undermining the property rights of petitioner Solid Triangle. The Court of Appeals itself recognized the rights of a dealer. The acts of the respondents were made to appropriate unjustly the goodwill of petitioner Solid Triangle, and goodwill is protected by the law on unfair competition.

48. Petitioner Solid Triangle has established a trade or business in which it had acquired goodwill and reputation that will be protected, and so, to permit respondents to continue importing and distributing Mitsubishi Photo Paper, would be to countenance the unlawful appropriation of the benefit of a goodwill which petitioner Solid Triangle has acquired and permit the respondent to grab the reputation or goodwill of the business of another.

49. x x x petitioners have a valid cause to complain against respondents for the criminal violation of the Intellectual Property Law when the latter made it appear that they were duly authorized to sell or distribute Mitsubishi Photo Paper in the Philippines, when in truth and in fact they were not, and when they were hiding their importation from the petitioners by such acts as removing the Emulsion Number and Type and covering the boxes with old newspapers.[19]

We disagree with petitioners and find that the evidence presented before the trial court does not prove unfair competition under Section 168 of the Intellectual Property Code. Sanly Corporation did not pass off the subject goods as that of another. Indeed, it admits that the goods are genuine Mitsubishi photographic paper, which it purchased from a supplier in Hong Kong.[20] Petitioners also allege that private respondents “made it appear that they were duly authorized to sell or distribute Mitsubishi Photo Paper in the Philippines.” Assuming that this act constitutes a crime, there is no proof to establish such an allegation.

We agree with petitioners, however, that the Court of Appeals went beyond the issues when it ruled that there were no grounds for the issuance of an order of preliminary attachment. The only issue raised with respect to the preliminary attachment was whether the application for the writ should have been denied because the same was not supported by an affidavit of the applicant corporation, through its authorized officer, who personally knows the facts. Whether there are sufficient grounds to justify the order is a matter best left to the trial court, which apparently has yet to hear the matter. Thus, we sustain the Court of Appeals’ original decision holding that an affidavit of merit is not necessary since the petition is verified by an authorized officer who personally knows the facts.

Similarly premature is whether petitioners’ failure to return the goods to respondents constituted indirect contempt. The assailed order dated April 20, 1999 was a “show cause” order. Before any hearing on the order could be

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held, petitioners promptly filed a petition for certiorari. Clearly, the trial court had yet to rule on the matter, and for this Court now to hold petitioners’ act contemptuous would preempt said court.

WHEREFORE, the petition is GRANTED IN PART. The Amendatory Decision of the Court of Appeals dated March 31, 2000, as well as its Resolution dated August 4, 2000, is AFFIRMED insofar as it holds that (1) the Quezon City Regional Trial Court, Branch 93, has the power to determine the existence of a crime in quashing a search warrant and, (2) the evidence does not support a finding that the crime of unfair competition has been committed by respondents; andREVERSED insofar as it holds that (1) there are no grounds to warrant the issuance of a writ of preliminary attachment and (2) petitioners are guilty of contempt. The case is remanded for further proceedings to the courts of origin, namely, Branch 91 of RTC, Quezon City for resolution of the application for a writ of attachment, and Branch 93 of the same court for resolution of the application to cite petitioners for contempt.

Petitioners are ordered to return to respondent Sanly Corporation the 451 boxes of Mitsubishi photographic color paper seized by virtue of Search Warrant No. 3324 (99) issued by the Quezon City Regional Trial Court, Branch 93.

SO ORDERED.

Davide, Jr., C.J., (Chairman), Puno, Pardo, and Ynares-Santiago, JJ., concur.

[G.R. No. 157216. November 20, 2003]

246 CORPORATION, doing business under the name and style of ROLEX MUSIC LOUNGE, petitioner, vs. HON. REYNALDO B. DAWAY, in his capacity as Presiding Judge of Branch 90 of the Regional Trial Court of Quezon City, MONTRES ROLEX S.A. and ROLEX CENTRE PHIL. LIMITED, respondents.

D E C I S I O N

YNARES-SANTIAGO, J.:

This is a petition for review on certiorari under Rule 45 of the 1997 Rules of Civil Procedure assailing the November 28, 2002 Decision[1] of the Court of Appeals in CA-G.R. SP No. 64660 which dismissed the petition for certiorari filed by petitioner, as well as the Resolution [2] dated February 13, 2003 denying its motion for reconsideration.

The undisputed facts show that on November 26, 1998, respondents Montres Rolex S.A. and Rolex Centre Phil., Limited, owners/proprietors of Rolex and Crown Device, filed against petitioner 246 Corporation the instant suit for trademark infringement and damages with prayer for the issuance of a restraining order or writ of preliminary injunction[3] before the Regional Trial Court of Quezon City, Branch 90. Respondents alleged that sometime in July 1996, petitioner adopted and, since then, has been using without authority the mark “Rolex” in its business name “Rolex Music Lounge” as well as in its newspaper advertisements as – “Rolex Music Lounge, KTV, Disco & Party Club.”

In its answer raising special affirmative defenses, petitioner argued that respondents have no cause of action because no trademark infringement exist; that no confusion would arise from the use by petitioner of the mark “Rolex” considering that its entertainment business is totally unrelated to the items catered by respondents such as watches, clocks, bracelets and parts thereof. It also contended that the complaint was not properly verified and certified against forum shopping considering that Atty. Alonzo Ancheta, the counsel of record of respondents who signed the verification and certification, was not authorized to represent respondents.[4]

On July 21, 2000, petitioner filed a motion for preliminary hearing on its affirmative defenses. [5] Subsequently, on motion of petitioner, the trial court issued a subpoena ad testificandum requiring Atty. Alonzo Ancheta to appear at the

preliminary hearing.[6] Respondents, in the meantime, filed a Comment and Opposition [7] to the motion for preliminary hearing and a motion to quash the subpoena ad testificandum.

In an Order dated October 27, 2000, the trial court quashed the subpoena ad testificandum and denied petitioner’s motion for preliminary hearing on affirmative defenses with motion to dismiss.[8]

With the denial of the motion for reconsideration on March 16, 2001, petitioner filed a petition for certiorari with the Court of Appeals contending that the trial court gravely abused its discretion in issuing the October 27, 2000 and March 16, 2001 orders.

On November 28, 2002, the Court of Appeals dismissed the petition. The motion for reconsideration filed by petitioner was denied. Hence, the instant petition anchored on the following grounds:

I

IN ISSUING THE ASSAILED DECISIONS, THE HONORABLE COURT OF APPEALS PERFUNCTORILY BRUSHED ASIDE THE CONTROLLING PRECEDENTS LAID DOWN BY THIS HONORABLE COURT IN ESSO STANDARD EASTERN, INC. VS. COURT OF APPEALS AND UNITED CIGARETTE CORPORATION AND OTHER COMPANION CASES HOLDING THAT NO TRADEMARK INFRINGEMENT CAN POSSIBLY OCCUR WHERE THE CONTENDING PARTIES DEAL WITH GOODS AND SERVICES THAT ARE TOTALLY UNRELATED AND NON-COMPETING WITH EACH OTHER.

II

IN ARBITRARILY AND CAPRICIOUSLY RULING THAT THE ISSUES RAISED IN PETITIONER’S CERTIORARI PETITION ARE QUESTIONS OF FACT, THE HONORABLE COURT OF APPEALS VIOLATED NOT ONLY PETITIONERS SUBSTANTIVE DUE PROCESS RIGHTS BUT ALSO THE WELL-SETTLED RULE THAT THE ALLEGATIONS OF THE COMPLAINT IS HYPOTHETICALLY ADMITTED WHEN THE MOTION TO DISMISS IS GROUNDED UPON LACK OF CAUSE OF ACTION. MOREOVER, INDEPENDENT OF THE HYPOTHETICALLY ADMITTED FACTS EMBODIED IN THE COMPLAINT A QUO, THERE ARE SELF-EVIDENT FACTS AND IMPLIEDLY ADMITTED FACTS CONTAINED IN PRIVATE RESPONDENTS’ PLEADINGS THAT WOULD CLEARLY AND UNMISTAKABLY SHOW PRIVATE RESPONDENTS’ LACK OF CAUSE OF ACTION AGAINST HEREIN PETITIONER.

III

THE HONORABLE COURT OF APPEALS VIOLATED PETITIONER’S RIGHT TO SUBSTANTIVE DUE PROCESS WHEN IT ARBITRARILY AND CAPRICIOUSLY RULED THAT WHAT WAS SPECIFICALLY DENIED IN THE ASSAILED OCTOBER 20, 2000 ORDER IS PETITIONER’S MOTION FOR PRELIMINARY HEARING ON DEFENDANT’S AFFIRMATIVE DEFENSES AND NOT PETITIONER’S MOTION TO DISMISS PER SE CONSIDERING THAT:

THERE IS ABSOLUTELY NOTHING IN THE ORDER DATED OCTOBER 20, 2000 OF RESPONDENT JUDGE WHICH SUGGESTS THAT THE RESOLUTION OF PETITIONER’S MOTION TO DISMISS PER SE WAS HELD IN ABEYANCE BY THE RESPONDENT JUDGE. HENCE THE SAID ORDER DATED OCTOBER 20, 2000 ALSO CONSTITUTES A DENIAL ON THE MERITS OF PETITIONER’S MOTION TO DISMISS PER SE AND NOT MERELY OF PETITIONER’S MOTION FOR PRELIMINARY HEARING THEREON.

PRIVATE RESPONDENTS’ COMMENT AND OPPOSITION DATED 11 AUGUST 2000, WHICH WAS CITED AND SUSTAINED BY RESPONDENT JUDGE, CLEARLY TRAVERSED THE MERITS OF THE GROUNDS FOR PETITIONER’S MOTION TO DISMISS PER SE. HENCE, THE SAID 20 OCTOBER 2000 ORDER’S DENIAL OF PETITIONER’S MOTION IS NOT LIMITED TO THE MOTION FOR PRELIMINARY HEARING BUT ALSO CONSTITUTES A DENIAL OF PETITIONER’S MOTION TO DISMISS PER SE.

IV

IN ARBITRARILY AND CAPRICIOUSLY RULING THAT ATTY. ALONZO ANCHETA PROPERLY VERIFIED AND CERTIFIED PRIVATE RESPONDENTS’ COMPLAINT A QUO, THE HONORABLE

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COURT OF APPEALS VIOLATED NOT ONLY PETITIONER’S SUBSTANTIVE DUE PROCESS RIGHTS, BUT ALSO THE DOCTRINE OF SEPARATE CORPORATE PERSONALITY; CONSIDERING THAT THE RECORDS OF THIS CASE IS (sic) COMPLETELY BEREFT AND DEVOID OF ANY DULY EXECUTED SPECIAL POWER OF ATTORNEY, EMANATING FROM PRIVATE RESPONDENTS, WHICH EXPLICITLY AND SPECIFICALLY AUTHORIZES ATTY. ALONZO ANCHETA TO REPRESENT PRIVATE RESPONDENTS MONTRES ROLEX S.A. IN THE FILING OF THE COMPLAINT A QUO. BY REASON THEREOF, PRIVATE RESPONDENTS COULD NOT BE DEEMED TO HAVE VOLUNTARILY APPEARED BEFORE THE RESPONDENT JUDGE; CONSEQUENTLY, THE TRIAL COURT COULD NOT HAVE VALIDLY ACQUIRED JURISDICTION OVER THE PERSON OF PRIVATE RESPONDENTS.

V

IN ARBITRARILY AND CAPRICIOUSLY AFFIRMING RESPONDENT JUDGE’S QUASHAL OF THE SUBPOENA DATED 14 AUGUST 2000 DIRECTED AGAINST ATTY. ALONZO ANCHETA, THE HONORABLE COURT OF APPEALS VIOLATED NOT ONLY PETITIONER’S SUBSTANTIVE DUE PROCESS RIGHTS, BUT ALSO SECTION 9, RULE 132 AND SECTION 7 RULE 133 OF THE 1989 REVISED RULES ON EVIDENCE, AND THE RULING OF THIS HONORABLE COURT IN THE CASE OF PEOPLE VS. RIVERA.[9]

Simply put, the issues are as follows – (1) whether the trial court denied not only petitioner’s motion for preliminary hearing on its affirmative defenses but its motion to dismiss as well; (2) if the answer is in the affirmative, whether or not the trial court gravely abused its discretion in denying said motions; and (3) whether the trial court gravely abused its discretion in quashing the subpoena ad testificandum issued against Atty. Ancheta.

Anent the first issue, we find that what was denied in the order dated October 27, 2000 was not only the motion for preliminary hearing but the motion to dismiss as well. A reading of the dispositive portion of said order shows that the trial court neither qualified its denial nor held in abeyance the ruling on petitioner’s motion to dismiss thus –

IN VIEW OF THE FOREGOING, the aforecited Motion To Quash Subpoena Ad Testificandum is granted; and the aforecited Motion For Preliminary Hearing On Defendant’s Affirmative Defenses With Motion To dismiss The Instant Complaint Based On Said Affirmative Defenses is denied.[10] (Emphasis supplied)

In issuing the assailed order, the trial court ruled on the merits of petitioner’s Motion to Dismiss vis-à-vis respondents’ Comment and Opposition which clearly traversed the affirmative defenses raised by petitioner, to wit:

After carefully going over the pleadings, this Court finds, on the first motion that the arguments raised in the said motion and the reply filed in connection thereto appear to be meritorious; and on the second motion, that the arguments raised in the comments and opposition and the rejoinder filed by the plaintiffs likewise appear to be meritorious.[11]

Moreover, it is presumed that all matters within an issue raised in a case were passed upon by the court. In the absence of evidence to the contrary, the presumption is that the court a quo discharged its task properly.[12]

In Municipality of Biñan Laguna v. Court of Appeals,[13] decided under the old Rules of Civil Procedure, it was held that a preliminary hearing permitted under Rule 16, Section 5, is not mandatory even when the same is prayed for. It rests largely on the sound discretion of the trial court, thus –

SEC. 5. Pleading grounds as affirmative defenses. — Any of the grounds for dismissal provided for in this Rule, except improper venue, may be pleaded as an affirmative defense, and a preliminary hearing may be had thereon as if a motion to dismiss had been filed. (Emphasis supplied)

The use of the word "may" in the aforequoted provision shows that such a hearing is not a matter of right demandable from the trial court; it is not mandatory but discretionary. “May” is an auxiliary verb indicating liberty, opportunity, permission and possibility.[14] Such interpretation is specifically stated under the 1997 Rules of Civil Procedure. Rule 16, Section 6, now provides that a grant of a preliminary hearing rests on the sound discretion of the court, to wit –

SEC. 6. Pleading grounds as affirmative defenses.— If no motion to dismiss has been filed, any of the grounds for dismissal provided for in this Rule may be pleaded as an affirmative defense in the answer and, in the discretion of the court, a preliminary hearing may be had thereon as if a motion to dismiss had been filed. (Emphasis supplied)

In the case at bar, the Court of Appeals did not err in finding that no abuse of discretion could be ascribed to the trial court’s denial of petitioner’s motion for preliminary hearing on its affirmative defenses with motion to dismiss. The issue of whether or not a trademark infringement exists, is a question of fact that could best be determined by the trial court.

Under the old Trademark Law[15] where the goods for which the identical marks are used are unrelated, there can be no likelihood of confusion and there is therefore no infringement in the use by the junior user of the registered mark on the entirely different goods.[16] This ruling, however, has been to some extent, modified by Section 123.1(f) of the Intellectual Property Code (Republic Act No. 8293), which took effect on January 1, 1998. The said section reads:

Sec. 123. Registrability. – 123.1. A mark cannot be registered if it:

x x x x x x x x x

(f) Is identical with, or confusingly similar to, or constitutes a translation of a mark considered well-known in accordance with the preceding paragraph, which is registered in the Philippines with respect to goods or services which are not similar to those with respect to which registration is applied for: Provided, That use of the mark in relation to those goods or services would indicate a connection between those goods or services, and the owner of the registered mark: Provided,further, That the interest of the owner of the registered mark are likely to be damaged by such use; (Emphasis supplied)

A junior user of a well-known mark on goods or services which are not similar to the goods or services, and are therefore unrelated, to those specified in the certificate of registration of the well-known mark is precluded from using the same on the entirely unrelated goods or services, subject to the following requisites, to wit:

1. The mark is well-known internationally and in the Philippines. Under Rule 102 of the Rules and Regulations on Trademarks, Service Marks, Trade Names and Marked or Stamped Containers,[17] in determining whether a mark is well known, the following criteria or any combination thereof may be taken into account:

(a) the duration, extent and geographical area of any use of the mark, in particular, the duration, extent and geographical area of any promotion of the mark, including advertising or publicity and presentation, at fairs or exhibitions, of the goods and/or services to which the mark applies;

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

(c) the degree of the inherent or acquired distinction of the mark;

(d) the quality-image or reputation acquired by the mark;

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

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

(g) the extent to which the mark has been used in the world;

(h) the exclusivity of use attained by the mark in the world;

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

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

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

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

2. The use of the well-known mark on the entirely unrelated goods or services would indicate a connection between such unrelated goods or services and those goods or services specified in the certificate of registration in the well known mark. This requirement refers to the likelihood of confusion of origin or business or some business connection or relationship between the registrant and the user of the mark.

3. The interests of the owner of the well-known mark are likely to be damaged. For instance, if the registrant will be precluded from expanding its business to those unrelated good or services, or if the interests of the registrant of the well-known mark will be damaged because of the inferior quality of the good or services of the user.[18]

Section 123.1(f) is clearly in point because the Music Lounge of petitioner is entirely unrelated to respondents’ business involving watches, clocks, bracelets, etc. However, the Court cannot yet resolve the merits of the present controversy considering that the requisites for the application of Section 123.1(f), which constitute the kernel issue at bar, clearly require determination facts of which need to be resolved at the trial court. The existence or absence of these requisites should be addressed in a full blown hearing and not on a mere preliminary hearing. The respondent must be given ample opportunity to prove its claim, and the petitioner to debunk the same.

The same is true with respect to the issue of whether Atty. Alonzo Ancheta was properly authorized to sign the verification and certification against forum shopping in behalf of respondents. This could be properly resolved during the trial together with the substantive issues raised by petitioner.

Considering that the trial court correctly denied petitioner’s motion for preliminary hearing on its affirmative defenses with motion to dismiss, there exists no reason to compel Atty. Ancheta to testify. Hence, no abuse of discretion was committed by the trial court in quashing the subpoena ad testificandum issued against Atty. Ancheta.

Grave abuse of discretion implies such capricious and whimsical exercise of judgment as equivalent to lack of jurisdiction, or, in other words, where the power is exercised in an arbitrary or despotic manner by reason of passion or personal hostility, and it must be so patent and gross as to amount to an evasion of positive duty or to a virtual refusal to perform the duty enjoined or to act at all in contemplation of law. None of these was committed by the trial court; hence, the Court of Appeals correctly dismissed the petition.

WHEREFORE, in view of all the foregoing, the petition for review on certiorari filed by petitioner is DENIED. The November 28, 2002 Decision and the February 13, 2003 Resolution of the Court of Appeals in CA-G.R. SP No. 64660 which dismissed the petition for certiorari filed by petitioner are AFFIRMED.

SO ORDERED.

Davide, Jr., C.J., (Chairman), Panganiban, Carpio and Azcuna, JJ., concur.