AIR PHILIPPINES CORPORATION VS. PENNSWELL INC.

G.R. No. 172835 December 13, 2007

FACTS: Pennswell, Inc., a manufacturer of industrial chemicals, solvents, and special lubricants, sold to Air
Philippines Corp. sundry goods for P449, 864.98 with interest at 14% per annum until fully paid. However, due to
petitioners failure to pay, respondent filed a Complaint for a Sum of Money on April 28, 2000 with the RTC. Petitioner
contended that it was defrauded by respondent for its sale of four items which were misrepresented as belonging to a
new line but were actually identical with products previously purchased. During the pendency of the trial, petitioner
filed a Motion to Compel respondent to give a detailed list of the ingredients and chemical components of the said
products for comparison by the Philippine Institute of Pure and Applied Chemistry (PIPAC). The RTC initially granted
the motion but subsequently reversed itself and held that the chemical components are respondents trade secrets
and are privileged in character. On appeal, the CA affirmed the order of the RTC and ruled that to compel respondent
to reveal in detail the list of ingredients of its lubricants is to disregard its rights over its trade secrets. Petitioner,
relying on Section 1, Rule 27 of the Rules of Court, argued that the use of modes of discovery operates with desirable
flexibility under the discretionary control of the trial court.

ISSUE: WON Pennswell may be compelled under Rule 27 to disclose the chemical ingredients and composition of its
lubricants

HELD: NO. Although Section 1, Rule 27 of the Rules of Court, permits parties to inspect documents or things upon a
showing of good cause before the court in which an action is pending, the said documents or things should not be
privileged. The rules providing for production and inspection of books and papers do not authorize the production or
inspection of privileged matter; that is, books and papers which, because of their confidential and privileged
character, could not be received in evidence. This condition is in addition to the requisite that the items be specifically
described, and must constitute or contain evidence material to any matter involved in the action and which are in the
partys possession, custody or control.
A trade secret is a plan or process, tool, mechanism or compound known only to its owner and those of his
employees to whom it is necessary to confide it. It is a secret formula or process not patented, but known only to
certain individuals using it in compounding some article of trade having a commercial value. Its disclosure is
proscribed and penalized under the Securities Regulation Code & under the Revised Penal Code.
Thus, the chemical composition, formulation, and ingredients of respondents special lubricants are trade
secrets and are thus privileged. There is substantial basis for respondent to seek protection of the law for its
proprietary rights over the detailed chemical composition of its products.