G.R. No. 121867 July 24, 1997 SMITH KLINE & FRENCH LABORATORIES, LTD., petitioner, vs.

COURT OF APPEALS, BUREAU OF PATENTS, TRADEMARKS AND TECHNOLOGY TRANSFER and DOCTORS PHARMACEUTICALS, INC. respondents. DAVIDE, JR., J.: This is an appeal under Rule 45 of the Rules of Court from the decision 1 4 November 1994 of the Court of Appeals in CA-G.R. SP No. 33520, which affirmed the 14 February 1994 decision 2 of the Director of the Bureau of Patents, Trademarks and Technology Transfer (BPTTT) granting a compulsory non-exclusive and nontransferable license to private respondent to manufacture, use and sell in the Philippines its own brands of pharmaceutical products containing petitioner's patented pharmaceutical product known as Cimetidine. Petitioner is a foreign corporation with principal office at Welwyn Garden City, England. It owns Philippine Letters Patent No. 12207 issued by the BPTTT for the patent of the drug Cimetidine. Private respondent is a domestic corporation engaged in the business of manufacturing and distributing pharmaceutical products. On 30 March 1987, it filed a petition for compulsory licensing 3 with the BPTTT for authorization to manufacture its own brand of medicine from the drug Cimetidine and to market the resulting product in the Philippines. The petition was filed pursuant to the provisions of Section 34 of Republic Act No. 165 (An Act Creating a Patent Office Prescribing Its Powers and Duties, Regulating the Issuance of Patents, and Appropriating Funds Therefor), which provides for the compulsory licensing of a particular patent after the expiration of two years from the grant of the latter if the patented invention relates to, inter alia, medicine or that which is necessary for public health or public safety. Private respondent alleged that the grant of Philippine Letters Patent No. 12207 was issued on 29 November 1978; that the petition was filed beyond the two-year protective period provided in Section 34 of R.A. No. 165; and that it had the capability to work the patented product or make use of it in its manufacture of medicine. Petitioner opposed, arguing that private respondent had no cause of action and lacked the capability to work the patented product; the petition failed to specifically divulge how private respondent would use or improve the patented product; and that private respondent was motivated by the pecuniary gain attendant to the grant of a compulsory license. Petitioner also maintained that it was capable of satisfying the demand of the local market in the manufacture and marketing of the medicines covered by the patented product. Finally, petitioner challenged the constitutionality of Sections 34 and 35 of R.A. No. 165 for violating the due process and equal protection clauses of the Constitution. After appropriate proceedings, the BPTTT handed down its decision on 14 February 1994, with the dispositive portion thereof providing: NOW, THEREFORE, by virtue of the powers vested in this Office by Republic Act No. 165, as amended by Presidential Decree No. 1263, there is hereby issued a license in favor of the herein [private respondent], United

Laboratories, Inc., [sic] under Letters Patent No. 12207 issued on November 29, 1978, subject to the following terms and conditions: 1. That [private respondent] be hereby granted a non-exclusive and nontransferable license to manufacture, use and sell in the Philippines its own brands of pharmaceutical products containing [petitioner's] patented invention which is disclosed and claimed in Letters Patent No. 12207; 2. That the license granted herein shall be for the remaining life of said Letters Patent No. 12207 unless this license is terminated in the manner hereinafter provided and that no right or license is hereby granted to [private respondent] under any patent to [petitioner] or [sic] other than recited herein; 5. By virtue of this license, [private respondent] shall pay [petitioner] a royalty on all license products containing the patented substance made and sold by [private respondent] in the amount equivalent to TWO AND ONE HALF PERCENT (2.5%) of the net sales in Philippine currency. The term "net scale" [sic] means the gross amount billed for the product pertaining to Letters Patent No. 12207, less (a) Transportation charges or allowances, if any, included in such amount; (b) Trade, quantity or cash discounts and broker's or agent's or distributor's commissions, if any, allowed or paid; (c) Credits or allowances, if any, given or made on account of rejection or return of the patented product previously delivered; and (d) Any tax, excise or government charge included in such amount, or measured by the production sale, transportation, use of delivery of the products. In case [private respondent's] product containing the patented substance shall contain one or more active ingredients admixed therewith, said product hereinafter identified as admixed product, the royalty to be paid shall be determined in accordance with the following formula: Net Sales on Value of Patented ROYALTY = Admixed Product x 0.025 x Substance Value of Patented Value of Other Substance Active Ingredients 4. The royalties shall be computed after the end of each calendar quarter to all goods containing the patented substance herein involved, made and sold during the precedent quarter and to be paid by [private respondent] at its place of business on or before the thirtieth day of the month following the end of each calendar quarter. Payments should be made to [petitioner's] authorized representative in the Philippines;

5. [Private respondent] shall keep records in sufficient detail to enable [petitioner] to determine the royalties payable and shall further permit its books and records to be examined from time to time at [private respondent's] premises during office hours, to the extent necessary to be made at the expense of [petitioner] by a certified public accountant appointed by [petitioner] and acceptable to [private respondent]. 6. [Private respondent] shall adopt and use its own trademark or labels on all its products containing the patented substance herein involved; 7. [Private respondent] shall comply with the laws on drugs and medicine requiring previous clinical tests and approval of proper government authorities before selling to the public its own products manufactured under the license; 8. [Petitioner] shall have the right to terminate the license granted to [private respondent] by giving the latter thirty (30) days notice in writing to that effect, in the event that [private respondent] default [sic] in the payment of royalty provided herein or if [private respondent] shall default in the performance of other convenants or conditions of this agreement which are to be performed by [private respondent]: (a) [Private respondent] shall have the right provided it is not in default to payment or royalties or other obligations under this agreement, to terminate the license granted to its, [sic] giving [petitioner] thirty (30) days-notice in writing to that effect; (b) Any termination of this license as provided for above shall not in any way operate to deny [petitioner] its rights or remedies, either at laws [sic] or equity, or relieve [private respondent] of the payment of royalties or satisfaction of other obligations incurred prior to the effective date of such termination; and (c) Notice of termination of this license shall be filed with the Bureau of Patents, Trademarks and Technology Transfer. 9. In case of dispute as to the enforcement of the provisions of this license, the matter shall be submitted for arbitration before the Director of Bureau of Patents, Trademarks and Technology Transfer or any ranking official of the Bureau of Patents, Trademarks and Technology Transfer duly delegated by him. 10. This License shall inure to the benefit of each of the parties herein, to the subsidiaries and assigns of [petitioner] and to the successors and assigns of [private respondent]; and 11. This license take [sic] effect immediately. 4

Petitioner then appealed to the Court of Appeals by way of a petition for review, which was docketed as CA-G.R. SP No. 33520. Petitioner claimed that the appealed decision was erroneous because: I. . . [IT] VIOLATES INTERNATIONAL LAW AS EMBODIED IN THE PARIS CONVENTION FOR THE PROTECTION OF INDUSTRIAL PROPERTY AND MUST ACCORDINGLY BE SET ASIDE AND MODIFIED. II. . . [IT] IS AN INVALID EXERCISE OF POLICE POWER. III CONCEDING ARGUENDO THE QUESTIONED DECISION'S VALIDITY, THE BPTTT'S PRONOUNCEMENT FIXING THE ROYALTY AT 2.5% OF THE NET WHOLESALE PRICE IN PHILIPPINE CURRENCY WAS RENDERED WITHOUT ANY FACTUAL BASIS AND AMOUNTS TO EXPROPRIATION OF PRIVATE PROPERTY WITHOUT JUST COMPENSATION WHICH IS VIOLATE OF THE CONSTITUTION. IV. . . [IT] SHOULD NOT HAVE PROCEEDED TO DECIDE THE CASE BELOW FOR FAILURE OF PRIVATE RESPONDENT TO AFFIRMATIVELY PROVE THE JURISDICTIONAL FACT OF PUBLICATION. 5 In its decision of 4 November 1994, 6 the Court of Appeals affirmed in toto the challenged decision. We quote its findings and conclusion upon which the affirmance is anchored, viz.: An assiduous scrutiny of the impugned decision of the public respondent reveals that the same is supported by substantial evidence. It appears that at the time of the filing of the petition for compulsory license on March 24, 1987, the subject letters Patent No. 12207 issued on November 29, 1978 has been in effect for more than two (2) years. The patented invention relates to compound and compositions used in inhibiting certain actions of the histamine, hence, it relates to medicine. Moreover, after hearing and careful consideration of the evidence presented, the Director of Patents ruled that "there is ample evidence to show that [private respondent] possesses such capability, having competent personnel, machines and equipment as well as permit to manufacture different drugs containing patented active ingredients such as ethambutol of American Cyanamid and Ampicillin and Amoxicillin of Beecham Groups, Ltd." As to the claim by the petitioner that it has the capacity to work the patented product although it was not shown that any pretended abuse has been committed, thus the reason for granting compulsory license "is intended not only to give a chance to others to supply the public with the quantity of the patented article but especially to prevent the building up of patent monopolities [sic]." [Parke Davis v. Doctors Pharmaceuticals, Inc., 14 SCRA 1053]. We find that the granting of compulsory license is not simply because Sec. 34 (1) e, RA 165 allows it in cases where the invention relates to food and medicine. The Director of Patents also considered in determining that the applicant has the capability to work or make use of the patented product in the manufacture of a useful product. In this case, the applicant was able to show that Cimetidine, (subject matter of latters Patent No. 12207) is

necessary for the manufacture of an anti-ulcer drug/medicine, which is necessary for the promotion of public health. Hence, the award of compulsory license is a valid exercise of police power. We do not agree to [sic] petitioner's contention that the fixing of the royalty at 2.5% of the net wholesale price amounted to expropriation of private property without just compensation. Paragraph 3, Section 35-B, R.A. No. 165, as amended by P.D. No. 1267, states: Sec. 35-B. Terms and Conditions of Compulsory License. (1) . . . (2) . . . (3) A compulsory license shall only be granted subject to the payment of adequate royalties commensurate with the extent to which the invention is worked. However, royalty payments shall not exceed five percent (5%) of the net wholesale price (as defined in Section 33-A) of the products manufactured under the license. If the product, substance, or process subject of the compulsory license is involved in an industrial project approved by the Board of Investments, the royalty payable to the patentee or patentees shall not exceed three percent (3%) of the net wholesale price (as defined in Section 34-A) of the patented commodity and/or commodity manufactured under the patented process, the same rate of royalty shall be distributed to the patentees in rates proportional to the extent of commercial use by the licensee giving preferential values to the holder of the oldest subsisting product patent. The foregoing provision grants the Director of Patents the use of his sound discretion in fixing the percentage for the royalty rate. In the instant case, the Director of Patents exercised his discretion and ruled that a rate of 2.5% of the net wholesale price is fair enough for the parties. In Parke Davis & Co. vs. DPI and Tiburcio, [L-27004, August 6, 1983, 124 SCRA 115] it was held that "liberal treatment in trade relations should be afforded to local industry for as reasoned out by respondent company, it is so difficult to compete with the industrial grants [sic] of the drug industry, among them being the petitioner herein, that it always is necessary that the local drug companies should sell at much lower (than) the prices of said foreign drug entities." Besides, foreign produce licensor can later on ask for an increase in percentage rate of royalty fixed by the Director of Patents if local sales of license should increase. Further, in Price vs. UNILAB, the award of royalty rate of 2.5% was deemed to be just and reasonable, to wit [166 SCRA 133]: Moreover, what UNILAB has with the compulsory license is the bare right to use the patented chemical compound in the manufacture of a special product, without any

technical assistance from herein respondent-appellant. Besides, the special product to be manufactured by UNILAB will only be used, distributed, and disposed locally. Therefore, the royalty rate of 2.5% is just and reasonable. It appearing that herein petitioner will be paid royalties on the sales of any products [sic] the licensee may manufacture using any or all of the patented compounds, the petitioner cannot complain of a deprivation of property rights without just compensation [Price v. UNILAB, L-82542, September 19, 1988]. We take note of the well-crafted petition submitted by petitioner albeit the legal milieu and a good number of decided cases militate against the grounds posited by petitioner. In sum, considering the well-entrenched jurisprudence sustaining the position of respondents, We reiterate the rule in Basay Mining Corporation vs.SEC, to the effect that The legal presumption is that official duty has been performed. And it is particularly strong as regards administrative agencies vested with powers said to be quasi-judicial in nature, in connection with the enforcement of laws affecting particular fields of activity, the proper regulation and/or promotion of which requires a technical or special training, aside from a good knowledge and grasp of the overall conditions, relevant to said field, obtaining in the nations. The policy and practice underlying our Administrative Law is that courts of justice should respect the findings of fact of said administrative agencies, unless there is absolutely no evidence in support thereof or such evidence is clearly, manifestly and patently insubstantial. [G.R. No. 76695, October 3, 1988, Minute Resolution; Beautifont, Inc., et al. v. Court of Appeals, et al., G.R. No. 50141, January 29, 1988] Its motion for reconsideration having been denied in the resolution 7 of 31 August 1995, petitioner filed the instant petition for review on certiorari with the following assignment of errors: I THE HON. COURT OF APPEALS ERRED IN NOT HOLDING THAT THE BPTTT'S DECISION VIOLATES INTERNATIONAL LAW AS EMBODIED IN (A) THE PARIS CONVENTION FOR THE PROTECTION OF INDUSTRIAL PROPERTY AND (B) THE GATT TREATY, URUGUAY ROUND, AND MUST ACCORDINGLY BE SET ASIDE AND MODIFIED. II THE HON. COURT OF APPEALS ERRED IN NOT HOLDING THAT THE BPTTT'S DECISION IS AN INVALID EXERCISE OF POLICE POWER, ABSENT ANY SHOWING BY EVIDENCE OF AN OVERWHELMING PUBLIC NEED FOR A COMPULSORY LICENSE OVER CIMETIDINE IN FAVOR OF PRIVATE RESPONDENT. III THE HON. COURT OF APPEALS ERRED IN NOT HOLDING THAT THE BPTTT'S PRONOUNCEMENT FIXING THE ROYALTY FOR AN

INVOLUNTARY LICENSE AT 2.5% OF THE NET WHOLESALE PRICE IN PHILIPPINE CURRENCY WAS RENDERED WITHOUT ANY FACTUAL BASIS AND AMOUNTS TO EXPORTATION OF PRIVATE PROPERTY WITHOUT JUST COMPENSATION AND IS IN VIOLATION OF THE CONSTITUTIONAL RIGHT TO DUE PROCESS. IV THE HON. COURT OF APPEALS ERRED IN NOT HOLDING THE BPTTT'S ACTION WAS RENDERED NULL AND VOID FOR FAILURE OF PRIVATE RESPONDENT TO AFFIRMATIVELY PROVE THE JURISDICTIONAL FACT OF PUBLICATION AS REQUIRED BY LAW. We resolved to give due course to the petition and required the parties to submit their respective memoranda, which they did, with that of public respondent filed only on 7 February 1997. After a careful perusal of the pleadings and evaluation of the arguments adduced by the parties, we find this petition to be without merit. In its first assigned error, petitioner invokes Article 5 of the Paris Convention for the Protection of Industrial Property, 8 or "Paris Convention," for short, of which the Philippines became a party thereto only in 1965. 9Pertinent portions of said Article 5, Section A, provide: A. . . . (2) Each country of the union shall have the right to take legislative measures providing for the grant of compulsory licenses to prevent the abuses which might result from the exercise of the exclusive rights conferred by the patent, for example, failure to work. xxx xxx xxx (4) A compulsory license may not be applied for on the ground of failure to work or insufficient working before the expiration of a period of four years from the date of filing of the patent application or three years from the date of the grant of the patent, whichever period expires last; it shall be refused if the patentee justifies his inaction by legitimate reasons. Such a compulsory license shall be non-exclusive and shall not be transferable, even in the form of the grant of a sub-license, except with that part of the enterprise or goodwill which exploits such license. In is thus clear that Section A (2) of Article 5 above unequivocally and explicitly respects the right of member countries to adopt legislative measures to provide for the grant of compulsory licenses to prevent abuses which might result from the exercise of the exclusive rights conferred by the patent. An example provided of possible abuses is "failure to work;" however, as such is merely supplied by way of an example, it is plain that the treaty does not preclude the inclusion of other forms or categories of abuses.

Section 34 of R.A. No. 165, even if the Act was enacted prior to the Philippines' adhesion to the Convention, fits well within the aforequoted provisions of Article 5 of the Paris Convention. In the explanatory note of Bill No. 1156 which eventually became R.A. No. 165, the legislative intent in the grant of a compulsory license was not only to afford others an opportunity to provide the public with the quantity of the patented product, but also to prevent the growth of monopolies. 10 Certainly, the growth of monopolies was among the abuses which Section A, Article 5 of the Convention foresaw, and which our Congress likewise wished to prevent in enacting R.A. No. 165. R.A. No. 165, as amended by Presidential Decree No. 1263, promulgated on 14 December 1977, provides for a system of compulsory licensing under a particular patent. Sections 34 and 35, Article Two, of Chapter VIII read as follows: Sec. 34. Grounds for Compulsory Licensing (1) Any person may apply to the Director for the grant of a license under a particular patent at any time after the expiration of two years from the date of the grant of the patent, under any of the following circumstances: (a) If the patented invention is not being worked within the Philippines on a commercial scale, although capable of being so worked, without satisfactory reason; (b) If the demand for the patented article in the Philippines is not being met to an adequate extent and on reasonable terms; (c) If, by reason of refusal of the patentee to grant a license or licenses on reasonable terms, or by reason of the conditions attached by the patentee to licensee or to the purchase, lease or use of the patented article or working of the patented process or machine for production, the establishment of any new trade or industry in the Philippines is prevented, or the trade or industry therein is unduly restrained; (d) If the working of the invention within the country is being prevented or hindered by the importation of the patented article; or (e) If the patented invention or article relates to food or medicine or manufactured products or substances which can be used as food or medicine, or is necessary for public health or public safety. (2) In any of the above cases, a compulsory license shall be granted to the petitioner provided that he has proved his capability to work the patented product or to make use of the patented product in the manufacture of a useful product, or to employ the patented process. (3) The term "worked" or "working" as used in this section means the manufacture and sale of the patented article, of the patented machine, or the application of the patented process for production, in or by means of a definite and substantial establishment or organization in the Philippines and

on a scale which is reasonable and adequate under the circumstances. Importation shall not constitute "working." xxx xxx xxx Sec. 35. Grant of License. (1) If the Director finds that a case for the grant is a license under Section 34 hereof has been made out, he shall, within one hundred eighty days from the date the petition was filed, order the grant of an appropriate license. The order shall state the terms and conditions of the license which he himself must fix in default of an agreement on the matter manifested or submitted by the parties during the hearing. (2) A compulsory license sought under Section 34-B shall be issued within one hundred twenty days from the filing of the proponent's application or receipt of the Board of Investment's endorsement. The case at bar refers more particularly to subparagraph (e) of paragraph 1 of Section 34 the patented invention or article relates to food or medicine or manufactured products or substances which can be used as food or medicine, or is necessary for public health or public safety. And it may not be doubted that the aforequoted provisions of R.A. No. 165, as amended, are not in derogation of, but are consistent with, the recognized right of treaty signatories under Article 5, Section A (2) of the Paris Convention. Parenthetically, it must be noted that paragraph (4) of Section A, Article 5 of the Paris Convention setting time limitations in the application for a compulsory license refers only to an instance where the ground therefor is "failure to work or insufficient working," and not to any ground or circumstance as the treaty signatories may reasonably determine. Neither may petitioner validly invoke what it designates as the GATT Treaty, Uruguay Round. This act is better known as the Uruguay Final Act signed for the Philippines on 15 April 1994 by Trade and Industry Secretary Rizalino Navarro. 11 Forming integral parts thereof are the Agreement Establishing the World Trade Organization, the Ministerial Declarations and Decisions, and the Understanding on Commitments in Financial Services. 12 The Agreement establishing the World Trade Organization includes various agreements and associated legal instruments. It was only on 14 December 1994 that the Philippine Senate, in the exercise of its power under Section 21 of Article VII of the Constitution, adopted Senate Resolution No. 97 concurring in the ratification by the President of the Agreement. The President signed the instrument of ratification on 16 December 1994. 13 But plainly, this treaty has no retroactive effect. Accordingly, since the challenged BPTTT decision was rendered on 14 February 1994, petitioner cannot avail of the provisions of the GATT treaty. The second and third assigned errors relate more to the factual findings of the Court of Appeals. Well-established is the principle that the findings of facts of the latter are conclusive, unless: (1) the conclusion is a finding grounded entirely on speculation or conjecture; (2) the inference made is manifestly absurd; (3) there is grave abuse of discretion in the appreciation of facts; (4) the judgment is premised on a

misapprehension of facts; (5) the findings of fact are conflicting; and (6) the Court of Appeals, in making its findings, went beyond the issues of the case and the same is contrary to the admissions of both the appellant and appellee. 14 Petitioner has not convinced us that the instant case falls under any of the exceptions. On the contrary, we find the findings of fact and conclusions of respondent Court of Appeals and that of the BPTTT to be fully supported by the evidence and the applicable law and jurisprudence on the matter. Petitioner's claim of violations of the due process and eminent domain clauses of the Bill of Rights are mere conclusions which it failed to convincingly support. As to due the process argument, suffice it to say that full-blown adversarial proceedings were conducted before the BPTTT pursuant to the Patent Law. We agree with the Court of Appeals that the BPTTT exhaustively studied the facts and its findings were fully supported by substantial evidence. It cannot likewise be claimed that petitioner was unduly deprived of its property rights, as R.A. No. 165 not only grants the patent holder a protective period of two years to enjoy his exclusive rights thereto; but subsequently, the law recognizes just compensation in the form of royalties. 15 In Parke, Davis & Co. v. Doctors' Pharmaceuticals, Inc., 16 we held: The right to exclude others from the manufacturing, using, or vending an invention relating to, food or medicine should be conditioned to allowing any person to manufacture, use, or vend the same after a period of three [now two] years from the date of the grant of the letters patent. After all, the patentee is not entirely deprived of any proprietary right. In fact, he has been given the period of three years [now two years] of complete monopoly over the patent. Compulsory licensing of a patent on food or medicine without regard to the other conditions imposed in Section 34 [now Section 35] is not an undue deprivation of proprietary interests over a patent right because the law sees to it that even after three years of complete monopoly something is awarded to the inventor in the form of bilateral and workable licensing agreement and a reasonable royalty to be agreed upon by the parties and in default of such an agreement, the Director of Patents may fix the terms and conditions of the license. As to the fourth assigned error, we hold that petitioner can no longer assail the jurisdiction of the BPTTT, raising this issue only for the first time on appeal. In Pantranco North Express, Inc. v. Court of Appeals, 17 we ruled that where the issue of jurisdiction is raised for the first time on appeal, the party invoking it is so barred on the ground of laches or estoppel under the circumstances therein stated. It is now settled that this rule applies with equal force to quasi-judicial bodies 18 such as the BPTTT. Here, petitioner have not furnished any cogent reason to depart from this rule. WHEREFORE, the petition is hereby DENIED and the challenged decision of the Court of Appeals in CA-G.R. SP No. 33520 is AFFIRMED in toto.

Costs against petitioner. SO ORDERED.

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

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. 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.

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 xxx xxx xxx On 19 December 1990, petitioner filed a motion for reconsideration of the abovementioned 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: xxx xxx xxx 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 LEESURES. 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 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 inCoburn 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. 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 (Inserted by Sec. 2, Rep. Act No. 638.)

Register

Sec. 4. Registration of trade-marks, trade-names and servicemarks 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: 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 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. 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 servicemarks; 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 xxx xxx xxx Following universal acquiescence and comity, our municipal law on trademarks regarding the requirement of actual use in the Philippines must subordinate an international agreement inasmuch as the apparent clash is being decided by a municipal tribunal (Mortisen vs. Peters, Great Britain, High Court of Judiciary of Scotland, 1906, 8 Sessions, 93; Paras, International Law and World Organization, 1971 Ed., p. 20). Withal, the fact that international law has been made part of the law of the land does not by any means imply the primacy of international law over national law in the municipal sphere. Under the doctrine of incorporation as applied in most countries, rules of international law are given a standing equal, not superior, to national legislative enactments. xxx xxx xxx

In other words, (a foreign corporation) may have the capacity to sue for infringement irrespective of lack of business activity in the Philippines on account of Section 21-A of the Trademark Law but the question of whether they have an exclusive right over their symbol as to justify issuance of the controversial writ will depend on actual use of their trademarks in the Philippines in line with Sections 2 and 2-A of the same law. It is thus incongruous for petitioners to claim that when a foreign corporation not licensed to do business in the Philippines files a complaint for infringement, the entity need not be actually using 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. xxx xxx xxx 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: xxx xxx xxx A rule widely accepted and firmly entrenched because it has come down through the years is that actual use in commerce or business is a prerequisite in the acquisition of the right of ownership over a trademark. xxx xxx xxx 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.) xxx xxx xxx

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 Courtprovided 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. 47Similarly, we give little weight to the 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. G.R. No. L-27793 March 15, 1928 PATRICK HENRY FRANK and WILLIAM HENRY appellees, vs.CONSTANCIO BENITO, defendant-appellant. STATEMENT Plaintiffs allege that they are the owners of a patent covering hemp-stripping machine No. 1519579 issued to them by the United States Patent Office of December 16, 1924, and duly registered in the Bureau of Commerce and Industry of the Philippine Islands under the provisions of Act No. 2235 of the Philippine Legislature on March 17, 1925. That the important feature of the machine "is a spindle upon which the hemp to be stripped is wound in the process of stripping." That plaintiffs have for some time been manufacturing the machine under the patent. That the defendant

manufactured a hemp-stripping machine in which, without authority from the plaintiffs, he has embodied and used such spindles and their method of application and use, and is exhibiting his machine to the public for the purpose of inducing its purchase. That the use by the defendant of such spindles and the principle of their application to the stripping of hemp is in violation of, and in conflict with, plaintiffs' patent, together with its conditions and specifications. That the defendant's machine is an infringement upon the patent granted the plaintiffs, and plaintiffs pray for an injunction that the defendant be required to account to plaintiffs for any profits he may have made by reason of such infringement, and for a temporary injunction restraining him in the manufacture of other machines of the same kind of its exhibition, and that upon the final hearing, the injunction be made permanent. The defendant demurred to the complaint upon the ground that the facts alleged therein do not constitute a cause of action, that it is ambiguous and vague, and that it was error to make William Henry Gohn plaintiff. After the demurrer was overruled, the defendant filed an answer in which he denied all of the material allegations of the complaint, except those which are hereinafter admitted, and as a special defense alleges: First. That the defendant has never had at any time nor does he have any knowledge of any suppose invention of the plaintiffs of whatever kind of hemp-stripping machine, whether patented or not, which has circulated or not in the Philippine Islands for the sale thereof or its private exploitation. Second. That not having had any knowledge of any kind of hemp-stripping machine supposed to have been invented by the plaintiffs, it never occurred to the defendant to imitate the unknown invention of the plaintiffs. Third. That the hemp-stripping machine of the plaintiffs, known as "La Constancia," patent of which is duly registered, has its characteristics and original invention belonging to the defendant which consist of two pinions with horizontal grooves which form the tool for extracting the fibers between a straight knife upon another which is cylindrical and provided with teeth and on the center of said two pinions there is a flying wheel its transmission belt connecting it with the motor. As a counterclaim, the defendant alleges: First. That he reproduces in this paragraph each and every allegation contained in the preceding special defense, as though the same were literally copied here. Second. That by the filing of the complaint of the plaintiffs and the issuance, as a consequence thereof, of a writ of injunction in this case, unduly obtained by the said plaintiffs through false and fraudulent representations, the defendant has suffered damages in the sum of five thousand pesos (P5,000), Philippine currency.

GOHN, plaintiff-

Wherefore, the defendant prays this court that he be absolved from the herein complaint, and that the plaintiffs be ordered jointly and severally to pay the sum of five thousand pesos (P5,000), Philippine currency, as damages, with legal interest thereon from the filing of this action until fully paid; with the costs of this case, as well as any other remedy that may be proper in law and equity. The lower court rendered judgment in legal effect granting the plaintiffs the injunction prayed for in their complaint, and absolving them from defendant's counterclaim, and judgment against the defendant for costs. The defendant's motion for a new trial was overruled, and on appeal, he contends that the court erred in holding the same spindles used by the parties in this case, though different in material and form, have the same utility and efficiency and that they are the same, and in finding that spindles used by the defendant are an imitation of those of the plaintiffs, and in finding that the defendant infringed upon plaintiffs' patent, and in not rendering judgment against the plaintiffs, requiring them to pay defendant P5,000 as damages, and in enjoining the appellant from the manufacture, use and sale of this hemp-stripping machine. JOHNS, J.: It is conceded that on December 16, 1924, the United States Patent Office issued to the plaintiffs the patent in question No. 1519579, and it was duly registered in the Bureau of Commerce and Industry of the Philippine Islands on March 17, 1925. After such registration the patent laws, as they exist in the United States for such patent, are then applied to and are in force and effect in the Philippine Islands. (Vargas vs. F. M. Yaptico & Co., 40 Phil., 195.) In the instant case, the original patent is in evidence, and that decision further holds that: The burden of proof to substantiate a charge of infringement is with the plaintiff. Where, however, the plaintiff introduces the patent in evidence, if it is in due form, it affords a prima facie presumption of its correctness and validity. The decision of the Commissioner of Patents in granting the patent is always presumed to be correct. The burden the shifts to the defendant to overcome by competent evidence this legal presumption. That is to say, the patent, which in the instant case is in due form, having been introduced in evidence, "affords a prima facie presumption of its correctness and validity." Hence, this is not a case of a conflict between two different patents. In the recent of Temco Electric Motor Co. vs. Apco Mfg. Co., decided by the Supreme Court of the United States on January 3, 1928, Advance Sheet No. 5, p. 192, the syllabus says: An improper cannot appropriate the basic patent of another, and if he does so without license is an infringer, and may be used as such. And on page 195 of the opinion, it is said:

It is well established that an improver cannot appropriate the basic patent of another and that the improver without a license is an infringer and may be sued as such. Citing a number of Federal decisions. The plans and specifications upon which the patent was issued recite: Our invention relates to hemp stripping machines and it consists in the combinations, constructions and arrangements herein described and claimed. An object of our invention is to provide a machine affording facilities whereby the operation of stripping hemp leaves may be accomplished mechanically, thereby obviating the strain incident to the performance of hemp stripping operations manually. And on page 3 of the application for patent, it is said: Obviously, our invention is susceptible of embodiment in forms other than the illustrated herein and we therefore consider as our own all modifications of the form of device herein disclosed which fairly fall within the spirit and scope of our invention as claimed. We claim: 1. In a hemp stripping machine, a stripping head having a supporting portion on which the hemp leaves may rest and having also an upright bracket portion, a lever of angular formation pivotally attached substantially at the juncture of the arms thereof of the bracket portion of the stripping head, whereby one arm of the lever overlies the supporting portion of the stripping head, a blade carried by said one arm of the lever for cooperating with said supporting, means connected with the other arm of the lever and actuating the latter to continously urge the blade toward said supporting portion of the stripping head, and a rotatable spindle positioned adjacent to said stripping head, said spindle being adapted to be engaged by hemp leaves extending across said supporting portion of the stripping head underneath said blade and being operable to draw said hemp leaves in the direction of their length between said supporting portion of the stripping head and said blade. 2. In a hemp stripping machine, a stripping head having a horizontal table portion, a rest supported upon said table portion, a stripping knife supported upon the table for movement into and out of position to cooperate with the rest to strip hemp leaves drawn between the knife and the rest, and power driven means adapted to be engaged with said hemp leaves and to pull the latter between the knife and rest, said power driven means including a rotating spindle, said spindle being free at one end and tapering regularly toward its free end.

3. In a hemp stripping machine, a stripping head having a horizontal table portion and an upright bracket portion a rest holder adjustably on the table portion, a rest resiliently supported by the holder, a knife carrying lever of angular formation and being pivotally attached substantially at the juncture of the arms thereof to the bracket portion of the stripping head, whereby one arm of the lever overlies the rest, a blade adjustably supported on said one arm, for cooperating with said rest and gravity means connected with the other arm of the lever and actuating the latter to continously urge the blade toward the rest. The spindle upon which the patent was obtained, together with the spindle upon which the defendant relies are exhibits in the record and were before the court at the time this case was argued. The spindle of the plaintiffs was made of wood, conical in shape and with a smooth surface. That of the defendant was somewhat similar in shape, but was made of metal with rough surface, and the defendant claims that his spindle was more effective and would do better work than that of the plaintiffs. Be that as it may, the plaintiffs have a patent for their machine, and the defendant does not have a patent, and the basic principle of plaintiffs' patent is the spindle upon which they rely, together with its specified manner and mode of operation, and in the final analysis, it must be conceded that the basic principle of the spindle upon which the defendant relies is founded upon the basic principle of the spindle for which the plaintiffs have a patent. Assuming, without deciding, that the defendant's spindle is an improvement upon and is a better spindle than that of the plaintiffs, yet, under the authority above cited, the defendant had no legal right to appropriate the basic principle upon which the plaintiffs obtained their patent. The plaintiffs having obtained their patent, which was duly registered in the Philippines Islands, the defendant cannot infringe upon its basic principle. The defendant contends that the basic principle of the spindle was a very old one in mechanics, and that there was nothing new or novel in the application of it by the plaintiffs. Be that as it may, the plaintiffs applied for and obtained their patent with its specifications which are attached to, and made part of, the patent, and the proof is conclusive that the defendant is infringing upon the basic principle of the spindle as it is defined and specified in plaintiffs' patent. The judgment of the lower court is affirmed, with costs. So ordered. G.R. No. 113388 September 5, 1997 ANGELITA MANZANO, petitioner, vs.COURT OF APPEALS, and MELECIA MADOLARIA, as Assignor to NEW UNITED FOUNDRY MANUFACTURING CORPORATION, respondents. BELLOSILLO, J.: The primary purpose of the patent system is not the reward of the individual but the advancement of the arts and sciences. The function of a patent is to add to the sum of useful knowledge and one of the purposes of the patent system is to encourage dissemination of information concerning discoveries and inventions. This is a matter which is properly within the competence of the Patent Office the official action of which has the presumption of correctness and may not be interfered with in the absence of new evidence carrying thorough conviction that the Office has erred.

Since the Patent Office is an expert body preeminently qualified to determine questions of patentability, its findings must be accepted if they are consistent with the evidence, with doubts as to patentability resolved in favor of the Patent Office. 1 Petitioner Angelita Manzano filed with the Philippine Patent Office on 19 February 1982 an action for the cancellation of Letters Patent No. UM-4609 for a gas burner registered in the name of respondent Melecia Madolaria who subsequently assigned the letters patent to New United Foundry and Manufacturing Corporation (UNITED FOUNDRY, for brevity). Petitioner alleged that (a) the utility model covered by the letters patent, in this case, an LPG gas burner, was not inventive, new or useful; (b) the specification of the letters patent did not comply with the requirements of Sec. 14, RA No. 165, as amended; (c) respondent Melecia Madolaria was not the original, true and actual inventor nor did she derive her rights from the original, true and actual inventor of the utility model covered by the letters patent; and, (d) the letters patent was secured by means of fraud or misrepresentation. In support of her petition for cancellation petitioner further alleged that (a) the utility model covered by the letters patent of respondent had been known or used by others in the Philippines for more than one (1) year before she filed her application for letters patent on 9 December 1979; (b) the products which were produced in accordance with the utility model covered by the letters patent had been in public use or on sale in the Philippines for more than one (1) year before the application for patent therefor was filed. Petitioner presented the following documents which she correspondingly marked as exhibits: (a) affidavit of petitioner alleging the existence of prior art, marked Exh. "A;" (b) a brochure distributed by Manila Gas Corporation disclosing a pictorial representation of Ransome Burner made by Ransome Torch and Burner Company, USA, marked Exh. "D;" and, (c) a brochure distributed by Esso Gasul or Esso Standard Eastern, Inc., of the Philippines showing a picture of another similar burner with top elevation view and another perspective view of the same burner, marked Exh. "E." Testifying for herself petitioner narrated that her husband Ong Bun Tua worked as a helper in the UNITED FOUNDRY where respondent Melecia Madolaria used to be affiliated with from 1965 to 1970; that Ong helped in the casting of an LPG burner which was the same utility model of a burner for which Letters Patent No. UM-4609 was issued, and that after her husband's separation from the shop she organized Besco Metal Manufacturing (BESCO METAL, for brevity) for the casting of LPG burners one of which had the configuration, form and component parts similar to those being manufactured by UNITED FOUNDRY. Petitioner presented in evidence an alleged model of an LPG burner marked Exh. "K" and covered by the Letters Patent of respondent, and testified that it was given to her in January 1982 by one of her customers who allegedly acquired it from UNITED FOUNDRY. Petitioner also presented in evidence her own model of an LPG burner called "Ransome" burner marked Exh. "L," which was allegedly manufactured in 1974 or 1975 and sold by her in the course of her business operation in the name of BESCO METAL. Petitioner claimed that this "Ransome" burner (Exh. "L") had the same configuration and mechanism as that of the model which was patented in favor of private respondent Melecia Madolaria. Also presented by petitioner was a burner cup of an imported "Ransome" burner marked Exh "M" which was allegedly existing even before the patent application of private respondent.

Petitioner presented two (2) other witnesses, namely, her husband Ong Bun Tua and Fidel Francisco. Ong testified that he worked as a helper in the UNITED FOUNDRY from 1965 to 1970 where he helped in the casting of LPG burners with the same form, configuration and mechanism as that of the model covered by the Letters Patent issued to private respondent. Francisco testified that he had been employed with the Manila Gas Corporation from 1930 to 1941 and from 1952 up to 1969 where he retired as supervisor and that Manila Gas Corporation imported "Ransome" burners way back in 1965 which were advertised through brochures to promote their sale. Private respondent, on the other hand, presented only one witness, Rolando Madolaria, who testified, among others, that he was the General Supervisor of the UNITED FOUNDRY in the foundry, machine and buffing section; that in his early years with the company, UNITED FOUNDRY was engaged in the manufacture of different kinds of gas stoves as well as burners based on sketches and specifications furnished by customers; that the company manufactured early models of single-piece types of burners where the mouth and throat were not detachable; that in the latter part of 1978 respondent Melecia Madolaria confided in him that complaints were being brought to her attention concerning the early models being manufactured; that he was then instructed by private respondent to cast several experimental models based on revised sketches and specifications; that private respondent again made some innovations; that after a few months, private respondent discovered the solution to all the defects of the earlier models and, based on her latest sketches and specifications, he was able to cast several models incorporating the additions to the innovations introduced in the models. Various tests were conducted on the latest model in the presence and under the supervision of Melecia Madolaria and they obtained perfect results. Rolando Madolaria testified that private respondent decided to file her application for utility model patent in December 1979. On 7 July 1986 the Director of Patents Cesar C. Sandiego issued Decision No. 86-56 denying the petition for cancellation and holding that the evidence of petitioner was not able to establish convincingly that the patented utility model of private respondent was anticipated. Not one of the various pictorial representations of business clearly and convincingly showed that the devices presented by petitioner was identical or substantially identical with the utility model of the respondent. The decision also stated that even assuming that the brochures depicted clearly each and every element of the patented gas burner device so that the prior art and patented device became identical although in truth they were not, they could not serve as anticipatory bars for the reason that they were undated. The dates when they were distributed to the public were not indicated and, therefore, were useless prior art references. The records and evidence also do not support the petitioner's contention that Letters Patent No. UM-4609 was obtained by means of fraud and/or misrepresentation. No evidence whatsoever was presented by petitioner to show that the then applicant Melecia Madolaria withheld with intent to deceive material facts which, if disclosed, would have resulted in the refusal by the Philippine Patent Office to issue the Letters Patent under inquiry. Petitioner elevated the decision of the Director of Patents to the Court of Appeals which on 15 October 1993 affirmed the decision of the Director of Patents. Hence, this petition for review on certiorari alleging that the Court of Appeals erred (a) in relying on imaginary differences which in actuality did not exist between the model of

private respondent covered by Letters Patent No. UM-4609 and the previously known model of Esso Standard Eastern, Inc., and Manila Gas Corporation, making such imaginary differences grounded entirely on speculation, surmises and conjectures; (b) in rendering judgment based on misapprehension of facts; (c) in relying mainly on the testimony of private respondent's sole witness Rolando Madolaria; and, (d) in not cancelling Letters Patent No. UM-4609 in the name of private respondent. Petitioner submits that the differences cited by the Court of Appeals between the utility model of private respondent and the models of Manila Gas Corporation and Esso Standard Eastern, Inc., are more imaginary than real. She alleges that based on Exhs. "E," "E-1," "F" and "F-1" or the brochures of Manila Gas Corporation and Esso Standard Eastern, Inc., presented by petitioner, the cup-shaped burner mouth and threaded hole on the side are shown to be similar to the utility model of private respondent. The exhibits also show a detachable burner mouth having a plurality of upwardly existing undulations adopted to act as gas passage when the cover is attached to the top of said cup-shaped mouth all of which are the same as those in the patented model. Petitioner also denies as substantial difference the short cylindrical tube of the burner mouth appearing in the brochures of the burners being sold by Manila Gas Corporation and the long cylindered tube of private respondent's model of the gas burner. Petitioner argues that the actual demonstration made during the hearing disclosed the similarities in form, operation and mechanism and parts between the utility model of private respondent and those depicted in the brochures. The findings of the Patent Office and the Court of Appeals that the brochures of Manila Gas Corporation and Esso Standard Eastern, Inc., are undated cannot overcome the fact of their circulation before private respondent filed her application for utility model patent. Petitioner thus asks this Court to take judicial notice of the fact that Esso Standard Eastern, Inc., disappeared before 1979 and reappeared only during the Martial Law years as Petrophil Corporation. Petitioner also emphasizes that the brochures indicated the telephone number of Manila Gas Corporation as 5-79-81 which is a five (5) numbered telephone number existing before 1975 because telephones in Metro Manila started to have six (6) numbers only after that year. Petitioner further contends that the utility model of private respondent is absolutely similar to the LPG burner being sold by petitioner in 1975 and 1976, and also to the "Ransome" burner depicted in the old brochures of Manila Gas Corporation and Esso Standard Eastern, Inc., fabricated by Ransome Torch and Burner Company of Oakland, California, USA, especially when considered through actual physical examination, assembly and disassembly of the models of petitioner and private respondent. Petitioner faults the Court of Appeals for disregarding the testimonies of Ong Bun Tua and Fidel Francisco for their failure to produce documents on the alleged importation by Manila Gas Corporation of "Ransome" burners in 1965 which had the same configuration, form and mechanism as that of the private respondent's patented model. Finally, it is argued that the testimony of private respondent's lone witness Rolando Madolaria should not have been given weight by the Patent Office and the Court of Appeals because it contained mere after-thoughts and pretensions.

We cannot sustain petitioner. Section 7 of RA No. 165, as amended, which is the law on patents, expressly provides Sec. 7. Inventians patentable. Any invention of a new and useful machine, manufactured product or substance, process or an improvement of any of the foregoing, shall be patentable. Further, Sec. 55 of the same law provides Sec. 55. Design patents and patents for utility models. (a) Any new, original and ornamental design for an article of manufacture and (b) any new model of implements or tools or of any industrial product or of part of the same, which does not possess the quality of invention, but which is of practical utility by reason of its form, configuration, construction or composition, may be protected by the author thereof, the former by a patent for a design and the latter by a patent for a utility model, in the same manner and subject to the same provisions and requirements as relate to patents for inventions insofar as they are applicable except as otherwise herein provided. The element of novelty is an essential requisite of the patentability of an invention or discovery. If a device or process has been known or used by others prior to its invention or discovery by the applicant, an application for a patent therefor should be denied; and if the application has been granted, the court, in a judicial proceeding in which the validity of the patent is drawn in question, will hold it void and ineffective. 2 It has been repeatedly held that an invention must possess the essential elements of novelty, originality and precedence, and for the patentee to be entitled to the protection the invention must be new to the world. 3 In issuing Letters Patent No. UM-4609 to Melecia Madolaria for an "LPG Burner" on 22 July 1981, the Philippine Patent Office found her invention novel and patentable. The issuance of such patent creates a presumption which yields only to clear and cogent evidence that the patentee was the original and first inventor. The burden of proving want of novelty is on him who avers it and the burden is a heavy one which is met only by clear and satisfactory proof which overcomes every reasonable doubt. 4 Hence, a utility model shall not be considered "new" if before the application for a patent it has been publicly known or publicly used in this country or has been described in a printed publication or publications circulated within the country, or if it is substantially similar to any other utility model so known, used or described within the country. 5 As found by the Director of Patents, the standard of evidence sufficient to overcome the presumption of legality of the issuance of UM-4609 to respondent Madolaria was not legally met by petitioner in her action for the cancellation of the patent. Thus the Director of Patents explained his reasons for the denial of the petition to cancel private respondent's patent Scrutiny of Exhs. "D" and "E" readily reveals that the utility model (LPG Burner) is not anticipated. Not one of the various pictorial representations of

burners clearly and convincingly show that the device presented therein is identical or substantially identical in construction with the aforesaid utility model. It is relevant and material to state that in determining whether novelty or newness is negatived by any prior art, only one item of the prior art may be used at a time. For anticipation to occur, the prior art must show that each element is found either expressly or described or under principles of inherency in a single prior art reference or that the claimed invention was probably known in a single prior art device or practice. (Kalman v. Kimberly Clark, 218 USPQ 781, 789) Even assuming gratia arguendi that the aforesaid brochures do depict clearly on all fours each and every element of the patented gas burner device so that the prior art and the said patented device become identical, although in truth they are not, they cannot serve as anticipatory bars for the reason that they are undated. The dates when they were distributed to the public were not indicated and, therefore, they are useless prior art references. xxx xxx xxx Furthermore, and more significantly, the model marked Exh. "K" does not show whether or not it was manufactured and/or cast before the application for the issuance of patent for the LPG burner was filed by Melecia Madolaria. With respect to Exh. "L," petitioner claimed it to be her own model of LPG burner allegedly manufactured sometime in 1974 or 1975 and sold by her in the course of her business operation in the name of Besco Metal Manufacturing, which burner was denominated as "Ransome" burner xxx xxx xxx But a careful examination of Exh. "L" would show that it does not bear the word "Ransome" which is the burner referred to as the product being sold by the Petitioner. This is not the way to prove that Exh. "L" anticipates Letters Patent No. UM-4609 through Exhs. "C" and "D." Another factor working against the Petitioner's claims is that an examination of Exh. "L" would disclose that there is no indication of the time or date it was manufactured. This Office, thus has no way of determining whether Exh. "L" was really manufactured before the filing of the aforesaid application which matured into Letters Patent No. UM-4609, subject matter of the cancellation proceeding. At this juncture, it is worthwhile to point out that petitioner also presented Exh. "M" which is the alleged burner cup of an imported "Ransome" burner. Again, this Office finds the same as unreliable evidence to show anticipation. It observed that there is no date indicated therein as to when it was manufactured and/or imported before the filing of the application for issuance of patent of the subject utility model. What is more, some component parts of Exh. "M" are missing, as only the cup was presented so

that the same could not be compared to the utility model (subject matter of this case) which consists of several other detachable parts in combination to form the complete LPG burner. xxx xxx xxx It must likewise be pointed out that Ong Bun Tua testified on the brochures allegedly of Manila Gas and of Esso Gasul marked Exhs. "E" and "F" and on the alleged fact that Manila Gas Corporation was importing from the United States "Ransome" burners. But the same could not be given credence since he himself admitted during cross-examination that he has never been connected with Manila Gas Corporation. He could not even present any importation papers relating to the alleged imported ransome burners. Neither did his wife. 6 The above findings and conclusions of the Director of Patent were reiterated and affirmed by the Court of Appeals. 7 The validity of the patent issued by the Philippine Patent Office in favor of private respondent and the question over the inventiveness, novelty and usefulness of the improved model of the LPG burner are matters which are better determined by the Patent Office. The technical staff of the Philippine Patent Office composed of experts in their field has by the issuance of the patent in question accepted private respondent's model of gas burner as a discovery. There is a presumption that the Office has correctly determined the patentability of the model 8 and such action must not be interfered with in the absence of competent evidence to the contrary. The rule is settled that the findings of fact of the Director of Patents, especially when affirmed by the Court of Appeals, are conclusive on this Court when supported by substantial evidence. Petitioner has failed to show compelling grounds for a reversal of the findings and conclusions of the Patent Office and the Court of Appeals. The alleged failure of the Director of Patents and the Court of Appeals to accord evidentiary weight to the testimonies of the witnesses of petitioner showing anticipation is not a justification to grant the petition. Pursuant to the requirement of clear and convincing evidence to overthrow the presumption of validity of a patent, it has been held that oral testimony to show anticipation is open to suspicion and if uncorroborated by cogent evidence, as what occurred in this case, it may be held insufficient. 9 Finally, petitioner would want this Court to review all over again the evidence she presented before the Patent Office. She argues that contrary to the decision of the Patent Office and the Court of Appeals, the evidence she presented clearly proves that the patented model of private respondent is no longer new and, therefore, fraud attended the acquisition of patent by private respondent. It has been held that the question on priority of invention is one of fact. Novelty and utility are likewise questions of fact. The validity of patent is decided on the basis of factual inquiries. Whether evidence presented comes within the scope of prior art is a

factual issue to be resolved by the Patent Office. 10 There is question of fact when the doubt or difference arises as to the truth or falsehood of alleged facts or when the query necessarily invites calibration of the whole evidence considering mainly the credibility of witnesses, existence and relevance of specific surrounding circumstances, their relation to each other and to the whole and the probabilities of the situation. 11 Time and again we have held that it is not the function of the Supreme Court to analyze or weigh all over again the evidence and credibility of witnesses presented before the lower tribunal or office. The Supreme Court is not a trier of facts. Its jurisdiction is limited to reviewing and revising errors of law imputed to the lower court, its findings of fact being conclusive and not reviewable by this Court. WHEREFORE, the Petition is DENIED. The Decision of the Court of Appeals affirming that of the Philippine Patent Office is AFFIRMED. Costs against petitioner. SO ORDERED. G.R. No. 14101 September 24, 1919 ANGEL VARGAS, plaintiff-appellant, vs.F. M. YAPTICO & CO. (Ltd.), defendantappellee. MALCOLM, J.: Rude wooden implements for tilling the soil have been in use in the Philippines, possibly not since the Israelites "went down to sharpen every man his share and his coulter," but certainly for many years. Iron plows called "Urquijo" and "Pony" have latterly been the vogue. Angel Vargas, a farmer acquainted with local conditions and alive to the commercial possibilities, took it upon himself to produce, with the native plow as the model, an improved, adjustable plow. On July 22, 1910, he made application for a United States patent to cover his so-called invention. On March 12, 1912, letters patent were issued by the United States Patent Office in favor of Vargas .On April 24, 1912, a certified copy of the patent was filed in the Division of Patents, Copyrights, and Trademarks of the Executive Bureau, Government of the Philippine Islands. The patent and its registry was also published in the newspaper, El Tiempo. Since 1910, Vargas has engaged in the manufacture of these plows in the city of Iloilo, Philippine Islands. On the plows there was first stamped the words "Patent Applied For," later after the patent had been granted, changed to "Patented Mar. 12, 1912." Ninety per cent of the plows in use in the Visayas (Iloilo and vicinity) are said to be Vargas plows. During this same period, the firm of F. M. Yaptico & Co. (Ltd.), was engaged in the foundry business in the City of Iloilo. It openly held itself out as a manufacturer of plow parts. It has in fact produced points, shares, shoes, and heel pieces in a considerable amount adapted to replace worn-out parts of the Vargas plow. Such was the existing situation when, in the early part of 1918, the owner of the patent, and thus the proper party to institute judicial proceedings, began action in the

Court of First Instance of Iloilo to enjoin the alleged infringement of U.S. Patent No. 1020232 by the defendant F. M Yaptico & Co. (Ltd.), and to recover the damages suffered by reason of this infringement. The court issued the preliminary injunction as prayed for. The defendant, in addition to a general denial, alleged, as special defenses, that the patent lacked novelty or invention, that there was no priority of ideas or device in the principle and construction of the plow, and that the plow, whose manufacture it was sought to have enjoined by the plaintiff, had already been in public use for more than two years before the application of the plaintiff for his patent. The parties subsequently entered into a stipulation that the court should first resolve the question of whether or not there had been an infraction of the patent, reserving the resultant question of damages for later decision. After the taking of evidence, including the presentation of exhibits, the trial judge, the Honorable Antonio Villareal, in a very exhaustive and learned decision, rendered judgment in favor of the defendant and against the plaintiff, declaring null and without effect the patent in question and dismissing the suit with costs against the plaintiff .The preliminary injunction theretofore issued was dissolved. From this judgment the plaintiff has appealed, specifying five errors. The principal assignment No. 1 is, that the trial court erred in finding that the patented invention of the plaintiff is lacking in novelty and invention. Defendant, in reply, relies on three propositions, namely: (1) The judgment of the trial court in finding the patent granted plaintiff void for lack of novelty and invention should be affirmed; (2) The patent granted plaintiff is void from the public use of his plow for over two years prior to his application for a patent, and (3) If the patent is valid, there has been no contributory infringement by defendant. Before resolving these rival contentions, we should have before us the relevant law. Act No. 2235 of the Philippine Legislature, enacted on February 10, 1913, in effect makes the United States Patent Laws applicable in the Philippine Islands. It provides that "owners of patents, including design patents, which have been issued or may hereafter be issued, duly registered in the United States Patent Office under the laws of the United States relating to the grant of patents, shall receive in the Philippine Islands the protection accorded them in the United States under said laws." (Sec. 1.) Turning to the United States Patent Laws, we find the Act of Congress of March 3, 1897, amendatory of section 4886 of the United States Revised Statutes, reading as follows: Any person who has invented or discovered any new and useful art, machine, manufacture, or composition of matter, or any new an useful improvements thereof, not known or used by others in this country, before his invention or discovery thereof, and not patented or described in any printed publication in this or any foreign country, before his invention or discovery thereof, or more than two years prior to his application, and not in public use or on sale in this country for more than two years prior to his application, unless the same is proved to have been abandoned, may upon payment of the fees required by law, and other due proceeding had, obtain a patent therefor. (29 Stat. L., 692, 7 Fed .Stat. Ann. [2d Ed.], p. 23.) When a patent is sought to be enforced, "the question of invention, novelty, or prior use, and each of them, are open to judicial examination." The burden of proof to

substantiate a charge of infringement is with the plaintiff. Where, however, the plaintiff introduces the patent in evidence, if it is in due form, it affords a prima faciepresumption of its correctness and validity. The decision of the Commissioner of Patents in granting the patent is always presumed to be correct. The burden then shifts to the defendant to overcome by competent evidence this legal presumption .With all due respect, therefore, for the critical and expert examination of the invention by the United States Patent Office, the question of the validity of the patent is one for judicial determination, and since a patent has been submitted, the exact question is whether the defendant has assumed the burden of proof as to anyone of his defenses. (See Agawan Co. vs. Jordan [1869], 7 Wall., 583; Blanchard vs .Putnam [1869], 8 Wall., 420; Seymour vs. Osborne [1871], 11 Wall., 516; Reckendorfer vs. Faber [1876], 92 U.S., 347; 20 R. C. L., 1112, 1168, 1169.) As herein before stated, the defendant relies on three special defenses. One such defense, on which the judgment of the lower court is principally grounded, and to which appellant devotes the major portion of his vigorous argument, concerns the element of novelty, invention, or discovery, that gives existence to the right to a patent. On this point the trial court reached the conclusion that "the patented plow of the plaintiff, Exhibit D, is not different from the native plow, Exhibit 2, except in the material, in the form, in the weight and the grade of the result, the said differences giving it neither a new function nor a new result distinct from the function and the result obtained from the native plow; consequently, its production does not presuppose the exercise of the inventive faculty but merely of mechanical skill, which does not give a right to a patent of an invention under the provisions of the Patent Law." In thus finding, the court may have been right, since the Vargas plow does not appear to be such a "combination" as contains a novel assemblage of parts exhibiting invention. (See Stimpsonvs. Woodman [1870], 10 Wall., 117 rollers; Hicks vs. Kelsey [1874], 20 Wall., 353 stoves; Washburn & Moen Mfg. Co. vs. Beat 'Em All Barbed Wire Co. [1892], 143 U.S., 275 barbed wire; Lynch vs .Dryden [1873], C. D., 73 walking cultivators; Torrey vs. Hancock [1910], 184 Fed., 61 rotary plows.) A second line of defense relates to the fact that defendant has never made a complete Vargas plow, but only points, shares, shoes, and heel pieces, to serve as repairs. Defendant's contention is, that in common with other foundries, he has for years cast large numbers of plow points and shares suitable for use either on the native wooden plow, or on the Vargas plow. A difference has long been recognized between repairing and reconstructing a machine. If, for instance, partial injuries, whether they occur from accident or from wear and tear, to a machine for agricultural purposes, are made this is only re-fitting the machine for use, and thus permissible. (Wilson vs. Simpson [1850], 9 How., 109.) Even under the more rigorous doctrine of Leeds & Catlin Co. vs. Victor Talking Machine Co. ([1909], 213 U.S., 325), it may be possible that all the defendant has done is to manufacture and sell isolated parts to be used to replace worn-out parts. The third defense is, that under the provisions of the statute, an inventor's creation must not have been in public use or on sale in the United States (and the Philippine Islands) for more than two years prior to his application .Without, therefore, committing ourselves as to the first two defenses, we propose to base our decision on the one just suggested as more easily disposing of the case. (See 20 R. C. L., 11401142.) We do so with full consciousness of the doubt which arose in the mind of the

trial court, but with the belief that since it has been shown that the invention was used in public at Iloilo by others than Vargas, the inventor, more than two years before the application for the patent, the patent is invalid. Although we have spent some time in arriving at this point, yet having reached it, the question in the case is single and can be brought to a narrow compass. Under the English Statute of Monopolies (21 Jac. Ch., 3), and under the United States Patent Act of February 21, 1793, later amended to be as herein quoted, it was always the rule, as stated by Lord Coke, Justice Story and other authorities, that to entitle a man to a patent, the invention must be new to the world. (Pennock and Sellers vs. Dialogue [1829], 2 Pet., 1.) As said by the United States Supreme Court, "it has been repeatedly held by this court that a single instance of public use of the invention by a patentee for more than two years before the date of his application for his patent will be fatal to the validity of the patent when issued." (Worley vs. Lower Tobacco Co . [1882], 104 U. S., 340; McClurg vs. Kingsland [1843], I How., 202; Consolidated Fruit Jar Co. vs. Wright [1877], 94 U. S., 92; Egbert vs. Lippmann [1881], 104 U. S., 333; Coffin vs. Ogden [1874], 18 Wall., 120; Manning vs. Cape Ann Isinglass and Glue Co. [1883], 108 U. S., 462; Andrews vs. Hovey [1887], 123 U. S., 267; Campbell vs. City of New York [1881], 1 L. R. A., 48.) On the facts, we think the testimony shows such a public use of the Vargas plow as to render the patent invalid Nicolas Roces, a farmer, testified that he had bought twenty Vargas plows, of which Exhibit 5 was one, in December, 1907; and Exhibit 5, the court found, was a plow completely identical with that for which the plaintiff had received a patent. The minor exception, and this in itself corroborative of Roces' testimony, is that the handle of plow Exhibit 5 is marked with the letters "A V" and not with the words "Patent Applied For" or "Patented Mar.12, 1912." Salvador Lizarraga, a clerk in a business house, testified that he had received plows similar to Exhibits D, 5, and 4, for sale on commission on May, 1908, from Bonifacio Araneta, partner of Vargas in the plow business. Ko Pao Ko, a blacksmith, testified that he had made fifty plow frames in 1905 for Vargas and Araneta, of which Exhibit 4 is one; Exhibit 4, the court found, is a plow identical with that patented by Vargas, but without share and mould-board. Alfred Berwin, an employee in the office of Attorney John Bordman, testified that on September 21, 1908, he had knowledge of a transaction wherein Vargas and Araneta desired to obtain money to invest in a plow factory. George Ramon Saul, a mechanic of the "Taller Visayas" of Strachan and MacMurray, testified that he had made Vargas plow points and shares of the present form upon order of Araneta and Vargas in 1906 and 1907 .William MacMurray, proprietor of the "Taller Visayas," corroborated the evidence of the witness Saul by the exhibition of the account against Vargas and Araneta wherein, under date of December 13, 1906, appears the item "12 new soft steel plow shares forged and bored for rivets as per sample." Against all this, was the testimony of the plaintiff Angel Vargas who denied that Saul could have been seen the Vargas plow in 1907 and 1907, who denied that Roces purchased the Vargas plow in 1907, who denied that Lizarraga could have acted as an agent to sell two plows in November, 1908, who denied any remembrance of the loan mentioned by Berwin as having been negotiated in September, 1908, who denied that Ko Pao Ko made fifty plows one of which is Exhibit 4, for Araneta and Vargas in 1905. Plaintiff introduced his books to substantiate his oral testimony .It is hardly believable that five or six witnesses for the defense would deliberately perjure themselves under oath. One might, but that all together, of

different nationalities, would enter into such a conspiracy, is to suppose the improbable. Tested by the principles which go to make the law, we think a preponderance of the evidence is to the effect that for more than two years before the application for the original letters patent, or before July 22, 1908, there was, by the consent and allowance of Vargas, a public use of the invention covered by them. To conclude, we are not certain but that appellee has proved every one of his defenses. We are certain that he has at least demonstrated the public use of the Vargas plow over two years prior to the application for a patent. Such being the case, although on a different ground, we must sustain the judgment of the lower court, without prejudice to the determination of the damages resulting from the granting of the injunction, with the costs of this instance against the appellant. So ordered.

G.R. No. L-4720 January 19, 1909 CARLOS GSELL, plaintiff-appellee, vs.VALERIANO VELOSO YAP-JUE, defendantappellant. CARSON, J.: This an appeal from a final order of the Court of First Instance of the city of Manila, in contempt proceedings prosecuted under the provisions of section 172 of the Code of Civil Procedure. The principal case to which these proceedings are ancillary, was an action to enjoin infringement of a patented process for the manufacture of curved handles for canes, parasols, and umbrellas. In that case plaintiff established his title to a valid patent covering the process in question, and obtained against this defendant a judgment, granting a perpetual injunction restraining its infringement, which judgment was affirmed by this court on appeal (6 Phil. Rep., 143.) The order was couched in the following terms: It is ordered that the defendant abstain from manufacturing canes and umbrellas with a curved handle by means of a lamp or blowpipe fed with mineral oil or petroleum, which process was protected by patent No. 19228, issued in favor of Henry Gsell, and by him transferred to Carlos Gsell and the process therein mentioned is fully described in the following statement which accompanied the application for the patent: After the canes have been cut for cane or umbrella handles, the outsides are thoroughly cleaned. This operation having been performed, they are then trimmed and the interior cleaned by means of a gimlet of about 15 centimeters in length operated by a wheel, by means of which the knots inside are broken. There is then introduced to a depth of about 15 centimeters a piece of very clean bamboo, which completely fills the hole made by the gimlet, thereby giving to the cane the necessary strength to resist the heat of the lamp or blowpipe without breaking or cracking. This operation having been performed, the cane, the end of which is attached to a fixed point, is given the shape of a hook or some other form by

means of fire and pressure. Once the cane has been shaped as desired, it is allowed to cool, and is then cleaned, varnished, and ornamented at will. This industry requires skillful, handiwork, owing to the great risk engendered by the treatment of such fragile material as a light cane. On the other hand, however, it affords large profits to the workman. NOTE. The patent applied for shall be for the industrial product "cane handles for walking sticks and umbrellas, curved by means of a small lamp or blowpipe, fed by petroleum or mineral fuel." Thereafter the defendant continued to manufacture curved cane handled for walking sticks and umbrellas by a process in all respectes identical with that used by the plaintiff under his patent, except only that he be substituted for a lamp fed with petroleum or mineral oil, lamp fed with alcohol, as appears from a stipulation entered into between plaintiff and defendant in the following terms: The plaintiff and defendant agree upon the fact that the defendant has used and is still using a process for curving handles of canes and umbrellas identical with that described in the application for the patent by the plaintiff with the exception that he has substituted for the lamp fed with all other lamp fed with alcohol. Contempt proceedings were instituted against the defendant in the month of February, 1904, the plaintiff in the original action alleging that the Defendant in disobediencce of the judgment of the same was and is now engaged in the unlawful manufacture of umbrella handles by the identical process described in and protected said patent, No. 19228, or a process so like the patented process as to be indistinguishable. The trial court found the defendant "not guilty" of contempt as charged; and this court, on appeal, held that a character that it could be made patent by the mere annunciation of the acts performed by the defendant, which are alleged to constitute the said violation. These acts were not clearly and manifestly contrary to the precise terms of the prohibition. According to the express language of the judgment, the prohibition is against the manufacture of canes and umbrellas with curved handles by means of the use of a cool or mineral oil-burning lamp or blowpipe and the parties have stipulated that the defendant did not use a coal or mineral oil-burning lamp but an alcohol-burning lamp. The question, however, arises as to whether that prohibition included the substitution of alcohol for coal or mineral oil. In more abstract and general terms, the appellant propounds this question in his brief, as follows: "The question presented by this appeal is whether or not the use of a patented process by a third person, without license or authority therefor, constitutes an infringement when the alleged infringer has substituted in lieu of some unessential part of the patented process a well-known mechanical equivalent."It has seen that by its very terms this question implies in the

present case the existence of two fundamental facts which must first be duly established, viz: (1) That the use of the lamp fed with petroleum or mineral oil was an unessential part of the patented process the use of which by the accused was prohibited by the said judgment; and (2) that alcohol is an equivalent and proper substitute, well known as such, for mineral oil or petroleum in connection with the said process. The appellant has failed to affirmatively establish either of these two essential facts. He has merely assumed their existence, without proving the same, thus begging the whole question. Consequently the contempt with which the accused is charged has not been fully and satisfactorily proved, and the order appealed from should accordingly be affirmed in so far as it holds that the defendant is not guilty of contempt. (7 Phil. Rep., 130). Thereafter the plaintiff continued the use of the patented process, save only for the substitutions of a lamp fed by alcohol for a lamp fed by petroleum or mineral oil, and new proceedings were instituted under the provisions of section 172 for the purpose of enforcing the original injunction above cited. Substantially the same question is submitted in these new proceedings as that submitted in the former case, but at the trial of this case testimony was introduced which, in our opinion, leaves no room for doubt, first, that alcohol is an equivalent or substitute, well known as such at the time when the patent was issued, for mineral oil or petroleum, in connection with blast lamps or blowpipes such as that which plaintiff uses in the patented process, and, second, that the use of a blast lamp or blowpipe fed with petroleum or mineral oil, rather than one fed with alcohol, is an unessential part of the patented process the use of which was prohibited by the said judgment. It was clearly proven at the trial, that kerosene and alcohol blast lamps are agencies for producing and applying heat, well known throughout the world long prior to 1906, the date of the issue of the patent; that it is and for many years has been known that one may for all ordinary purposes be used in the place of the other, and especially for the purpose of applying heat in the manner described in the patent; that the only consideration which determines the employment of one in place of the other is the convenience of the user and the question of relative cost; and that the principle upon which both lamps work is substantially identical, the only difference in construction being occasioned by the application of this principle to oils of different physical and chemical composition. The plaintiff does not and can not claim a patent upon the particular lamp used by him. The patent, however, gives him the exclusive right to the use of "la lamparilla o soplete, alimentada de petroleo o esencia mineral" (the small lamp or blowpipe fed with petroleum or mineral oil) in manufacturing curved handles for umbrellas and canes, to which reference is made in the above-cited descriptive statement and annexed note. "The small lamp or blowpipe" mentioned in the descriptive statement and annexed note which accompanied the application for the patent, evidently referred to the design of a blast lamp which was attached thereto; and in our opinion both plaintiff and defendant make use of a blast lamp substantially similar, in principle and design, to that referred to in the descriptive statement and the annexed note, for the exclusive use of which in the manufacture of curved handles, plaintiff holds a patent. True, defendant's blast lamp is fed with alcohol, and its shape varies in unimportant details, for the purpose of accommodating the principle, by which the flame is secured, to the different physical and chemical composition of the fuel used

therein; but the principle on which it works, its mode of application, and its general design distinguish it in no essential particular from that used by the plaintiff. If the original design accompanying the statement had shown a blast lamp made of brass or delf, he would be a reckless advocate who would claim that the patent might lawfully be evaded by the use of a lamp made of iron or tin; or if the original design had shown a blast lamp 6 inches high with a nozzle 4 inches long it would hardly be seriously contended that the use of lamp 8 inches high with a nozzle 3 inches long would protect the ingenious individual, who in all other respects borrowed the patented process, from the consequences of an action for damages for infringement. But in the light of the evidence of record in this case, the reasoning upon which these hypothetical claims should be rejected applies with equal force to the contentions of the defendant, the ground for the rejection of the claims in each case being the same, and resting on the fact that unessential changes, which do not affect the principle of the blast lamp used in the patented process, or the mode of application of heat authorized by the patent, are not sufficient to support a contention that the process in one case is in any essential particular different from that used in the other. Counsel for plaintif invokes the doctrine of "mechanical equivalents" in support of his contention, and indeed that doctrine is strikingly applicable to the facts in this case. This doctrine is founded upon sound rules of reason and logic, and unless restrained or modified by law in particular jurisdiction, is of universal application, so that it matters not whether a patent be issued by one sovereignty or another, the doctrine may properly be invoked to protect the patentee from colorable invasions of his patent under the guise of substitution of some part of his invention by some well known mechanical equivalent. Our attention has not been called to any provision of the patent law of Spain, which denies to patentees thereunder the just and equitable protection of the doctrine; and indeed a patent law which failed to recognize this doctrine would afford scant protection to inventors, for it is difficult if not impossible to conceive an invention, which is incapable of alteration or change in some unessential part, so as to bring that part outside of the express terms of any form of language which might be used in granting a patent for the invention; and has been well said by counsel for plaintiff, human ingenuity would be taxed beyond its powers in preparing a grant of a patent so comprehensive in its terms, "as to include within the express terms of its detailed description every possible alternative of form, size, shape, material, location, color, weight, etc., of every wheel, rod, bolt, nut, screw, plate, and other component parts of an invention." The following citations from various decisions of the Federal Courts of the United States illustrate the application of the doctrine in that jurisdiction, and clearly point the way to the proper solution of the questions involved in the case at bar: Can the defendant have the right of infringement, by substituting in lieu of some parts of the combination well-known mechanical equivalents? I am quite clear that be can not, both on principle and authority. It is not to be disputed that the inventor of an ordinary machine is, by his letters patent, protected against all mere formal alterations and against the substitution of mere mechanical equivalents. Why should not the inventor of a new combination receive the same protection? If he can not, then will his patent not be worth the parchment on which it is written.

If no one can be held to infringe a patent for a combination unless he uses all the parts of the combination and the identical machinery as that of the patentee, then will no patent for a combination be infringed; for certainly no one capable of operating a machine can be incapable of adopting some formal alteration in the machinery, or of substituting mechanical equivalents. No one infringes a patent for a combination who does not employ all of the ingredients of the combination; but if he employs all the ingredients, or adopts mere formal alterations, or substitutes, for one ingredient another which was well known at the date of the patent as a proper substitute for the one withdrawn, and which performs substantially the same function as the one withdrawn, he does infringe. (King vs. Louisville Cement Co., Fed. Cas., 7798.) Bona fide inventors of a combination are as much entitled to equivalents as the inventors other patentable improvements; by which is meant that a patentee in such a case may substitute another ingredient for any one of the ingredients of his invention, if the ingredient substituted performs the same function as the one omitted and as well known at the date of his patent as a proper substitute for the one omitted in the patented combination. Apply that rule and it is clear that an alteration in a patented combination which merely substitutes another old ingredient for one of the ingredients in the patented combination, is an infringement of the patent, if the substitute performs the same function and was well known at the date of the patent as a proper substitute for the omitted ingredient. (Gould vs. Rees, 82 U.S., 187, 194.) Mere formal alterations in a combination in letters patent are no defense to the charge of infringement and the withdrawal of one ingredient from the same and the substitution of another which was well known at the date of the patent as a proper substitute for the one withdrawn is a mere formal alteration of the combination if the ingredient substituted performs substantially the same function as the one withdrawn. Bona fide inventors of a combination are as much entitled to suppress every other combination of the same ingredients to produce the same result, not substantially different from what they have invented and caused to be patented as to any other class of inventors. All alike have the right to suppress every colorable invasion of that which is secured to them by letters patent. (Seymour vs. Osborne, 78 U.S., 516, 556.) A claim for the particular means and mode of operation described in the specification extends, by operation of law, to the equivalent of such means not equivalent simply because the same result is thereby produced but equivalent as being substantially the same device in structure, arrangement and mode of operation. (Burden vs. Corning, Fed. Cas., 2143. Gottfried vs. Philip Best Brewing Co., Fed. Cas., 5633.) An equivalent device is such as a mechanic of ordinary skill in construction of similar machinery, having the forms, specifications and machine before him, could substitute in the place of the mechanism described without the exercise of the inventive faculty. (Burden vs. Corning, supra.)

All the elements of the invention in this case are old, and the rule in such cases, as before explained, undoubtedly is that a purpose can not invoke the doctrine of equivalents to suppress all other improvements of the old machine, but he is entitled to treat everyone as an infringer who makes, uses, or vends his patented improvement without any other change than the employment of a substitute for one of its elements, well known as such at the date of his invention, and which any constructor acquainted with the art will know how to comply. The reason for the qualification of the rule as stated is, that such change that is, the mere substitution of a well- known element for another where it appears that the substituted element was well known as a usual substitute for the element left out is merely a formal one, and nothing better than a colorable evasion of the patent. (Union Sugar Refining Co. vs. Matthieson, Fed. Cas., 14399.) Counsel for the defendant insists that, under Spanish law, none of the steps of the process described in the descriptive statement, save those mentioned in the "note" thereto attached are included in the patent, and that the patent rights secured thereunder are strictly limited to the precise language of the "note" attached to the descriptive statement; while counsel for plaintiff appears to think that the language of the patent covers any process or device whereby wood or cane may be bent or curved by the use of heat. But for the purpose of this decision it is not necessary to consider these questions, further than to hold, as we do, that under the doctrine of equivalents, the language of the note in the descriptive statement applies to the operation of applying heat for the purpose of curving handles or canes and umbrellas by means of a blast lamp fed with alcohol, as well as by means of a blast lamp fed with petroleum or mineral oil; and the defendant having admitted the fact that he applied heat for the purpose of curving handles for canes and umbrellas by means of a blast lamp fed with alcohol, he must be deemed to have contempt of violating the terms and the injunction issued in the principal case, wherein plaintiff was declared the owner of the patent in question, and defendant enjoined from its infringement. The argument of counsel for defendant and appellant, based on the theory that the questions herein discussed and decided to have been heretofore settled by this court, and that the subject-matter of this proceeding is res adjudicata between the parties thereto is sufficiently refuted by the simple reading of the decision of this court in the case relied upon. (Gsell vs. Veloso, 7 Phil. Rep., 130.) The judgment of the lower court should be and is hereby affirmed, with the costs of this instance against the appellant. G.R. No. L-32160 January 30, 1982 DOMICIANO A. AGUAS, petitioner, vs.CONRADO G. DE LEON and COURT OF APPEALS, respondents. FERNANDEZ, J.: This is a petition for certiorari to review the decision of the Court of Appeals in CA G.R. NO. 37824-R entitled "Conrado G. de Leon, plaintiff-appelle vs. Dominciano Aguas and F.H. Aquino and Sons, defendants-appellants," the dispositive portion of which reads:

WHEREFORE, with the modification that plintiff-applee's award of moral damages is hereby redured to P3,000.00, the appealed judgment is hereby affirmed, in all othe respects, with costs against appellants.1 On April 14, 1962, Conrado G. de Leon filed in the Court of First Instance of Rizal at Quezon City a complaint for infringement of patent against Domiciano A. Aguas and F. H. Aquino and Sons alleging that being the original first and sole inventor of certain new and useful improvements in the process of making mosaic pre-cast tiles, he lawfully filed and prosecuted an application for Philippine patent, and having complied in all respects with the statute and the rules of the Philippine Patent Office, Patent No. 658 was lawfully granted and issued to him; that said invention was new, useful, not known or used by others in this country before his invention thereof, not patented or described in any printed publication anywhere before his invention thereof, or more than one year prior to his application for patent thereof, not patented in any foreign country by him or his legal representatives on application filed more than one year prior to his application in this country; that plaintiff has the exclusive license to make, use and sell throughout the Philippines the improvements set forth in said Patent No. 658; that the invention patented by said Patent No. 658 is of great utility and of great value to plaintiff and of great benefit to the public who has demanded and purchased tiles embodying the said invention in very large quantities and in very rapidly increasing quant ies; that he has complied with the Philippine statues relating to marking patented tiles sold by him; that the public has in general acknowledged the validity of said Patent No. 658, and has respected plaintiff's right therein and thereunder; that the defendant Domiciano A. Aguas infringed Letters of Patent No. 658 by making, using and selling tiles embodying said patent invention and that defendant F. H. Aquino & Sons is guilty of infringement by making and furnishing to the defendant Domiciano A. Aguas the engravings, castings and devices designed and intended of tiles embodying plaintiff;s patented invention; that he has given direct and personal notice to the defendants of their said acts of infringement and requested them to desist, but nevertheless, defendants have refused and neglected to desist and have disregarded such request, and continue to so infringe causing great and irreparable damage to plaintiff; that if the aforesaid infringement is permitted to continue, further losses and damages and irreparable injury will be sustained by the plaintiff; that there is an urgent need for the immediate issuance of a preliminary injunction; that as a result of the defendants' wrongful conduct, plaintiff has suffered and the defendants are liable to pay him, in addition to actual damages and loss of profits which would be determined upon proper accounting, moral and exemplary or corrective damages in the sum of P90,000.00; that plaintiff has been compelled to go to court for the protection and enforcement of his and to engage the service of counsel, thereby incurring attorney's fees and expenses of litigation in the sum of P5,000.00. 2 On April 14, 1962, an order granting the plaintiff's petition for a Writ of Preliminary Injunction was issued. 3 On May 23, 1962, the defendant Domiciano A. Aguas filed his answer denying the allegations of the plaintiff and alleging that: the plaintiff is neither the original first nor sole inventor of the improvements in the process of making mosaic pre-cast tiles, the same having been used by several tile-making factories in the Philippines and abroad years before the alleged invention by de Leon; that Letters Patent No. 658 was

unlawfully acquired by making it appear in the application in relation thereto that the process is new and that the plaintiff is the owner of the process when in truth and in fact the process incorporated in the patent application has been known and used in the Philippines by almost all tile makers long before the alleged use and registration of patent by plaintiff Conrado G. de Leon; that the registration of the alleged invention did not confer any right on the plaintiff because the registration was unlawfully secured and was a result of the gross misrepresentation on the part of the plaintiff that his alleged invention is a new and inventive process; that the allegation of the plaintiff that Patent No. 658 is of great value to plaintiff and of great benefit to the public is a mere conclusion of the plaintiff, the truth being that a) the invention of plaintiff is neither inventive nor new, hence, it is not patentable, b) defendant has been granted valid patents (Patents No. 108, 109, 110 issued on December 21, 1961) on designs for concrete decorative wall tiles; and c) that he can not be guilty of infringement because his products are different from those of the plaintiff.4 The trial court rendered a decision dated December 29, 1965, the dispositive portion of which reads: WHEREFORE, judgment is hereby rendered in favor of plaintiff and against the defendants: 1. Declaring plaintiff's patent valid and infringed: 2. Granting a perpetual injunction restraining defendants, their officers, agents, employees, associates, confederates, and any and all persons acting under their authority from making and/or using and/or vending tiles embodying said patented invention or adapted to be used in combination embodying the same, and from making, manufacturing, using or selling, engravings, castings and devises designed and intended for use in apparatus for the making of tiles embodying plaintiff's patented invention, and from offering or advertising so to do, and from aiding and abetting or in any way contributing to the infringement of said patent; 3. Ordering that each and all of the infringing tiles, engravings, castings and devices, which are in the possession or under the control of defendants be delivered to plaintiff; 4. Ordering the defendants to jointly and severally pay to the plaintiff the following sums of money, to wit: (a) P10,020.99 by way of actual damages; (b) P50,000.00 by way of moral damages; (c) P5,000.00 by way of exemplary damages; (d) P5,000.00 by way of attorney's fees and (e) costs of suit. 5 The defendant Domiciano Aguas appealed to the Court of Appeals, assigning the following errors. 6 I THE TRIAL COURT ERRED IN NOT HOLDING THAT PLAINTIFF'S PATENT FOR THE 'PROCESS OF MAKING MOSAIC PRE-CAST TILE' IS INVALID BECAUSE SAID ALLEGED PROCESS IS NOT AN INVENTION OR DISCOVERY AS THE

SAME HAS ALREADY LONG BEEN USED BY TILE MANUFACTURERS BOTH ABROAD AND IN THIS COUNTRY. II THE TRIAL COURT ERRED IN HOLDING THAT THE PATENT OF PLAINTIFF IS VALID BECAUSE IT IS AN IMPROVEMENT OR THE AGE-OLD TILE MAKING SYSTEM. III THE TRIAL COURT ERRED IN NOT ORDERING THE CANCELLATION OF PLAINTIFF-APPELLEE'S LETTERS PATENT NO. 658, EXHIBIT L, IN ACCORDANCE WITH THE PERTINENT PROVISIONS OF THE PATENT LAW, REPUBLIC ACT 165. IV THE TRIAL COURT ERRED IN HOLDING THAT DEFENDANT DOMICIANO A. AGUAS IS GUILTY OF INFRINGEMENT DESPITE THE FACT THAT PLAINTIFF'S PATENT IS NOT A VALID ONE. V THE TRIAL COURT ERRED IN NOT HOLDING THAT THE DEFENDANT COULD NEVER BE GUILTY OF INFRINGEMENT OF PLAINTIFF'S PATENT BECAUSE EVEN IN MATTERS NOT PATENTED BY THE PLAINTIFF - LIKE THE COMPOSITION AND PROPORTION OF INGREDIENTS USED AND THE STRUCTURAL DESIGNS OF THE MOULD AND THE TILE PRODUCED - THAT OF THE DEFENDANT ARE DIFFERENT. VI THE TRIAL COURT ERRED IN NOT DISMISSING THE COMPLAINT AND IN HOLDING THE DEFENDANT, INSTEAD OF THE PLAINTIFF, LIABLE FOR DAMAGES, AND ATTORNEY'S FEES. On August 5, 1969, the Court of Appeals affirmed the decision of the trial court, with the modification that plaintiff-appellee's award of moral damages was reduced to P3,000.00. 7 The petitioner assigns the following errors supposedly committed by the Court of Appeals: It is now respectfully submitted that the Court of Appeals committed the following errors involving questions of law, to wit: First error. When it did not conclude that the letters patent of the respondent although entitled on the cover page as a patent for improvements, was in truth and in fact, on the basis of the body of the same, a patent for the old and non-patentable process of making mosaic pre-cast tiles; Second error. When it did not conclude from the admitted facts of the case, particularly the contents of the letters patent, Exh. L and the pieces of physical evidence introduced consisting of samples of the tiles and catalouges, that the alleged improvements introduced by the respondent in the manufacture of mosaic pre-cast tiles are not patentable, the same being not new, useful and inventive. Third error. As a corollary, when it sentenced the herein petitioner to pay the damages enumerated in the decision of the

lower court (Record on Appeal, pp. 74-75), as confirmed by it (the Court of Appeals), but with the modification that the amount of P50,000.00 moral damages was reduced to P3,000.00. 8 The facts, as found by the Court of Appeals, are: The basic facts borne out by the record are to the effect that on December 1, 1959 plaintiff-appellee filed a patent application with the Philippine Patent Office, and on May 5, 1960, said office issued in his favor Letters Patent No. 658 for a "new and useful improvement in the process of making mosaic pre-cast tiles" (Exh, "L"); that defendant F.H. Aquino & Sons engraved the moulds embodying plaintiff's patented improvement for the manufacture of pre-cast tiles, plaintiff furnishing said defendant the actual model of the tiles in escayola and explained to said engraver the plans, specifications and the details of the engravings as he wanted them to be made, including an explanation of the lip width, artistic slope of easement and critical depth of the engraving that plaintiff wanted for his moulds; that engraver Enrique Aquino knew that the moulds he was engraving for plaintiff were the latter's very own, which possession the new features and characteristics covered by plaintiff's parent; that defendant Aguas personally, as a building contractor, purchased from plaintiff, tiles shaped out of these moulds at the back of which was imprinted plaintiff's patent number (Exhs., "A" to "E"); that subsequently, through a representative, Mr. Leonardo, defendant Aguas requested Aquino to make engravings of the same type and bearing the characteristics of plaintiff's moulds; that Mr. Aquino knew that the moulds he was asked to engrave for defendant Aguas would be used to produce cement tiles similar to plaintiff's; that the moulds which F.H. Aquino & Sons eventually engraved for Aguas and for which it charged Aguas double the rate it charged plaintiff De Leon, contain the very same characteristic features of plaintiff's mould and that Aguas used these moulds in the manufacture of his tiles which he actually put out for sale to the public (Exhs. "1" to "3" and Exhs. "A" to "E"); that both plaintiff's and defendant Aguas' tiles are sculptured pre-cast wall tiles intended as a new feature of construction and wag ornamentation substantially Identical to each other in size, easement, lip width and critical depth of the deepest depression; and that the only significant difference between plaintiff's mould and that engraved by Aquino for Aguas is that, whereas plaintiff's mould turns out tiles 4 x 4 inches in size, defendant Aguas' mould is made to fit a 4-1/4 x 4-1/4 inch tile. 9 The patent right of the private respondent expired on May 5, 1977. 10 The errors will be discuss only to determine the right of said private respondent to damages. The petitioner questioned the validity of the patent of the private respondent, Conrado G. de Leon, on the ground that the process, subject of said patent, is not an invention or discovery, or an improvement of the old system of making tiles. It should be noted

that the private respondent does not claim to be the discoverer or inventor of the old process of tile-making. He only claims to have introduced an improvement of said process. In fact, Letters Patent No. 658 was issued by the Philippine Patent Office to the private respondent, Conrado G. de Leon, to protect his rights as the inventor of "an alleged new and useful improvement in the process of making mosaic pre-cast tiles." 11 Indeed, Section 7, Republic Act No. 165, as amended provides: "Any invention of a new and useful machine, manufactured product or substance, process, or an improvement of the foregoing, shall be patentable. The Court of Appeals found that the private respondent has introduced an improvement in the process of tile-making because: ... we find that plaintiff-appellee has introduced an improvement in the process of tile-making, which proceeds not merely from mechanical skill, said improvement consisting among other things, in the new critical depth, lip width, easement and field of designs of the new tiles. The improved lip width of appellee's tiles ensures the durability of the finished product preventing the flaking off of the edges. The easement caused by the inclination of the protrusions of the patented moulds is for the purpose of facilitating the removal of the newly processed tile from the female die. Evidently, appellee's improvement consists in the solution to the old critical problem by making the protrusions on his moulds attain an optimum height, so that the engraving thereon would be deep enough to produce tiles for sculptured and decorative purposes, strong optimum thickness of appellee's new tiles of only 1/8 of an inch at the deepest easement (Exhs. "D" and "D-1") is a most critical feature, suggestive of discovery and inventiveness, especially considering that, despite said thinness, the freshly formed tile remains strong enough for its intended purpose. While it is true that the matter of easement, lip width, depth, protrusions and depressions are known to some sculptors, still, to be able to produce a new and useful wall tile, by using them all together, amounts to an invention. More so, if the totality of all these features are viewed in combination with the Ideal composition of cement, sodium silicate and screened fine sand. By using his improved process, plaintiff has succeeded in producing a new product - a concrete sculptured tile which could be utilized for walling and decorative purposes. No proof was adduced to show that any tile of the same kind had been produced by others before appellee. Moreover, it appears that appellee has been deriving considerable profit from his manufacture and sale of such tiles. This commercial success is evidence of patentability (Walker on Patents, Dellers Edition, Vol. I, p. 237). 12 The validily of the patent issued by the Philippines Patent Office in favor of the private respondent and the question over the inventiveness, novelty and usefulness of the improved process therein specified and described are matters which are better

determined by the Philippines Patent Office. The technical staff of the Philippines Patent Office, composed of experts in their field, have, by the issuance of the patent in question, accepted the thinness of the private respondent's new tiles as a discovery. There is a presumption that the Philippines Patent Office has correctly determined the patentability of the improvement by the private respondent of the process in question. Anent this matter, the Court of Appeals said: Appellant has not adduced evidence sufficient to overcome the above established legal presumption of validity or to warrant reversal of the findings of the lower court relative to the validity of the patent in question. In fact, as we have already pointed out, the clear preponderance of evidence bolsters said presumption of validity of appellee's patent. There is no indication in the records of this case and this Court is unaware of any fact, which would tend to show that concrete wall tiles similar to those produced by appellee had ever been made by others before he started manufacturing the same. In fact, during the trial, appellant was challenged by appellee to present a tile of the same kind as those produced by the latter, from any earlier source but, despite the fact that appellant had every chance to do so, he could not present any. There is, therefore, no concrete proof that the improved process of tilemaking described in appellee's patent was used by, or known to, others previous to his discovery thereof. 13 The contention of the petitioner Aguas that the letters patent of de Leon was actually a patent for the old and non-patentable process of making mosaic pre-cast tiles is devoid of merit. De Leon never claimed to have invented the process of tile-making. The Claims and Specifications of Patent No. 658 show that although some of the steps or parts of the old process of tile making were described therein, there were novel and inventive features mentioned in the process. Some of the novel features of the private respondent's improvements are the following: critical depth, with corresponding easement and lip width to such degree as leaves the tile as thin as 1/8 of an inch at its thinnest portion, Ideal composition of cement and fine river sand, among other ingredients that makes possible the production of tough and durable wall tiles, though thin and light; the engraving of deep designs in such a way as to make the tiles decorative, artistic and suitable for wall ornamentation, and the fact that the tiles can be mass produced in commercial quantities and can be conveniently stockpiled, handled and packed without any intolerable incidence of breakages. 14 The petitioner also contends that the improvement of respondent is not patentable because it is not new, useful and inventive. This contention is without merit. The records disclose that de Leon's process is an improvement of the old process of tile making. The tiles produced from de Leon's process are suitable for construction and ornamentation, which previously had not been achieved by tiles made out of the old process of tile making. De Leon's invention has therefore brought about a new and useful kind of tile. The old type of tiles were usually intended for floors although

there is nothing to prevent one from using them for walling purposes. These tiles are neither artistic nor ornamental. They are heavy and massive. The respondent's improvement is indeed inventive and goes beyond the exercise of mechanical skill. He has introduced a new kind of tile for a new purpose. He has improved the old method of making tiles and pre-cast articles which were not satisfactory because of an intolerable number of breakages, especially if deep engravings are made on the tile. He has overcome the problem of producing decorative tiles with deep engraving, but with sufficient durability. 15 Durability inspite of the thinness and lightness of the tile, is assured, provided that a certain critical depth is maintained in relation to the dimensions of the tile. 16 The petitioner also claims that changing the design from embossed to engraved tiles is neither new nor inventive because the Machuca Tile Factory and the Pomona Tile Manufacturing Company have been manufacturing decorative wall tiles that are embossed as well as engraved; 17 that these tiles have also depth, lip width, easement and field of designs; 18 and that the private respondent had copied some designs of Pomona. 19 The Machuca tiles are different from that of the private respondent. The designs are embossed and not engraved as claimed by the petitioner. There may be depressions but these depressions are too shallow to be considered engraved. Besides, the Machuca tiles are heavy and massive. There is no similarity between the Pomona Tiles and de Leon's tiles. The Pomona tiles are made of ceramics. 20The process involved in making cement tiles is different from ceramic tiles. Cement tiles are made with the use of water, while in ceramics fire is used. As regards the allegation of the petitioner that the private respondent copied some designs of Pomona, suffice it to say that what is in issue here is the process involved in tile making and not the design. In view of the foregoing, this Court finds that Patent No. 658 was legally issued, the process and/or improvement being patentable. Both the trial court and the Court of Appeals found as a fact that the petitioner Domiciano A. Aguas did infringe de Leon's patent. There is no showing that this case falls under one of the exceptions when this Court may overrule the findings of fact of the Court of Appeals. The only issue then to be resolved is the amount of damages that should be paid by Aguas. In its decision the Court of Appeals affirmed the amount of damages awarded by the lower court with the modification that the respondent is only entitled to P3,000.00 moral damages. 21 The lower court awarded the following damages: 22 a) P10,020.99 by way of actual damages; b) P50,000.00 by way of moral damages; c) P5,000.00 by way of exemplary damages;

d) P5,000.00 by way of attomey's fees and e) Costs of suit because: An examination of the books of defendant Aguas made before a Commissioner reveals that during the period that Aguas was manufacturing and selling tiles similar to plaintiff's, he made a gross income of P3,340.33, which can be safely be considered the amount by which he enriched himself when he infringed plaintiff's patent. Under Sec. 42 of the Patent Law any patentee whose rights have been infringed is entitled to damages which, according to the circumstances of the case may be in a sum above the amount found as actual damages sustained provided the award does not exceed three times the amount of such actual damages. Considering the wantonness of the infringement committed by the defendants who knew all the time about the existence of plaintiff's patent, the Court feels there is reason to grant plaintiff maximum damages in the sum of P10,020.99. And in order to discourage patent infringements and to give more teeth to the provisions of the patent law thus promoting a stronger public policy committed to afford greater incentives and protection to inventors, the Court hereby awards plaintiff exemplary damages in the sum of P5,000.00 to be paid jointly and severally by defendants. Considering the status of plaintiff as a reputable businessman, and owner of the likewise reputed House of Pre-Cast, he is entitled to an award of moral damages in the sum of P50,000.00. 23 In reducing the amount of moral damages the Court of Appeals said: As regards the question of moral damages it has been shown that as a result of the unlawful acts of infringment committed by defendants, plaintiff was unstandably very sad; he worried and became nervous and lost concentration on his work in connection with his tile business (pp. 28, 30, t.s.n., Feb. 28, 1964). In addition, plaintiff's character and reputation have been unnecessarily put in question because defendants, by their acts of infringement have created a doubt or suspicion in the public mind concerning the truth and honesty of plaintiff's advertisements and public announcements of his valid patent. Necessarily, said acts of defendants have caused plaintiff considerable mental suffering, considering especially, the fact that he staked everything on his pre-cast tile business (p. 36, t.s.n., Id.) The wantonness and evident bad faith characterizing defendants' prejudicial acts against plaintiff justify the assessment of moral damages in plaintiff's favor, though we do not believe the amount of P50,000.00 awarded by the lower court is warranted by the circumstances. We feel that said amount should be reduced to P3,000.00 by way of compensating appellee for his moral suffering. "Willful injury to property may be a legal ground for awarding moral damages if the court should find that, under the circumstances such damages are justly due" (Art. 2219 NCC).

There is no reason to reduce the amount of damages and attorneys fees awarded by the trial court as modified by the Court of Appeals. WHEREFORE, the decision of the Court of Appeals in CA G.R. No. 37824-R appealed from is hereby affirmed, without pronouncement as to costs. SO ORDERED.